Clarion Ready Mixed Concrete Co. v. Iowa State Tax Commission

• Decision Date: 08 February 1961
• Docket Number: No. 50232,50232
• Citation: 107 N.W.2d 553,252 Iowa 500
• Parties: CLARION READY MIXED CONCRETE CO., a corporation, Appellee, v. IOWA STATE TAX COMMISSION, Appellant.
• Court: Iowa Supreme Court

Page 553

107 N.W.2d 553

252 Iowa 500

CLARION READY MIXED CONCRETE CO., a corporation, Appellee, v. IOWA STATE TAX COMMISSION, Appellant.

No. 50232.

Supreme Court of Iowa.

Feb. 8, 1961.

Norman A. Erbe, Atty. Gen., and Gary S. Gill, Sp. Asst. Atty. Gen., for appellant.

Archerd, Birdsall & Draheim, Clarion, for appellee.

LARSON, Justice.

This is an appeal from a district court judgment reversing the action of the Iowa State Tax Commission confirming an additional sales tax assessment against plaintiff on transportation charges made and collected by it for delivery of ready mixed concrete to its customers. The dispute revolves around the sales arrangements, the sales tax provisions, and Tax Commission rules relating thereto. The trial court, in effect, held that under the record separate sales of ready mixed concrete and of transportation services were disclosed, and that under Section 422.45, subd. 2, the transportation services were exempt from the state sales tax. We agree with the trial court.

The case was submitted upon a stipulation and the testimony of Mr. L. C. Toft, president and general manager of the plaintiff corporation. From the stipulation it appears plaintiff was engaged in the retail sale of ready mixed concrete during the period involved from April 1, 1955, to March 31, 1959. Its plant is situated on the railway right of way at Clarion, Iowa. There, mixer trucks owned by the company are loaded with necessary materials kept on hand to make concrete. The mixed concrete is then transported to the customer in the trucks. Concrete is furnished to customers in both the city and county. Ready mixed concrete is offered for sale at a certain price per yard 'and a separate charge (is made) for the transportation of said concrete at a certain price per yard-mile.' Transportation charges therefor varied depending upon the number of miles of travel required. These charges were kept in separate books and appear as separate entries on the consumer's invoice. 'On each sale involved in this controversy the delivery charges made by the plaintiff were based upon a cubic yard mile basis computed as follows: $.70 per cubic yard for the first two miles or fraction thereof and $.12 per yard mile beyond the two mile radius.'

The plaintiff charged, collected and remitted the sales tax required on the ready mixed concrete, but did not charge, collect or remit any sales tax on the separate transportation charge. It appears in the stipulation 'that at no time during this period did the plaintiff quote any ready mixed concrete at a delivered price or make any sales at a price F. O. B. his plant and subsequently furnish transportation service without additional charge.' (Emphasis supplied.) Pursuant to an audit by defendant August 13, 1959, the additional assessment covering the transportation charges was made in the sum of $453.66, and a penalty of $157.60 levied against plaintiff. It was agreed that if these charges were subject to a sales tax, the amount of the assessment and penalty is correct.

Mr. Toft testified the special type mixer trucks are driven under a loader at the plant, and a prepared batch of measured material is dumped into a drum mounted on the truck. This drum is driven by a separate motor and the batch immediately mixed at the plant, usually in two-yard batches. After the ingredients of sand, fine material, rock, cement and water are mixed for some 'five, six minutes' at high speed, the driver pulls out to make the delivery. The drum is kept revolving at slow speed during the trip 'to keep it stirred up', and especially to avoid getting 'flat spots' on the 'rollers' when the load bounces up and down during transportation. Nothing is done to the mixed concrete in transit or on delivery except for a little added water if the mix is too dry to suit the customer. The price of the ready mix during the period involved varied between $13 and $14 per yard. The basis of the transportation charges or service was the company's expenses of operating the trucks and depreciation. Mr. Toft further testified that when a person called to ask 'How much is concrete?' his answer would be '$13.00 a yard plus delivery.' When they want to know as to the cost of delivery he asks 'How far out do you live? For ten miles it is $.70 for the first two miles, and then it is $.12 a yard mile for the next 8 miles.' It is true that by adding the cost of the concrete and the transportation cost one can arrive at a so-called 'delivery price', which defendant contends is not exempt under the Iowa sales tax law and its rules. It maintains no sale is in fact consummated or intended until the ready mixed concrete is delivered to the customer, and that until such time delivery costs are but a part of the expense to the retailer in making a sale of tangible personal property and, as the total charge is a part of the gross receipts, it is taxable under Section 422.43, 1958 Code of Iowa, I.C.A., and not exempt under Section 422.45, subd. 2, as claimed by plaintiff.

Section 422.43 provides: 'There is hereby imposed, beginning on the first day of April, 1937, a tax of two percent upon the gross receipts from all sales of tangible personal property, consisting of goods, wares, or merchandise, except as otherwise provided in this division, sold at retail in the state to consumers or users; * * * (Emphasis supplied.)

Section 422.45 provides: 'There are hereby specifically exempted from the provisions of this division and from the computation of the amount of tax imposed by it, the following: * * * 2. The gross receipts from the sales, furnishing or service of transportation service. * * *'

The record amply supports the trial court's finding that the ready mixed concrete was sold and charged as an item of tangible personal property, and that transportation service in the form of delivery of that property was also sold and separately charged to the customer. Thus the only real issue was the meaning of Section 422.45, subd. 2, of the 1958 Code, I.C.A., which specifically exempted from sales tax in Iowa the gross receipts from the sale of transportation services. The learned trial court found no ambiguity in the statute, and neither do we. The ambiguity, if any, involved in this dispute arises from an attempt by the Tax Commission to interpret that section in Rule No. 41, 1958 Iowa Departmental Rules, page 458.

Defendant explains that Rule No. 41 sets out a number of examples where transportation services are involved and indicates the tax consequences to a retailer. Under the first two paragraphs plaintiff appears to be exempt, but under the third paragraph, if the Tax Commission's contention is correct, plaintiff must pay tax upon all gross sales of transportation services rendered prior to the actual delivery of possession or, as it contends, the actual transfer of title to the personal property involved. The first paragraph provides: 'Where a seller supplies tangible personal property from stock, the transportation charges for shipment or delivery from the seller to the consumer or user, shall become part of the purchase price on which sales tax is computed, except and unless such delivery or transportation charges are billed separately.' The second paragraph provides: 'Where a retailer furnishes transportation in his own vehicle the charge for transportation shall be deducted from the gross receipts on which sales tax is computed, provided the transportation is charged separately and the price charged for merchandise at retailer's place of business, exclusive of transportation, is the same price charged a buyer furnishing his own transportation. The transportation charge shall be separated both in the retailer's books and on the invoice to the consumer.'

It is readily seen from the evidence in this case that plaintiff's method of conducting its business complies with those requirements of the Tax Commission.

However, in the third paragraph it is stated: 'Where the goods, wares or merchandise sold are quoted by the seller at a delivered price, no cost of transportation shall be deducted from the gross receipts on which retail sales tax is computed regardless of the manner in which transportation is made and notwithstanding the fact that the purchaser pays the cost of transportation and receives credit therefor.' (Emphasis supplied.)

Without attempting to interpret or construe this paragraph, it is clear that defendant takes the position...