Daniels Tobacco Co., Inc. v. Norberg, s. 73-236-M

• Citation: 114 R.I. 502,335 A.2d 636
• Decision Date: 18 April 1975
• Docket Number: Nos. 73-236-M,s. 73-236-M
• Parties: DANIELS TOBACCO CO., INC. v. John H. NORBERG, Tax Administrator. P., 73-239-M.P.
• Court: United States State Supreme Court of Rhode Island

Page 636

335 A.2d 636

114 R.I. 502

DANIELS TOBACCO CO., INC. v. John H. NORBERG, Tax Administrator.

Nos. 73-236-M.P., 73-239-M.P.

Supreme Court of Rhode Island.

April 18, 1975.

[114 R.I. 508] Higgins, Cavanagh & Cooney, Kenneth P. Borden, Providence, for plaintiff.

Richard J. Israel, Atty. Gen., W. Slater Allen, Jr., Asst. Atty. Gen., Perry Shatkin,

Chief Legal Officer (Taxation), Providence, for defendant.

OPINION

DORIS, Justice.

The State Tax Administrator filed a petition for certiorari under G.L.1956 (1969 Reenactment) § 42-35-16, as amended by P.L.1972, ch. 169, § 30, seeking review of a judgment entered by a Superior Court justice in the case of Daniels Tobacco Co., Inc. v. John H. Norberg, Tax Administrator, C.A.No. 73-139 which reversed in part and sustained in part a decision of the tax administrator assessing a tax under the Cigarettes and Tobacco Products Tax Act against Daniels Tobacco Co., Inc., a Rhode Island taxpayer. The taxpayer filed a cross-petition for certiorari seeking review of the same judgment. We granted the writ in each case, and pursuant thereto, the pertinent records have been certified to this court. The cases were ordered consolidated for hearing before this court.

The record discloses that on February 2, 1972, the taxpayer, a distributor of cigarettes and tobacco products, sustained a loss by theft of 284 cases of cigarettes. The tax administrator, acting pursuant to G.L.1956 (1970 Reenactment) § 44-20-12, assessed a tax on the stolen cigarettes in the amount of $21,733.16. At an administrative hearing requested by the taxpayer, evidence was produced indicating that approximately 70 percent of the stolen cigarettes were destined for out-of-state sale. The administrator rendered a final decision affirming the assessment against the taxpayer in the amount of $21,733.16. As required by statute, the taxpayer paid the tax and appealed the assessment to the Superior Court under § 42-35-15 of the Administrative Procedures Act. The parties filed legal memoranda, and after oral argument a Superior Court justice entered a final judgment on August 22, 1973, reversing the administrator's assessment of taxes as it related to cigarettes held by the taxpayer for distribution outside Rhode Island, affirming the administrator's assessment of taxes as it related to cigarettes held by the taxpayer for distribution in Rhode Island, and ordering a refund to the taxpayer in the amount of $15,321.88. The court denied the taxpayer's motion for an award of interest on the amount of taxes determined to have been erroneously assessed.

The Superior Court justice held that § 44-20-12(1) and § 44-20-28 indicate a legislative intent to make the introduction of cigarettes into the state a taxable event, but that § 44-20-12(1) imposes a tax only on cigarettes sold in Rhode Island or held for sale in Rhode Island. Thus a tax could be imposed only on that portion of the cigarettes that were being held for sale in Rhode Island on the date they were stolen. The administrator contends that the Superior Court erred when it ordered a refund in the amount of $15,321.88 on the tax assessed on cigarettes which were destined for distribution outside Rhode Island.

The trial justice in reviewing § 44-20-12 felt that the difference in language used in paragraph (1) and paragraph (2) indicated a legislative intent that something other than the holding of cigarettes in Rhode Island was necessary for the imposition of a tax on cigarettes. The administrator contends that the different language in paragraph (2) concerning liability for the tobacco products tax is the result of a different process of taxation, but that both taxes are livied on the mere possession of the article in the state.

It seems to us that if the Legislature had intended to tax the possession of all cigarettes the word possession would have been applied to cigarettes as it was applied to tobacco products. Furthermore, from a reading of other statutory sections applicable to cigarettes, it appears that cigarettes to be sold out of Rhode Island are not to be taxed. For example, § 44-20-22 provides for reimbursement of the distributor where a manufacturer withdraws from the market in this state cigarettes which have already been taxed. Likewise, § 44-20-23 enables the administrator to authorize any person to purchase the requisite cigarette stamps if that person manufactures or ships cigarettes into the state for sale in this state.

As we read § 44-20-12(1) and § 44-20-12(2) it is plain to us, as it was to the trial justice, that the clear intention of the Legislature was to impose a tax on the tobacco products that were possessed in Rhode Island by any person for the purpose of sale and to impose a tax on cigarettes sold in Rhode Island or held for sale in Rhode Island. The Superior Court judgment ordering a refund on the tax assessed on cigarettes destined for distribution outside Rhode Island should therefore be sustained.

The taxpayer asserts that the Superior Court justice erred when he refused to order a refund on the tax assessed on cigarettes which were stolen before they were shipped or delivered to customers in Rhode Island. The taxpayer argues that unlike § 44-20-12(2), (3) which levies a tax on tobacco products, § 44-20-12(1) does not make a distributor liable for the imposition of the cigarette tax, and that furthermore § 44-20-53 states that cigarette taxes are a direct tax on the consumer, precollected for convenience only.

The taxpayer overlooks § 44-20-28, which requires a...