Cass v. Colorado Beverage Co.

• Decision Date: 19 June 1950
• Docket Number: No. 16464,16464
• Citation: 122 Colo. 101,220 P.2d 867
• Parties: CASS v. COLORADO BEVERAGE CO.
• Court: Colorado Supreme Court

Page 867

220 P.2d 867

122 Colo. 101

CASS v. COLORADO BEVERAGE CO.

No. 16464.

Supreme Court of Colorado, en Banc.

June 19, 1950.

J. Glenn Donaldson, Charles H. Haines, Denver, for plaintiff in error.

David Rosner, Walter F. Scherer, Denver, for defendant in error.

HAYS, Justice.

This controversy concerns the assessment for ad valorem taxes of a stock of merchandise consisting of distilled spirits. The specific question presented is whether or not the amount paid for state and federal excise taxes on said spirits should be included in the assessor's valuation. The trial court found that such excise taxes should not be so included, and the assessor seeks reversal of the judgment on writ of error.

Sections 54 and 55, chapter 142, '35 C.S.A., as amended by chapter 158, S.L. '43, and quoted, in so far as here material, in City and County of Denver v. Hover Motors, Colo., 217 P.2d 863, require that all stocks of merchandise shall be assessed as of March 1 of each year on the average amount of money and credits invested in such stocks of merchandise during the preceding twelve months, in accordance with the following statutory formula contained in section 54, supra, as amended, to wit: 'In ascertaining the amount of moneys of any taxpayer invested in merchandise or in manufactures, the assessor shall ascertain the average amount during the fiscal year for which the tax is to be levied; and the average amount of money invested in such merchandise or manufactures during twelve months ending with the last day of February of such fiscal year shall be taken as a true measure of the value of such merchandise or manufactures for such fiscal year.'

Defendant in error is a wholesale dealer in distilled spirits, and purchases all of his stock from distillers located outside the state of Colorado. Stocks of liquor, like other merchandise, are assessed, and the value for assessment purposed ascertained and determined in conformity with the provisions of the above statute. Bedford v. Sinclair, 112 Colo. 176, 147 P.2d 486.

Title 26 U.S.C.A. § 2800, provides for the levying and collection of an excise tax upon all distilled spirits in bond, and provides that such tax shall attach to such spirits as soon as they come into existence, and is payable when such spirits are withdrawn from bond. In practice, as the parties hereto agree, defendant in error was required to remit to the distiller the amount of said federal tax before the spirits were withdrawn from bond. The federal statute makes it unlawful for any person, other than a bonded distiller, to have in his possession in the United States distilled spirits which do not have a United States internal revenue stamp, evidencing payment of said tax, attached to the immediate container.

Section 38, chapter 89, '35 C.S.A., imposes an excise tax upon all malt and vinous liquors sold, offered for sale, or used in this state, to be paid by the first licensee receiving such liquors, if shipped from without the state. Said first licensee is made primarily liable for such tax. The state tax thus imposed becomes a lien upon entry of the liquor into the state. It is by statute made unlawful for any person to sell or offer for sale any alcoholic liquor in Colorado unless stamps evidencing payment of the state tax are attached to the container.

The specific question here involved is whether or not sums paid on account of the federal and state excise taxes constitute moneys 'invested in merchandise' within the purview of the taxing statute. The wholesaler contends that such sums so paid on account of said taxes cannot lawfully be included in the value of the liquor for state ad valorem taxation purposes, while the assessor contends that the amount so paid for taxes constitutes an element in the cost and value of liquors, and should, therefore, be included in the value of such liquors for ad valorem taxation.

The above question has been determined adversely to the contention of defendant in error in Lash's Products Co. v. United States, 278 U.S. 175, 49 S.Ct. 100, 73 L.Ed. 251. That court, speaking through Justice Holmes, said: 'This tax was paid by the petitioner, calculated at ten per centum of the sum actually received by it for the goods sold. But the petitioner had notified its customers beforehand that it paid the ten per cent. tax and it contends that in this way it passed the tax on and that the true price of the goods was the sum received less the amount of the tax. The phrase 'passed the tax on' is inaccurate, as obviously the tax is laid and remains on the manufacturer and one him alone. Heckman & Co. v. I. S. Dawes & Son Co., 56 App.D.C. 213, 12 F.2d 154. The purchaser does not pay the tax. He pays or may pay the seller more for the goods because of the seller's obligation, but that is all. Still the question as to the meaning of the statute remains.

'The petitioner supports its position by a regulation of the Commissioner that when the tax is billed as a separate item it is not to be considered as an increase in the sale price. Naturally a delicate treatment of a tax on sales might seek to avoid adding a tax on the amount of the tax. But it is no less natural to avoid niceties and to fix the tax by the actual price received. Congress could do that as properly as it could have added one-tenth to the tax on the price as fixed by the other items determining the charge to the buyer. The price is the total sum paid for the goods. The amount added because of the tax is paid to get the goods and for nothing else. Therefore it is part of the price, * * *.'

The supreme court of Georgia in Consolidated Distributors, Inc., v. City of Atlanta, 193 Ga. 853, 20 S.E.2d 421, 424, in disposing of the same question, said: 'Such taxes, even though they may in effect have been 'passed on' ultimately to the purchaser by an increase in the purchase-price covering the amount of tax, were an element of cost, first to the dealer and then to the purchaser, by this increased amount which each was required to pay. In determining the cost to the dealer, it is immaterial whether he or the manufacturer paid the stamp tax under the arrangement between them, since in either event the amount paid became part of the actual cost to the dealer. Since the City of Atlanta was authorized under its charter to levy and collect 'an ad valorem tax on all * * * personal property' (Ga.L. 1874, p. 122, § 25), which amount would ordinarily be based on the true market value in the usual course of trade (Code, § 92-4101; 26 R.C.L., § 323), and since in ascertaining such value every fact and circumstance bearing thereon should be considered (State ex rel. Gilbert, Atty. General v. Halliday, 61 Ohio St. 352, 56 N.E. 118, 49 L.R.A. 427), and since liquors on sale without payment of the tax required to make a sale lawful would be illegal and valueless in the ordinary course of trade, but their value would be augmented to the extent of such a paid tax, the City in this case was authorized to require that such taxes, increasing to that extent the cost to the dealer, should be included as an element in assessing the value of the liquor.'

The same question was presented to the Ohio supreme court in Gruen Watch Co. v. Evatt, 143 Ohio St. 461, 55 N.E.2d 794, where the taxpayer claimed a deduction from his ad valorem tax on manufacturing inventory on account of import duties paid upon watch movements and parts. In upholding the tax commissioner in refusing to deduct such import duties from the value of the manufacturing inventory the supreme court of that state said: 'The standard fixed by the statute is 'the then true value of such property in money.' These watch movements and parts had been transported from Biel, Switzerland, to Cincinnati, Ohio, and it cannot be maintained that their value was unaffected by the expenses of transportation, duties and incidental charges paid...