City of Covington v. State Tax Com'n

• Decision Date: 21 December 1934
• Citation: 257 Ky. 84,77 S.W.2d 386
• Parties: CITY OF COVINGTON et al. v. STATE TAX COMMISSION et al. STATE TAX COMMISSION et al. v. CITY OF COVINGTON et al.
• Court: Kentucky Court of Appeals

77 S.W.2d 386

257 Ky. 84

CITY OF COVINGTON et al. v. STATE TAX COMMISSION et al.

STATE TAX COMMISSION et al. v. CITY OF COVINGTON et al.

Court of Appeals of Kentucky

December 21, 1934

Appeal from Circuit Court, Franklin County.

Action by the City of Covington against the State Tax Commission and others, wherein the City of Louisville and others intervened. From the judgment, all parties to the litigation appeal.

Judgment affirmed in part, and reversed in part, with directions.

B. P Wootton, Atty. Gen., and S. H. Brown and H. H. Rice, Asst Attys. Gen., for State Tax Commission.

THOMAS Justice.

The General Assembly of this commonwealth at its Extra Session 1934, enacted chapter 25 of the published acts of that session, and which are now sections 4281v-1 to and including 4281v-19 of the 1934 Special Legislative Issue of the Supplement to Carroll's Kentucky Statutes. This litigation was begun by the filing of a declaratory judgment action in the Franklin circuit court by the city of Covington against the members of the State Tax Commission and Honorable Bailey P. Wootton, Attorney General of the commonwealth, seeking an interpretation of the statute and to have it adjudged that municipalities in the commonwealth, of which the plaintiff was one, were exempt from the payment of the 3 per cent. tax that the statute prescribed should be collected upon the receipts from all retail sales of certain commodities, except such as were expressly exempt by the terms of the act or by constitutional provisions. After the action was filed, various other municipalities of different classifications filed their intervening petitions, and on their motions became parties thereto, and in which the same contention was made and the same relief asked as was done in the petition of the city of Covington. Representative charitable institutions also intervened and sought a declaration of their rights, as well as immunity of themselves from the tax imposed by the statute. Likewise, representative educational institutions filed their intervening petitions asking the same relief, and some retail merchants also came into the case in the same manner and sought the same interpretative relief; they contending, however, that the tax was not one imposed upon the seller, which if true would make him liable for the levied 3 per cent. on the gross amount of sales when made to a buyer or purchaser who, under the law, constitutional or otherwise, is exempted from the payment of the tax. The intervening charitable, educational, and eleemosynary institutions claimed absolute exemption from the payment of the tax in any and all events, not only under the provisions of section 170 of our Constitution, but also under their interpretation of the exemptions contained in section 5 of the act, which we will later insert with our interpretation thereof. It will, therefore, appear that all classes of persons, corporations, and institutions affected by the act are parties to the action; each representative litigant appearing not only for itself, but for and on behalf of others belonging to the same class.

The issues were made by demurrers and motions and some pleadings, following the initial ones, and upon final submission the court, pursuant to a written opinion, adjudged: (1) That sales to municipalities as such are not exempt from the provisions of the act and must be paid by the purchaser to the seller as therein specified; (2) that all merchants and sellers in sales that are taxed by the act must add to his selling price the 3 per cent. burden imposed by the act and collect it from the purchaser either at the time of making the sale or when the account is collected if the sale was made on time, and that he (seller or merchant) is not liable for the 3 per cent. assessment, unless he makes the collection thereof from the purchaser, and which automatically exempts him from accounting to the tax gathering authority for any part of the 3 per cent. levy on sales made to purchasers who by law are exempt from the payment of the assessment; (3) that sales to municipalities for the exclusive use and benefit of educational or charitable purposes under their control, and that sales made directly to such educational and charitable institutions, "are exempt from the provisions of the Act," and that the seller is not required to collect from them any of the levied tax, nor to account therefor to the state taxing authority in the settlements he is required to make with it; (4) that educational and charitable institutions when engaged in making the character of sales described in the statute are likewise exempt from collecting the tax on any of them from its customers, or the one or ones to whom such sales are made, and as a consequence they are exempt from reporting to the State Tax Commission any such sales made by them or from paying any part of the tax; and (5) that municipalities selling any of the tax commodities are not exempted from collecting and accounting for the tax but must do so the same as in sales by private individuals. All parties to the litigation prayed and were granted appeals to this court, and the record has been brought here under the double caption that we have indicated in the styling of the case.

Preliminary to taking up for consideration the various subdivisions of the judgment that we have pointed out, it is appropriate at this point to observe that the fundamental rule for the interpretation of statutes is to declare and administer the intent of the Legislature in enacting it, and which is to be gathered from all parts of the statute and from all of the language employed in it, whether conflicting or otherwise, and to give it the interpretation that such comprehensive view clearly indicates was the legislative intention. However, in applying such fundamental rule the express terms employed in the statute should not always be strictly or literally followed when the general import of the statute, and the clear purpose that the Legislature had in view in enacting it, demonstrate beyond controversy that such express terms, though possessing an ordinary and well understood meaning, should not be literally accepted. In other words, the rule is that a Legislature is forbidden to designate and expressly name in a statute a particular purpose or intention as motivating it when the language of the statute as a whole clearly, unerringly, and unmistakably portrays a different purpose and intention. A contrary rule would authorize it to incorporate in a statute descriptive terms and declared purposes, when the statute itself, read as a whole, prescribed for wholly different ones than those so falsely expressed.

An illustration of what we are endeavoring to declare is found in the case of City of Lexington v. Thompson, 250 Ky. 96, 61 S.W.2d 1092. In that case the Legislature in enacting the statute there involved expressly stated that the public functionary that it created should not be classified as an "officer," although it clothed him with every known power and characteristic of one, and which we in that case held him to be, notwithstanding the Legislature had enacted that he was not, nor could he be considered as one. The rule under consideration is thus stated in the text in 25 R. C. L. p. 1008, § 247: "The court may not, in order to give effect to particular words, virtually destroy the meaning of the entire context; that is, give the particular words a significance which would be clearly repugnant to the statute, looked at as a whole, and destructive of its obvious intent." The case of Van Dyke v. Cordova Copper Co., 234 U.S. 188, 34 S.Ct. 884, 58 L.Ed. 1273, is cited in support of that statement, and numerous are the opinions and text-writers declaring the rule to be that a statute should be interpreted as indicated by all of its parts, rather than as indicated (or even expressed) in one or more particular parts thereof, and which, after all, is but another way of saying that a Legislature may not nullify the clearly expressed import and purpose of a statute by expressing therein a contrary one, a homely illustration of which is that a statute regulating the ownership of dogs could not be made to apply to the ownership of automobiles by the mere ipse dixit of the Legislature that it was so intended. See, also, the text in 59 C.J. 960. Having said this much, we will now proceed to a consideration of the statute, and the various interpretations insisted on as well as those that the trial court put upon it.

The first part of the act is taken up with the definition of terms. Then follows a recitation of the commodities the sale of which is taxed and the sale of each of which, according to the literal language employed, is "imposed" on the sellers thereof, all of which appears in the various subdivisions of section 3 of the act, it being divided into section 3a, 3b, and 3c; but it is distinctly prescribed in each of the subsections that the seller "is required to collect the tax from the purchaser" of the commodity taxed. Other and later provisions impose the duty on him (seller) to make periodical reports to the State Tax Commission of the amount of his gross receipts since the last report with the taxes collected from and paid by the various purchasers and to pay into the treasury through the Tax Commission that amount. By section 4 of the act he is given the right to deduct from the amount of tax so collected from his purchasers 3 per cent. as compensation for his services in collecting it. In defining "gross receipts" upon which the tax is exclusively levied, the words are restricted to sales for which the seller has received the consideration either at the time of making the sale, or by payment of accounts of his customers to whom he extended credit. ...