City of St. Louis v. Smith, 35392.

• Decision Date: 01 April 1938
• Docket Number: No. 35392.,35392.
• Citation: 114 S.W.2d 1017
• Court: Missouri Supreme Court
• Parties: CITY OF ST. LOUIS, a Municipal Corporation, ALFRED LEWALD, Inc., a Corporation, R.C. MICOTTO CONSTRUCTION COMPANY, a Corporation, PELLIGREEN CONSTRUCTION & INVESTMENT COMPANY, a Corporation, SAMUEL KRAUS, Doing Business as SAMUEL KRAUS COMPANY, Appellants, v. FORREST SMITH, State Auditor.

114 S.W.2d 1017

CITY OF ST. LOUIS, a Municipal Corporation, ALFRED LEWALD, Inc., a Corporation, R.C. MICOTTO CONSTRUCTION COMPANY, a Corporation, PELLIGREEN CONSTRUCTION & INVESTMENT COMPANY, a Corporation, SAMUEL KRAUS, Doing Business as SAMUEL KRAUS COMPANY, Appellants, v. FORREST SMITH, State Auditor.

No. 35392.

Supreme Court of Missouri.

Division One, April 1, 1938.

Appeal from Cole Circuit Court. — Hon. Nike G. Sevier, Judge.

REVERSED.

Edgar H. Wayman and John G. Burkhardt for appellants.

The use by a building contractor of materials and supplies in construction or repair of a public building, or of a public sewer, or a public alley, which materials are thereby incorporated into the realty, is not a sale at retail within the meaning of the Emergency Revenue Act of 1935, and Special Rule No. 13 promulgated by the State Auditor relating to owners, contractors and subcontractors is invalid. State v. Christhilf, 185 Atl. 456; Boyer-Campbell Co. v. Fry, 271 Mich. 282, 260 N.W. 165, 98 A.L.R. 827; State v. J. Watts Kearney & Sons, 191 La. 554, 160 So. 77; 23 R.C.L., p. 1233, sec. 49; Bradley Supply Co. v. Ames, 359 Ill. 162, 194 N.E. 272; Sec. 6, Art. X, Mo. Const.; Sec. 9743, R.S. 1929.

Roy McKittrick, Attorney General, and Olliver W. Nolen, Assistant Attorney General, for respondent.

(1) The city of St. Louis, a municipality, is liable for the tax as a purchaser of tangible personal property by the terms of the Emergency Revenue Act, Laws of Missouri 1935, pages 411, 426, the same as any other purchaser of tangible personal property. Secs. 1, 2, subsec. (a), Laws 1935, pp. 413, 415; City of Covington v. State Tax Comm., 77 S.W. (2d) 386; State ex rel. Mo. Portland Cement Co. v. Smith, 90 S.W. (2d) 405; State Tax Comm. v. City of Logan, 54 Pac. (2d) 1197; Oklahoma G. & E. Co. v. Okla. Tax Comm., 58 Pac. (2d) 124; City of Ardmore v. State, 32 Pac. (2d) 728. (2) Contractors (plaintiffs) are the sellers of tangible personal property contemplated by the act, and the city of St. Louis is the user and consumer. It therefore becomes the duty of the contractor to collect the tax and remit the same to the State Auditor. Sec. 5, Laws 1935, p. 417; Bradley v. Ames, 359 Ill. 162; Blome v. Ames, 365 Ill. 456; Wiseman v. Gillioz, 96 S.W. (2d) 459; Boyer-Campbell v. Fry, 291 Mich. 282, 260 N.W. 165; City of Covington v. State Tax Comm., 77 S.W. (2d) 386. (3) Such sums, in the instant case thirty per cent, as are derived from the Federal Government by the city of St. Louis are outright grants or gifts and become the funds of the city when received and such funds lose their Federal identity. Only the Federal Government could maintain that such taxation constitutes or burdens a Federal instrumentality. Meyer Const. Co. v. Corbett, 7 Fed. Supp. 616; Silas Mason Co. v. Heneford, 15 Fed. Supp. 958; Ranier Natl. Park Co. v. Henneford, 45 Pac. (2d) 617; General Const. Co. v. Fisher, 39 Pac. (2d) 358, 97 A.L.R. 1257.

FRANK, P.J.

This suit was instituted in the Cole County Circuit Court by appellants, plaintiffs below, asking that court to declare by its judgment whether or not the city of St. Louis is required to pay a one per cent sales tax, under Laws of Missouri 1935, page 411, on tangible personal property used in the construction of a street paving, a sewer, or a hospital, where the price to be paid by the city for such construction was fixed by contract between the city and the contractor at a definite lump sum for the completed work. The court below held in favor of the State Auditor, and declared the city was liable for the tax. Plaintiffs appealed.

The four appellants named with the city are the contractors who did the work in question for the city. The contracts for such work provided, in substance, that the contractors should furnish all labor and material necessary to complete the work, and deliver to the city the completed work for a fixed sum of money.

The pleadings are not challenged. They present the issues raised on this appeal. The prayer of the pleadings will sufficiently present the contentions of the parties. Plaintiffs' petition prays the court to declare the law as follows:

"Wherefore the plaintiffs pray that the Court enter its decree, defining and declaring the rights of the parties in the premises, and determining (1) whether the plaintiff the City of St. Louis is the consumer of tangible personal property used by a contractor in the construction of a street paving, or a sewer, or a hospital, where the price paid is a fixed sum for the completed work, or a fixed sum for each completed unit thereof, (2) whether the plaintiff the city of St. Louis is acting in its governmental capacity in the construction of street paving, sewers, and hospitals, or any of them, and if so, whether plaintiff is required by said Sales Tax Law to pay the sales tax on the tangible personal property used in the construction thereof, (3) whether plaintiff the City of St. Louis is required by said Sales Tax Law to pay a sales tax on tangible personal property used in the construction of a public work paid for with funds granted by the Government of the United States for that purpose through its governmental agencies."

Defendant's answer asks the court to adjudge, decree and declare:

"First — That the plaintiff City of St. Louis is a municipal corporation, and by the terms of the Emergency Revenue Act is subject to the payment of the tax of 1 per cent on all purchases of tangible personal property so purchased by said City.

"Second — That the plaintiff contractors are sellers of tangible personal property, as contemplated by the Sales Tax Act, and that the City of St. Louis, upon the completion and consummation of the contracts pleaded in plaintiffs' petition, is the user and consumer as contemplated within the act, and that said contractors are sellers within the terms of the act.

"Third — That such sums as are given and granted by the Federal Government to the amount of 30 per cent more or less, as alleged in plaintiffs' petition, when so granted and given to the City of St. Louis, become funds of the City of St. Louis, and that said funds are no longer Federal funds, and that the taxation thereof does not constitute taxation of Federal instrumentalities.

"Fourth — That the rules and regulations made and promulgated by the State Auditor, Forrest Smith, are a reasonable and correct construction of the Sales Tax Act as it applies to plaintiffs, and that it is his duty to enforce and carry out the terms thereof.

"Fifth — That irrespective of whether or not the plaintiff City of St. Louis is acting in a governmental capacity in the construction of street pavements, sewers and hospitals, plaintiff City of St. Louis is subject to the terms of the act and is liable for the tax on such sewers, hospitals and improvements as it contracts for and constructs.

"Sixth — That the improvements in the nature of hospitals, pavements and sewers, contracted for by plaintiff City of St. Louis, do not become a part of the realty on which the same are constructed, but that same remain tangible personal property within the terms of the contract, and are subject upon final completion and acceptance by plaintiff City of St. Louis to the tax of 1 per cent of the total cost price.

"Seventh — That, as a matter of law, plaintiffs cannot commingle their cause of action praying for a declaration of rights and include therein a prayer and an action for injunctive relief.

"Eighth — That plaintiff contractors are the sellers of tangible personal property within the meaning of the act, and that as such sellers of tangible personal property, which has been used in the construction of sewers, hospitals and other civil improvements in the City of St. Louis, are liable to the ...