Birmingham Vending Co. v. State

• Decision Date: 17 February 1949
• Docket Number: 6 Div. 722.
• Citation: 38 So.2d 876,251 Ala. 584
• Parties: BIRMINGHAM VENDING CO. v. STATE.
• Court: Alabama Supreme Court

38 So.2d 876

251 Ala. 584

BIRMINGHAM VENDING CO. v. STATE.

6 Div. 722.

Supreme Court of Alabama

February 17, 1949

Kingman C. Shelburne and Berkowitz, Fleisher & Miller, all of Birmingham, for appellants.

A. A. Carmichael, Atty. Gen., and Gardner F Goodwyn, Jr., Asst. Atty. Gen., for appellee.

FOSTER Justice.

This is one of several appeals from a final assessment by the State Department of Revenue by authority of Title 51, section 753(b), Code. It is an excise tax payable by 'every person, firm or corporation engaged' in the business of operating musical devices within the State of Alabama. The tax is two percent of the gross receipts. It is a feature of the sales tax, though it does not involve a sale, but is rather in the nature of a use tax. Its administration is vested in the State Department of Revenue. Title 51, section 780, Code.

The musical device here in question is an automatic record player, which operates when the coin is placed in a slot. Appellants were the owners of many of them for which they paid the sales tax charges in acquiring them.

The substance of the material facts is thus stated in appellants' brief:

'Appellants furnished automatic music machines to small cafes lunchrooms, confectionaries, etc., by agreement with, and, at the order of, the proprietors of such places. The title to the music machines remained in appellants. The machines were constructed in such a fashion that the insertion of a coin was all that was required to cause them to function. They were adjusted by appellants to take either five cents or ten cents per play, as requested by the proprietors of the places of businesses in which the machines were placed.

'The music records used in the machines were furnished by appellants, but the type of records and specific selections requested by proprietors were supplied whenever possible. Proprietors were never bound to accept any record which they did not want.

There was never any particular space assigned to appellants in a proprietor's place of business; the proprietors could, and often did, move the machines from one location in their place of business to another, as they saw fit.

'The usual agreement between appellants and the proprietors, as to the amount which must be paid to appellants, was as follows: If the machine took in $10.00 or more per week, appellants received 50% of the intake; if it took in less than $10.00, but more than $6.00, appellants received 66 2/3% of the intake; and, if less than $6.00, the appellants received 75% of the intake. If the appellants' share did not amount to $2.00, the proprietor would have to pay that amount, or the machine would be taken out of his place of business. Appellants always had written contracts of some kind with virtually every proprietor who had one of appellants' machines in his place of business.

'Appellants collected from proprietors by sending to each location an agent who would open the cash box in the machine in the presence of the proprietor. In most cases, the keys to the machine and cash box were kept by appellants. The money was always counted either by the agent in the presence of the proprietor, by the proprietor himself, or by the agent and proprietor jointly. In every case, settlement was made between the appellants' agent and the proprietor at the time the music machine was opened in the proprietor's place of business, so that there were never debits and credits subsisting between them thereafter.

'The appellants' agent, prior to taking the appellants' agreed percentage from the proceeds of the cash box, with the proprietor's consent, would withdraw 2% of the total proceeds. These funds were to be set aside by appellants as a reserve for sales tax liability pending the outcome of this suit, which was then proposed by appellants' counsel.

'The automatic music machines were purchased by appellants from manufacturers for about $1,000.00 each, and a use or sales tax was paid on each. Use taxes were also paid by appellants on the records which were purchased by them from wholesalers. The federal license was customarily paid out of the intake of the machines, but appellants paid State and county licenses for the machines. In addition, appellants, of course, assessed and paid ad valorem taxes for the ownership of personal property in Jefferson County upon the machines.

'The proprietors of the places of business in which the machines were placed supplied the electricity for the operation of the machines; the proprietors could permit the playing of the machines during whatever time of the day or night that they considered proper; the proprietors could control the volume, loudness or softness, by the use of a device on the machines; and the proprietors could, of course, allow or refuse to allow whomever they wished to play the machines.

'Appellants, during the periods covered by the assessments involved in these cases, occasionally rented the music machines to a party or some social club for specified period of time, receiving flat daily or weekly sums as rental for the use of said machines. On these occasions, if coins were used to operate the machines, the entire intake would be retained by the party or social club, and appellants would receive only the flat per diem or weekly sums.'

Those circumstances constituted them joint adventurers. Saunders v. McDonough, 191 Ala. 119, 67 So. 591; Brewer v. Ewart, 210 Ala. 292, 97 So. 910; Pfingstl v. Solomon, 240 Ala. 58, 197 So. 12; Peoples v. Seamon, 249 Ala. 284(7), 31 So.2d 88.

There were no monthly reports of such receipts made to the State Department of Revenue, as required by section 756, Title 51, Code. Whereupon, after pursuing the statutory requirements, not here questioned, the Revenue Department made an assessment against appellants for the full amount of the two percent so deducted without including the proprietor of the location in it. Thereupon appellants appealed to the circuit court, in equity, as authorized by section 140, Title 51, and filed their bill as the procedure contemplates. It is doubtful if the bill makes the State Department of Revenue and Phillip J. Hamm, Commissioner of Revenue, parties as well as the State of Alabama. But they as parties demurred, and their demurrer was sustained, and they were dismissed as parties.

Section 140, Title 51, provides that from such final assessment 'either the state or the taxpayer may appeal'. 'In such appeals the party taking the appeal shall be styled the appellant and the party against whom the appeal is taken shall be styled the appellee.' The Department of Revenue administered by the commissioner is the State tribunal designated by law with judicial functions to pass upon questions of fact or law which may arise in making an assessment. Perry County v. Selma M. & M. R. Co., 58 Ala. 546, 559; Union Bank & Trust v. Phelps, 228 Ala. 236, 153 So. 644(5); State Tax Comm. v. Stanley, 234 Ala. 66(3), 173 So. 609; State Tax Comm. v. Bailey & Howard, 179 Ala. 620(6), 60 So. 913(15); Ex parte Homewood Dairy Products Co., 241 Ala. 470, 3 So.2d 58(15); State v. Pollock, Ala.Sup., 38 So.2d 870; Constitution of 1901, section 139.

The tribunal itself so acting is not a proper party to an appeal provided by section 140, supra: neither is the commissioner. That statute shows clearly that the parties to it are the State and taxpayer. State v. Louis Pizitz Dry Goods Co., 243 Ala. 629, 11 So.2d 342(8).

There was no error in sustaining the demurrer of the Revenue Department and Hamm, and dismissing them as parties.

Appellants next insist that the assessment made by the Revenue Department against them as to the principal sum and interest on it should not be sustained, and that the penalty attached by the Department was properly remitted by the trial court.

Appellants argue that any assessment should have included the proprietors of the places where the instruments were located; that so far as the pleadings show the State is not seeking to hold appellants as trustees of the fund for the State, or to enforce an agreement expressed or implied by appellants to pay the amount of the fund to the State; that such procedure which occurred between the parties is not relevant to the assessment or as to whether the whole of it may be made to appellants alone without including the other party equally liable. That procedure was brought into the situation by the State's answer to the bill on appeal. It does not in any manner appear in the assessment proceedings before the Revenue Department. Its only effect is to illustrate the status of the parties to each other.

Appellants in brief state that this litigation is for the purpose of finding out where appellants stand with reference to any liability for the tax on gross receipts of the machines. Of course any issue proper to be litigated on such appeal to an equity court would be available. State v. Louis Pizitz Dry Goods Co., supra, headnote 7. The answer of the State setting up such matters did not seek relief other than a confirmation of the assessment and a decree for its payment.

We think it is clear that appellants and the proprietors of the locations in question were, as we have said, joint adventurers in the business there conducted of operating the musical devices, and as such were controlled as to liability to assessment on the principles which apply to that sort of business enterprise.

Under their joint adventure they constituted themselves a 'person, firm or corporation' under section 753(b), Title 51, Code. Portland Syndicate v. Belchic & Laskey Gas Co., 1 La.App. 586. The term 'person' as used in section 753 is defined in section 752, Title 51, as including any group or combination acting as a unit.

We may here observe that the question is not the...