E. C. Olsen Co. v. State Tax Commission

• Decision Date: 18 April 1946
• Docket Number: 6889
• Citation: 109 Utah 563,168 P.2d 324
• Court: Utah Supreme Court
• Parties: E. C. OLSEN CO. v. STATE TAX COMMISSION

168 P.2d 324

109 Utah 563

E. C. OLSEN CO. v. STATE TAX COMMISSION

No. 6889

Supreme Court of Utah

April 18, 1946

Rehearing Denied June 14, 1946.

Certiorari By The E C Olsen Company To Review The Action of The State Tax Commission of The State of Utah In Finding Plaintiff Deficient In Its Sales Tax Payments As Provided By The Emergency Revenue Act of 1933 As Amended

Case remanded to Tax Commission in accordance with opinion.

James A. Howell, David L. Stine, and Neil R. Olmstead, all of Ogden, for plaintiff.

W. L Skanchy, Wayne L. Christoffersen, and G. Hal Taylor, all of Salt Lake City, for defendant.

Wolfe Justice. McDonough and Wade JJ., concur. Larson, Chief Justice (dissenting). Pratt, J., not participating.

OPINION

Wolfe Justice.

Certiorari to review the action of the State Tax Commission in finding plaintiff deficient in its sales tax payments as provided for by the Emergency Revenue Act of 1933, c. 63, as amended by Chapter 20, Laws of Utah, 2nd Special Session 1933 and by Chapter 91, Laws of Utah 1935.

Plaintiff corporation has been for many years and now is engaged in the manufacture and/or sale of fruit picking boxes, fertilizers, insecticides, shipping crates and related items. Since the passing of the Emergency Revenue Act of 1933 (Sales Tax Act) plaintiff has not collected sales tax from its customers nor has it remitted to the Tax Commission any amount as a sales tax on the sales of insecticides to growers, car strips, picking boxes, pea canning trays, milk cases or boxes and corrugated can cases.

From the time of the passing of the Sales Tax Law until February, 1945, no action was taken by the State Tax Commission to collect from plaintiff the sales tax on the above sales. During said period of over twelve years an auditor from the Tax Commission audited plaintiff's books one or more times. There is evidence that said auditor told plaintiff's manager that the sales in question were exempt from the sales tax.

On the 3rd of February, 1945, the State Tax Commission made a deficiency assessment against plaintiff for the sales tax on above listed sales for the past three years. Plaintiff filed a petition for hearing on the proposed deficiency which hearing was held before two members of the Tax Commission on the 9th of March, 1945. A further hearing was held on May 10th, 1945 before the four members of the Commission. The findings and decision in the matter, dated August 30th, 1945, were signed by only two members of the Commission, both of whom attended all the hearings. Said decision ordered plaintiff to pay sales tax on sales of the above listed items made during the past three years. No penalties were imposed.

The sales tax in this state is a tax on the "consumer". Section 80-15-4 and 2, U. C. A. 1943; Western Leather & Finding Co. v. State Tax Commission of Utah, 87 Utah 227, 48 P. 2d 526. It is the duty of the vendor to collect the tax from vendees who are "consumers" and to remit same with proper records to the Tax Commission. Section 80-15-5, U. C. A. 1943. However, the last cited section of the code makes the vendor to consumers liable for the sales tax regardless of whether or not said vendor collects said tax from the vendee.

Plaintiff's attack on the actions of the Tax Commission is based on the following contentions:

1. The plaintiff taxpayer did not have a hearing before the Tax Commission as provided by law in view of the fact that the Tax Commission is a four-man Commission and only two commissioners attended one of the hearings.

2. That no tax deficiency has been assessed against plaintiff since the decision on the hearings is signed by only two commissioners.

3. That all of the questioned sales come within the exemptions allowed by subdivision (f) 80-15-2, U. C. A. 1943, which reads as follows:

"Each purchase of tangible personal property or product made by a person engaged in the business of manufacturing, compounding for sale, profit or use, any article, substance or commodity, which enters into and becomes an ingredient or component part of the tangible personal property or product which he manufactures, or compounds, or the container, label or the shipping case thereof, shall be deemed a wholesale sale and shall be exempt from taxation under this act; and for the purpose of this act, poultry, dairy and other livestock feed, and the components thereof, and all seeds and seedlings, are deemed to become component parts of the eggs, milk, meat and other livestock products, plants and plant products, produced for resale; and each purchase of such feed or seed from a wholesaler, or retailer as well as from any other person shall be deemed a wholesale sale and shall be exempt from taxation under this act."

4. That the questioned sales of "car strips" and of "picking boxes" are wholesale sales in fact.

5. That in view of the facts that for over twelve years and since the sales tax law was enacted the Tax Commission did not attempt to make plaintiff charge sales tax on the questioned sales and that during said twelve years Tax Commission auditors have on one or more occasions assured plaintiff that said sales were excluded from said tax, the Tax Commission is now precluded from demanding the amount of the back tax.

As to the plaintiff's first contention: Did the taxpayer have a hearing though a quorum of the Tax Commission did not attend all sessions thereof? Section 80-5-40, U. C. A. 1943 provides:

"A majority of the [Tax] Commission shall constitute a quorum for the transaction of business."

In the case of Crow v. Industrial Commission, 104 Utah 333, 140 P. 2d 321, 322, 148 A. L. R. 316, this court held that where there is a conflict in the testimony, and the weight and credibility to be given testimony of the various witnesses is the determining factor, the person who hears the testimony and sees the witnesses while testifying, whether a member of the board, or an examiner or referee, must pass on to the deciders his findings, conclusions and impressions on the testimony he heard. Where, at the time the decision is rendered, he has severed his connections with the board, commission or fact finding body, the record must show affirmatively that the one who finds the facts had access to the benefit of his findings, conclusions and impressions on such testimony, by either written or oral reports thereof. This court there said:

"This does not necessarily require that all of the commissioners must be present at the hearing, or even that the one hearing the evidence must concur in the result, but his opinion on the testimony must be available to the commission in making its decision."

In the writer's concurring opinion in the Crow case, supra, on page 326 of the Pacific Report, the matter is summarized as follows:

"The upshot of the matter is that even where the Administrative Agency is performing functions in their nature judicial * * * the requirements of due process do not require that he who conducts the hearing must make or participate in the decision * * *. What is required to satisfy the demands of due process, that is, of a full or fair hearing, is that he who observes the witness and listens to the evidence must transmit his observations or conclusions to those others who, whether they are superiors or associate members of the same agency, are to decide and this may be done in the form of tentative findings or by a report or recommendations or orally in conference. And ordinarily where the examiner is still connected with the agency at the time it renders its decision it will be presumed that he has communicated his observations and conclusions to the body whichemployes him or of which he is a part. * * *." Also see 42 Am. Jur. 484, 485.

In the case at bar the men who conducted the hearings were Tax Commissioners at the time the decision on said hearings was rendered. Presumably all members of the Commission had the benefits of the hearers' observations and conclusions. It follows that there is no merit in plaintiff's contention that a full hearing was not had because a quorum of the Commission did not attend all sessions thereof.

We proceed to the question of whether or not there is a deficiency assessment against plaintiff by the decision which was signed by only two of the four Tax Commissioners.

The Tax Commission is created by statute and has only such powers as the statute confers upon it. Such powers must be exercised in accordance with the statute. Section 80-5-37, U. C. A. 1943 provides:

"The state tax commission shall be composed of four members * * *."

Section 80-5-40, U. C. A. 1943 states:

"* * * A majority of the [tax] commission shall constitute a quorum for the transaction of business."

Our statute merely defines a quorum for the transaction of Tax Commission business. It is silent as to what part of the quorum must concur to perform Commission business.

It is our opinion that when the Legislature used the word "quorum" in reference to the Tax Commission it intended that when a quorum of the Commission is present, a majority thereof is sufficient to conduct the business of the Commission. See Brown v. District of Columbia, 127 U.S. 579, 8 S.Ct. 1314, 32 L.Ed. 262; Frischer & Co., Inc., et al. v. Bakelite Corporation et al., Cust. & Pat. App.,39 F.2d 247, for that rule in reference to public commissions. See Leavitt v. Oxford & Geneva Silver Mining Co., 3 Utah 265, 1 P. 356; Buell v Buckingham, 16 Iowa 284, 85 Am. Dec. 516; Sargent v. Webster, 13 Metc., Mass., 497, 46 Am. Dec. 743; Ex Parte Willcocks, 7 Cow., N.Y., 402, 17 Am. Dec. 525; Wells v. Rahway White Rubber Co., 19 N. J. Eq. 402, 404; Fletcher Cyclopedia Corporations (permanent edition), Section 425, for the rule applied to corporate board of directors. See...