Des Moines & C.I. Ry. Co. v. Iowa State Tax Commission

• Decision Date: 08 May 1962
• Docket Number: No. 50548,50548
• Citation: 115 N.W.2d 178,253 Iowa 994
• Parties: DES MOINES AND CENTRAL IOWA RAILWAY COMPANY, Appellant, v. IOWA STATE TAX COMMISSION, Appellee.
• Court: Iowa Supreme Court

Page 178

115 N.W.2d 178

253 Iowa 994

DES MOINES AND CENTRAL IOWA RAILWAY COMPANY, Appellant, v. IOWA STATE TAX COMMISSION, Appellee.

No. 50548.

Supreme Court of Iowa.

May 8, 1962.

Bannister, Carpenter, Ahlers & Cooney, Des Moines, for appellant.

George W. Murray, Special Asst. Atty. Gen., and John M. Stull, State Counsel, for the Iowa State Tax Commission, for appellee.

THORNTON, Justice.

This is an appeal from an order of the state tax commission confirming an assessment for sales tax against plaintiff, Des Moines and Central Iowa Railway Company. On the issues involved the trial court upheld the order of the commission and plaintiff appeals to us. The proceedings are pursuant to section 422.55, Code of Iowa, 1958, I.C.A. Our review is de novo. Rule 334, Rules of Civil Procedure, 58 I.C.A.; and Fischer Artificial Ice & Cold Storage Company v. Iowa State Tax Commission, 248 Iowa 497, 499, 81 N.W.2d 437, 439.

There are two categories of sales involved. We will deal with them in the order presented.

I. The first category consists of sales made by plaintiff to the Fort Dodge, Des Moines and Southern Railway Company, hereinafter referred to as the Fort Dodge line. Plaintiff railroad operates principally in Des Moines and has approximately 25 miles of main line track. It connects with all major railroads coming into Des Moines. The Fort Dodge line operates from Des Moines to Fort Dodge and Webster City with branch lines in various towns in the area. It has about 145 miles of main line track and connects with all interstate railroads traversing the territory in which it operates. Plaintiff owns approximately 70% of the stock of the Fort Dodge line and controls its board of directors. J. C. Bussey is the general manager of plaintiff and the Fort Dodge line. His testimony is a short course in short line railroading. The property involved in the first category is salvage and surplus railroad property consisting of box cars, cross-ties, rails, poles, switch timbers, spikes, washers, tie plates, angle bars, and ballast. During the years 1949 through 1957 plaintiff abandoned its operations to Granger and Perry. This reduced its miles of track from around 80 miles to the present 25. During this time it converted from electrical power to diesel. The items involved in this category of sales were the surplus usable items salvaged by the abandonment of some 55 miles of track. A large portion of such salvaged items were used by plaintiff in maintaining its own track. The sales made to Fort Dodge line were during the years 1953, 1956, and 1957. There are 14 separate sales, the total dollar value is $105,839.62. The amount of tax in this category is $2,618.11 and penalty of $419.41.

Plaintiff contends the disposal by it of this salvage and obsolete property does not make it a dealer in salvage and such transactions are casual or isolated sales and are therefore not subject to the retail sales tax. The trial court found these sales were not casual or isolated and in the course of its ruling stated, 'The statute provides for no exemption for this sort of sale in the circumstances shown in this case, * * *.'

Plaintiff relies upon rule 10 and rule 30 of the State Tax Commission. These rules provide:

'Rule No. 10. Applies to sales tax only. Nature of retail sales tax. The retail sales tax consists of four parts which are as follows:

'1. A tax of two per cent on the gross receipts from all sales of tangible personal property consisting of goods, wares and merchandise sold at retail by a person engaged in the business of selling such property in the state to consumers or users, and the gross receipts from serving meals. * * *.' (Emphasis added.)

'Rule No. 30. Applies to sales tax only. Casual or isolated sales. Receipts from casual or isolated sales are not subject to the sales tax law. Where a person sells his household furniture, where a farmer sells his farm machinery, implements or other farm equipment, the same would be casual or isolated sales. All sales made by officers of a court, pursuant to court orders, as for example, sales made by sheriffs in foreclosure proceedings or sales of confiscated property, are casual sales.

'Manufacturers in the business of producing tangible personal property, whose sales are primarily other than at retail, are not deemed to be making casual or isolated sales, when they sell tangible personal property with any regularity to purchasers for use or consumption, even if these sales at retail may comprise a small fraction of their total sales.

'A farmer or truck-gardener making sales regularly from a roadside stand or a regular delivery route is not making casual sales, although a farmer selling products occasionally to transient callers is deemed to be making casual or isolated sales.

'If a person holds himself out as offering to sell any item of tangible personal property to any person desiring to purchase it for use or consumption, and if he makes regular sale of like nature or deliveries, he is a retailer within the meaning of the act, and must secure a retail sales tax permit and pay sales tax to the state.'

The sales tax is imposed by section 422.43, Code of Iowa, I.C.A. (The Codes of 1950 and 1954 are applicable to the sales under consideration, the applicable part of section 422.43 is identical with the wording in the 1958 Code. The same wording appeared in the temporary statute, chapter 82, section 38, Extra Session, 45th General Assembly, and in chapter 196, section 2, 47th General Assembly.) In pertinent part, it states:

'There is hereby imposed, beginning 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; * * *.'

The exemptions from the tax imposed are provided in section 422.45. None of them are applicable, nor does plaintiff so claim, to the sales under consideration.

The applicable definitions are found in section 422.42. It provides:

'422.42 Definitions. The following words, terms, and phrases, when used in this division, have the meanings ascribed to them in this section, except where the context clearly indicates a different meaning: * * *

'2. 'Sales' means any transfer, exchange, or barter, conditional or otherwise, in any manner or by any means whatsoever, for a consideration.

'3. 'Retail sale' or 'sale at retail' means the sale to a consumer or to any person for any purpose, other than for processing or for resale of tangible personal property * * *.

'4. 'Business' includes any activity engaged in by any person or caused to be engaged in by him with the object of gain, benefit, or advantage, either direct or indirect.

'5. 'Retailer' includes every person engaged in the business of selling tangible goods, wares, or merchandise at retail, * * *.'

We cannot see a statutory basis for rule 10 or rule 30. Section 422.43 imposes a tax '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.' This section clearly imposes a tax on the gross receipts of all sales of personal property at retail to consumers or users. W. J. Sandberg Company v. Iowa State Board of Assessment and Review, 225 Iowa 103, 278 N.W. 643, 281 N.W. 197. The purchaser here, the Fort Dodge line, is a consumer or user. The definition of retail sale in section 422.42 is a restatement of the above-quoted portion of section 422.43. It takes nothing away from a sale to a consumer as being taxable. Nowhere do we find a suggestion a casual or isolated sale, if it is to a consumer or user and is not for processing or resale, is not subject to the tax imposed. Nor are we able to find anything in the statute to the effect the tax is limited to 'all sales of tangible personal property consisting of goods, wares and merchandise sold at retail by a person engaged in the business of selling such property in the state to consumers or users.' The definitions of 'business' or 'retailer' above set out do not purport to limit the application of section 422.43 or exempt any sales therefrom. Retailers are mentioned in determining their gross receipts and conditional sales in paragraph 6 of section 422.42. They are required to add the tax, section 422.48, prohibited from absorbing the tax or advertising that they will, section 422.49, required to keep records, section 422.50, make returns, section 422.51, and have a permit, section 422.53, as well as pay the tax due as provided in section 422.52. Section 422.52, subsection 1, provides, 'The tax levied hereunder shall be due and payable in quarterly installments * * *.' This subsection is not limited to retailers or those in business.

Section 422.61, subsection 1, made applicable by section 422.59, gives the tax commission power to prescribe all rules and regulations not inconsistent with the provisions of the chapter, necessary and advisable for its detailed administration and to effectuate its purpose. The stated purpose may be found at page 409, chapter 196, 47th General Assembly, 'An Act to impose a tax on the gross receipts from retail sales as defined herein; * * *.'

An administrative board has only such power to enact rules as are not inconsistent with the law to be administered. It has no power to impose a tax nor to grant an exemption from a tax. Fischer Artificial Ice & Cold Storage Company v. Iowa State Tax Commission, 248 Iowa 497, 504, 505, 81 N.W.2d 437, 442; Bruce Motor Freight v. Lauterbach, 247 Iowa 956, 77 N.W.2d 613, 616, and citations; Holland v. State, Iowa, 115 N.W.2d 161, and citations; and Clarion Ready Mixed Concrete Company v. Iowa State Tax Commission, Iowa, 107 N.W.2d 553, 558, and citations. Both rule 10 and rule 30 purport to grant an exemption from the tax...