Doby v. State Tax Commission

• Decision Date: 06 May 1937
• Docket Number: 3 Div. 205
• Citation: 234 Ala. 150,174 So. 233
• Parties: DOBY et al. v. STATE TAX COMMISSION.
• Court: Alabama Supreme Court

174 So. 233

234 Ala. 150

DOBY et al. v. STATE TAX COMMISSION.

3 Div. 205

Supreme Court of Alabama

May 6, 1937

Appeal from Circuit Court, Montgomery County; Walter B. Jones Judge.

Bill in equity for declaratory judgment by F.A. Doby and another doing business as J.G. Doby & Son, against the State Tax Commission. From the decree rendered, complainants appeal.

Modified and affirmed.

Mooneyham & Mooneyham, of Montgomery, for appellants.

A.A Carmichael, Atty. Gen., H.L. Anderton, of Birmingham, E.C. Boswell, of Geneva, and L.H. Ellis, of Columbiana, for appellee.

BOULDIN Justice.

Appellants filed a bill against the State Tax Commission of Alabama under the Declaratory Judgment Act (Gen.Acts 1935, p. 777) to have an adjudication upon controverted questions arising upon the construction of the Sales Tax Act, referred to in the bill as the "Alabama Luxury Tax Act," being House Bill No. 179, approved February 23, 1937 (Acts 1936-1937 (Ex.Sess.) p. 125).

The State Tax Commission answered admitting jurisdictional facts, and joined in the prayer for an adjudication on the points raised. The cause was submitted on bill and answer and stipulation of counsel admitting the averments of the bill, etc. From the final decree, this appeal is prosecuted.

Appellants operate a "General Automobile Repair Shop," "engage in the general upkeep and repair of automotive vehicles, such as lubrication and repairs of all kinds, including addition of new and old parts and replacement of same; repainting automobiles and parts." In such business "they purchase paints, solder, automobile parts and accessories and use them in replacement of old or broken parts." They do this in connection with the service they render their customers, and insist this is all part of the service they render. It is agreed, however, that "when a second hand automotive vehicle is repaired for a customer, the charges are made against the customer on account of parts used for replacement and accessories, and the labor service is likewise charged separately to the customer"; that this is a business custom of complainants and those engaged in similar businesses.

Another line of business of complainants is the purchase of "old cars to be repaired and reconditioned for sale by them." In this business they replace old or broken parts, accessories, tires, batteries, etc., with new ones, and use paints, solder, and other materials and supplies. They purchase and carry in stock many items for use in their business.

The bill prays for a declaratory judgment and decree adjudicating:

"1. Whether or not automobile parts, automobile accessories, tires, batteries, etc., used by them in repairing secondhand automotive vehicles for their customers are subject to, or liable for said 2% Luxury Tax imposed by said act.

"2. Whether or not orators are liable for the 2% tax levied by said act as respects materials and supplies purchased by them and which are consumed by them in and about the repairing of secondhand automotive vehicles for their customers.

"3. Whether or not automobile parts, automobile accessories, tires, batteries, etc., used by orators in repairing or reconditioning secondhand automotive vehicles purchased by them and reconditioned for resale are subject to said tax.

"4. Whether or not said act of the Legislature, approved February 23, 1937, and known as the Alabama Luxury Tax Act, requires your orators, or others similarly situated, to pay the tax levied under said act on parts, or supplies, or materials used in repairing automotive vehicles, or requires your orators to collect the tax from its customers, or consumers."

The views of the State Tax Commission, as disclosed in the answer, are that the decree should declare:

"1. Automobile parts, automobile accessories, batteries, tires, etc., used by complainants in repairing secondhand automotive vehicles for their customers, are subject to, and liable for, said 2% luxury tax imposed by said Act.

"2. That complainants are liable for the 2% tax levied by said Act as respects materials and supplies purchased by them and which are consumed by them in and about the repairing of secondhand automobiles for their customers, as well as such materials and supplies consumed by them in and about the repairing and re-conditioning of secondhand automotive vehicles purchased by them for resale.

"3. That automobile parts, automobile accessories, tires, batteries, etc., used by complainants in repairing or reconditioning for resale of secondhand automobiles purchased by them are subject to said tax.

"4. Whether or not said act of the Legislature, approved February 23, 1937, and known as the Alabama Luxury Tax Act, requires complainants, or others similarly situated, to pay the tax levied under said Act on parts, supplies, or materials used in repairing automotive vehicles, or requires complainants to collect the tax from its customers, or consumers."

On the hearing the trial court decreed and declared:

"(1) That automobile parts, automobile accessories, tires and batteries, used by automotive repair shops in repairing secondhand automotive vehicles for customers are subject to the 2% tax known as the Alabama Sales Tax of 1937.

"(2) That materials and supplies purchased by automotive repair shops, such as paint, solder, and so forth, and which are consumed by such shops in and about repairing second-hand automotive vehicles for their customers are subject to the tax when purchased by such automotive repair shops, said shops being the consumers of such materials;

"(3) That automobile parts, accessories, batteries, and so forth, as well as paint and solder, and other materials, used by automotive repair shops in reconditioning their own secondhand cars for re-sale are subject to the tax when purchased by said repair shops, such repair shops, in this event, being the consumers of said automobile parts, acces-

By section 2 of the act there is levied:

"(a) Upon every person, firm or corporation engaged or continuing within this State in business of selling at retail any tangible personal property whatsoever, including merchandise and commodities of every kind and character, (not including, however, bonds or other evidences of debt or stocks) an amount equal to two per cent of the gross proceeds of sales of the business, except where a different amount is expressly provided herein."

It is expressly declared a privilege or license tax against the person on account of such business activity, and measured by a per centum of gross sales, or gross receipts, as defined in the act. sories and batteries."

The retailer is the "taxpayer," the person liable to the state for the tax. He is the person required to take out the license under section 3, the person required to make returns and pay the tax to the State Tax Commission under sections 5 and 6; the person required to keep records under section 8; the person on whose personal property a lien is declared as security for the tax under section 9.

In considering the coverage of such statutes, as other tax laws the rule of strict construction prevails. No strained construction is to be indulged against the taxpayer because of a purpose to...