Berry-Kofron Dental Laboratory Co. v. Smith

• Decision Date: 21 February 1940
• Docket Number: 36073
• Citation: 137 S.W.2d 452,345 Mo. 922
• Parties: Berry-Kofron Dental Laboratory Company, a Corporation, Appellant, v. Forrest Smith, State Auditor and Roy McKittrick, Attorney General
• Court: Missouri Supreme Court

137 S.W.2d 452

345 Mo. 922

Berry-Kofron Dental Laboratory Company, a Corporation, Appellant, v. Forrest Smith, State Auditor and Roy McKittrick, Attorney General

No. 36073

Supreme Court of Missouri

February 21, 1940

Appeal from Cole Circuit Court; Hon. Nike G. Sevier, Judge.

Reversed.

Harry G. Erbs and Rene J. Lusser for appellant.

(1) The court erred in finding that plaintiff is engaged in the business of selling tangible personal property at retail "at retail" being defined in the Sales Tax Act as any transfer of the ownership of, or title to, the purchaser for "use or consumption." (a) A tax levy must be clearly authorized by statute, and construed strictly against the taxing authority and in favor of the taxpayer. State ex rel. Ford Motor Co. v. Gehner, 27 S.W.2d 3; State ex rel. Kansas City P. & L. Co. v. Smith, 111 S.W.2d 515. (b) In the construction of statutes, words and phrases shall be taken in their ordinary sense, and the courts are bound to construe a statute as written, without regard to the results of the construction. Sec. 655, R. S. 1929; Bellerive Inv. Co. v. Kansas City, 13 S.W.2d 638. (c) In giving the wording and definitions of the Sales Tax Act their plain and ordinary meaning, plaintiff is not engaged in selling "at retail," which is defined in the statute as selling to a purchaser "for use or consumption." American Optical Co. v. Nudelman, 370 Ill. 630; Revzan v. Nudelman, 370 Ill. 180; State v. Lagomarcino-Grupe Co., 223 N.W. 513. (2) As plaintiff is primarily engaged in rendering highly technical services, involving skill, knowledge, labor and the use of machinery, the court erred in its decree holding that plaintiff was engaged in the business of selling tangible personal property. ABC Electrotype Co. v. Ames, 364 Ill. 360; Burgess Co. v. Ames, 359 Ill. 427.

Roy McKittrick, Attorney General, and Tyre W Burton, Assistant Attorney General, for respondents John H. Hendren of counsel.

(1) The court did not err in finding that the plaintiff is engaged in the business of selling tangible personal property at retail for use and consumption. 111 A. L. R. 943; State v. Newton, 81 P. 1003; St. Louis v. Smith, 114 S.W.2d 1017, 1019; Babcock v. Nudelman, 367 Ill. 626, 12 N.E.2d 635, 115 A. L. R. 495. (2) The court did not err in holding that the plaintiff is engaged in the business of selling tangible personal property. 27 C. J., p. 234; Lee v. Griffin, 1 B. & S. 272, 121 Reprint, 716; Pratt v. Miller, 109 Mo. 88; Federal Brilliant Co. v. Nelson, 231 Mo.App. 1049, 84 S.W.2d 424; People ex rel. Walker Engraving Corp. v. Graves, 243 A.D. 652, 276 N.Y.S. 674; Cusick v. Commonwealth, 84 S.W.2d 14; State Tax Comm. v. Hopkins, 176 So. 210; Schmidt v. Rozier, 121 Mo.App. 309. (3) The construction placed upon a statute by an administrative officer is entitled to consideration. Special Rule 57, p. 71, Rules & Regulations relating to the Missouri Sales Tax Act of 1937; State ex rel. Union Elec. L. & P. Co. v. Baker, 316 Mo. 863, 293 S.W. 399.

Cooley, C. Westhues and Bohling, CC., concur.

OPINION

COOLEY

Action for declaratory judgment by which plaintiff sought to have the court declare it not to be engaged in the business of selling tangible personal property at retail, as defined by the Sales Tax Act of 1937, page 552 et seq., particularly Section 1, paragraph g and Section 2, paragraph a, and not subject to the provisions of the act relative to assessment and collection of the tax; also that Rule 57 promulgated by the State Auditor, so far as it applies to plaintiff, is invalid. Defendants by their answer assert that plaintiff is subject to the tax, that on the facts stated in plaintiff's petition the transaction there described is a sale of tangible personal property at retail within the purview of the Act, and that Rule 57 is a reasonable and correct construction of the Act and they ask the court so to declare. The court found and by its judgment declared as prayed by defendants and dismissed plaintiff's bill. Plaintiff appealed. It is agreed that appellant in its brief has made a correct statement of the facts, as follows:

"Plaintiff's petition alleges that it is engaged in the dental laboratory business in the City of St. Louis, Missouri. It further states that in the course of its business it does not sell any dental equipment, dental appliances or dental supplies, but is engaged exclusively in the making, manufacturing and fabricating of artificial dentistry, dentures, inlays, bridge work and dental restoratives exclusively for dentists from plaster models or impressions made by the dentists of the mouths of their particular patients; that each and every item manufactured by plaintiff are designed exclusively for the individual use of the particular patient of the dentist ordering said item, and that said dentures or devices so manufactured by plaintiff are of no value whatever to any other person except the individual patient for whom such denture, or other restorative made by plaintiff, is designed and made; that the finished denture or other restorative manufactured and delivered to the dentist by plaintiff is thereafter placed in the mouth of the patient by the dentist and that the dentist so affixing said device does not change, alter, modify or tamper with such dental device except to make minor adjustments thereon.

"The petition further alleges that in the manufacture of any of the items in plaintiff's business, certain materials and supplies are used in making the original cast from which the finished denture is ultimately made, and, that all of the materials are completely destroyed in the process of manufacture of the finished denture or dental device.

"The petition further states that the cost of materials comprising the finished denture or dental device is but a small fractional part of the cost of the finished denture and that by far the greatest cost is comprised of the cost of the destroyed materials and supplies, the cost of skilled and expert technicians, and the costs of machinery and equipment supplied by plaintiff.

"To sustain the allegations in plaintiff's petition, plaintiff's evidence at the trial of the cause showed that it manufactures full dentures, partials, porcelain crowns, fixed bridge work, cast gold crowns and inlays; that plaintiff has nothing whatever to sell, such as dental equipment, medicines, or a general line of dentists' tools. Before any article is manufactured by plaintiff it has to receive a prescription from the dentist and an impression of the mouth of the dentist's patient. The method of manufacture and finishing of the various dentures are fully set forth in appellant's abstract of the record; that the witness (Robert J. Kofron, president of plaintiff company) in all of his experience (twenty years) has never seen two impressions from two different mouths that were identically alike; that a denture has no salvage value whatever, excepting gold restoratives; that a set of teeth made for a particular patient of a dentist cannot be used by any other person. When the finished denture is delivered to the dentist, plaintiff bills the dentist for it; that plaintiff does not look to the patient at all for pay for the manufactured article; that plaintiff is unfamiliar with the price that the dentist makes or of the profit that the dentist makes on the articles manufactured by plaintiff.

"Plaintiff's evidence further showed that the substances that are used in the manufacture of a denture, other than the final product, are all destroyed completely; that the actual cost of the material of a denture is between eleven and fifteen cents and the price of the finished product to the dentist is three dollars, or approximately 5 per cent or less of the finished product; that beginners in the business are paid twenty-five dollars per week and that the finished technician receives all the way up to seventy-five dollars per week; that in the case of gold crowns the cost of materials is approximately 30 per cent of the finished product price; that in the manufacture of a porcelain cap the cost of materials is about six cents, and the crown costing the dentist six dollars and more, the cost of materials, therefore, being about 1 per cent of the price of the product and that the final price is practically all labor.

"The defendants admit that Special Rule No. 57 was formulated by the State Auditor, claiming it to be a reasonable and correct construction of the Sales Tax Act as it applies to this plaintiff and claiming that the plaintiff is selling the said dentures, etc., to the dentists who order such articles, and by the Sales Tax Act the tax of 2 per cent of the purchase price charged is due the State of Missouri."

Section 2 of the Sales Tax Act, Laws 1937, l. c. 557, provides that there is levied and imposed and shall be collected and paid (a) "upon every retail sale in this State of tangible personal property a tax equivalent to two (2) per cent of the purchase price paid or charged. . . ." By Section 5 the seller is to collect and remit the tax.

Paragraph (g) of Section 1 defines "retail sales" thus: "'Sale at retail' means any transfer made by any person engaged in business as defined herein of the ownership of, or title to, tangible personal property to the purchaser, for use or consumption and not for resale in any form as tangible personal property, for a valuable consideration."

Rule 57 promulgated by the State Auditor, so far as pertinent here, provides that "Dental laboratories . . . who . . . pursuant to the dentist's instructions prepares and makes inlays, bridgework and false teeth, make sales for use or consumption within the meaning of the Act and must collect the tax on all such sales made and shall remit same to the State Auditor."

The...