City of Mobile v. M.A.D., Inc.

• Decision Date: 28 June 1996
• Citation: 684 So.2d 1283
• Parties: CITY OF MOBILE v. M.A.D., INC., d/b/a Lumberyard Cafe. 1930116.
• Court: Alabama Supreme Court

Page 1283

684 So.2d 1283

CITY OF MOBILE v. M.A.D., INC., d/b/a Lumberyard Cafe.

1930116.

Supreme Court of Alabama.

June 28, 1996.

Rehearing Denied Sept. 6, 1996.

Wanda J. Cochran, Asst. City Atty., and John R. Lockett, City Atty., Mobile, for Appellant.

W. Lewis Garrison, Jr. and Ezra B. Perry, Jr. of Corley, Moncus & Ward, P.C., Birmingham, for Appellee.

J. Kenneth Smith, League Counsel, Montgomery, for Amicus Curiae Alabama League of Municipalities, in support of appellant.

PER CURIAM.

The dispositive issue presented in this case is whether Alabama's 56% tax on liquor, see Ala.Code 1975, § 28-3-200 et seq., is a tax levied on liquor retailers or whether it is a tax levied on consumers. This is not the first time this issue has been presented to this Court. For a better understanding of this case, see Guthrie Enterprises, Inc. v. City of Decatur, 595 So.2d 1358 (Ala.1992), wherein this Court, acknowledging that it was making "a fairly close call," held that the liquor tax in question was a tax on consumers.

In Guthrie, the City of Decatur had levied a "license tax of ten (10) percent of the gross receipts of [the retailer's] business derived from the sale of all alcoholic beverages, except beer and table wine." 595 So.2d at 1358. The importance of distinguishing between a tax on the seller/retailer (which tax is not required to be passed on to the consumer) and a tax on the consumer was fully explained in Guthrie:

"Whether the incidence of the state liquor tax falls on the ultimate consumer of the liquor or on the retailer when he buys the liquor from the ABC [Alcoholic Beverage Control] Board store is the dispositive issue in this case. That issue is dispositive, because if the state liquor tax is a consumer tax, then the amount of the state liquor tax included in the sale price to the consumer is not a 'gross receipt' of [the retailer]; that amount is simply the tax. If the incidence of the state liquor tax falls on the retailer, then the amount of the state liquor tax included in the sale price to the consumer is a gross receipt of the retailer, because the retailer is passing on the cost of the tax to the consumer in the form of a price increase, although the consumer is not necessarily the entity that the taxing statutes intended to bear that cost. Accordingly, [the retailer] contends that the incidence of the state liquor tax falls on the ultimate consumer, but the City contends that the incidence of the state liquor tax falls on ... the retailer."

595 So.2d at 1360. (Emphasis in Guthrie.) In reversing a summary judgment for the city, this Court in Guthrie, relying on S & L Beverages & Blends, Inc. v. Ritchie, 567 So.2d 341 (Ala.Civ.App.1990), concluded that the legislature must have intended for the state liquor tax to be a consumer tax. The basic rationale of Ritchie, and, thus, of this Court's holding in Guthrie, was that the liquor tax statutes should be construed so as to be in harmony with the statutes controlling the taxation of beer and table wine, which clearly provide that the taxes levied on those beverages are consumer taxes, with the person or entity paying the tax in the first instance acting as an agent for the state for the collection and payment of taxes. See Ala.Code 1975, §§ 28-3-184 ("malt or brewed beverages") and 28-3-190 ("beer"), and § 28-7-16 ("table wine"). This Court in Guthrie, quoting in part from Ritchie, also stated:

" 'Statutes concerning the taxes on liquor were enacted by the legislature between 1943 and 1980, prior to the time that retailers were allowed to sell liquor to consumers for off-premises consumption, which was permitted in 1981 as a result of the supreme court's decision in Broadwater v. Blue & Gray Patio Club, 403 So.2d 209 (Ala.1981). These statutes provide that the ABC Board shall not absorb the tax, but shall pass it on to the purchaser. The County contends that the use of the term purchaser indicates that it is a tax on the retailer, S & L, which is part of the cost of doing business, and cannot be passed on to the consumer. See Ala.Code 1975, §§ 28-3-200 through -205.

" 'This court, considering similar facts, recognized no distinction between beer and wine taxes and liquor taxes in the case of State Department of Revenue v. B & B Beverage, Inc., 534 So.2d 1114 (Ala.Civ.App.1987), and found further that the intent of the legislature in the use of the term "purchaser" in the statute was for the liquor taxes, as it was for the beer and wine taxes, to be on the ultimate consumer, not the retail stores buying at wholesale for resale.[ ¹] Any other interpretation would lead to double taxation, which "should be avoided whenever possible." Id. at 1115.

" 'Further, concluding that the tax was an excise tax and not a privilege tax, Presiding Judge Bradley, concurring specially, said:

" ' "Taxpayer contends that the liquor tax is an excise tax and, therefore, a consumer tax. If denominated a consumer tax, the liquor tax would be passed on to the ultimate consumer as are the excise taxes on beer and wine. Consequently, taxpayer would be allowed to deduct the liquor tax from gross proceeds for sales tax computation. The Department contends that the statute intended the tax to be on the purchaser and not the consumer. It is my conclusion that the ... tax is an excise tax, not a privilege tax as the Department contends."

" 'Id. at 1117.

" 'And, where the same case discusses the tax as a business expense, the majority said:

" ' "The Department further argues that a rational basis for taxation distinction is created because package stores become the 'purchasers' when they buy their liquor inventory from state stores. But in fact they are not the ultimate purchasers, and they should not be treated as such under a taxing arrangement that disallows their passing the liquor tax on to the real ultimate purchaser, the consumer, as a tax instead of a business expense."

" 'Id. at 1116.

" 'Consequently, we find in the instant case that the liquor taxes imposed by §§ 28-3-200 through -205 are consumer taxes and may properly be deducted from S & L's gross receipts for purposes of computation and payment of the county license tax and sales tax.'

"567 So.2d at 341-42. The only difference between the tax in S & L and the tax in this case is that the gross receipts tax in S & L was a county tax, not a tax imposed by a municipality. We find no significance in that distinction for the purposes of our analysis in this case.

"As the Court of Civil Appeals suggests in S & L, the holding in S & L was based in part on Presiding Judge Bradley's special concurrence in State Department of Revenue v. B & B Beverage, Inc., 534 So.2d 1114 (Ala.Civ.App.1987). Judge Bradley wrote in that case:

" ' "Package store" retail liquor establishments are a relatively new creature in Alabama, coming into existence after 1981 by virtue of judicial interpretation of sections 28-3A-1 through -26, Code 1975. See, Broadwater v. Blue & Gray Patio Club, 403 So.2d 209 (Ala.1981). The Department's regulations are silent as to how they should be taxed.

" 'Taxpayer contends that the liquor tax is an excise tax and, therefore, a consumer tax. If denominated a consumer tax, the liquor tax would be passed on to the ultimate consumer as are the excise taxes on beer and wine. Consequently, taxpayer would be allowed to deduct the liquor tax from gross proceeds for sales tax computation. The Department contends that the statute intended the tax to be on the purchaser and not the consumer. It is my conclusion that the ... tax is an excise tax, not a privilege tax as the Department contends. The taxes levied on beer and wine are considered by the Department to be excise taxes. The Department cites to Ross Jewelers, Inc. v. State, 260 Ala. 682, 72 So.2d 402 (1953), in its regulations regarding beer and wine taxes. I see no distinction between these taxes and the liquor tax.

" 'Ross involved a Federal excise tax commonly referred to as a "luxury tax." The court was faced with interpreting whether gross proceeds should include this tax for the computation of State sales tax. The State there contended the tax was merely a cost of doing business and that, as such, State sales tax could be computed on its inclusion in the gross proceeds. The court disagreed, stating:

" ' "[T]he Federal Retail excise Tax is not imposed upon the retailer as a privilege tax for doing business, but is specifically imposed upon the article sold. It is to be included in the price to the purchaser or consumer and therefore collected from the purchaser or consumer and held by the retailer to be accounted for and remitted to the Federal Government. Under the circumstances it is a mistake to say that the Federal Retail Excise Tax is a part of the expense of sale made by the retailer, because in no way is he obligated to make such outlay and in no way is he responsible for the tax, except that he is a conduit through whom the tax passes from his purchaser to the Federal Government."

" 'Ross, supra.

" 'Ross can be distinguished from the instant case in that the sale of liquor involves a wholesale/retail relationship not found in Ross. I do not see that this difference presents any problem. The merchandise sold in Ross was not part of a highly regulated industry as are the sales of liquor. The State of Alabama requires the existence of the wholesale situation in retail liquor sales. The existence of the wholesale situation does not present a problem in sales of beer or wine.'

"534 So.2d at 1117."

595 So.2d at 1361-62.

Like the retailer in Guthrie, the retailer involved in this case challenged the license tax imposed by the city on the ground that the state liquor tax was a consumer tax. Unlike the City of Decatur in Guthrie, which levied its tax on the "gross receipts" of retailers, the City of Mobile in this case levied a license tax on "the purchase price paid by the retailer for all liquor purchases from all sources." Relying on...