Dodgen Industries, Inc. v. Iowa State Tax Commission

• Decision Date: 18 July 1968
• Docket Number: No. 52879,52879
• Citation: 160 N.W.2d 289
• Parties: DODGEN INDUSTRIES, INC., Appellee, v. IOWA STATE TAX COMMISSION, E. A. Burrows, Jr., Lynn Potter, and X. T. Prentis, as Members of the Iowa State Tax Commission, Appellants.
• Court: Iowa Supreme Court

Page 289

160 N.W.2d 289

DODGEN INDUSTRIES, INC., Appellee, v. IOWA STATE TAX COMMISSION, E. A. Burrows, Jr., Lynn Potter, and X. T. Prentis, as Members of the Iowa State Tax Commission, Appellants.

No. 52879.

Supreme Court of Iowa.

July 18, 1968.

Richard C. Turner, Atty. Gen., George W. Murray and Harry M. Griger, Asst. Attys. Gen., for appellants.

Maurice E. Stark, Fort Dodge, and Parrish, Guthrie, Colflesh & O'Brien, Des Moines, for appellee.

MASON, Justice.

Plaintiff-appellee, Dodgen Industries, Inc., an Iowa corporation doing business in Humboldt, protested an assessment of retail sales tax and penalty on sales of specially constructed truck bodies sold to out-of-state purchaser for use outside the state of Iowa. After defendant-appellant, Iowa State Tax Commission, upheld said assessment, Dodgen appealed to the Humboldt County district court seeking to have the assessment set aside. From a judgment and decree favorable to Dodgen, State Tax Commission appeals to this court.

Validity of the tax assessment presents two issues, whether the state of Iowa may levy a sales tax upon the sales transaction here involved without transcending constitutional authority to lay tax on the receipts therefrom and whether the Sales Tax Law was intended to tax such sales under section 422.43, Code, 1962.

We refer to plaintiff-appellee, Dodgen Industries, Inc., as Dodgen and to defendant-appellant, Iowa State Tax Commission, as the commission.

I. Following completion of a five-year sales tax audit conducted by the commission of Dodgen and its subsidiaries, an additional tax liability of $10,533.05 plus penalty of $2562.95 was developed. After the protest hearing before it, the commission issued its findings of fact, conclusions of law and order on December 30, 1963, sustaining the assessments in their entirety on the ground the controverted sales did not transcend any constitutional authority to lay taxes on the receipts therefrom.

The case is concerned with transactions upon which the commission assessed sales tax, not with transactions upon which the tax was not assessed.

The controverted transactions of Dodgen involve contracts entered into and executed outside the state of Iowa by its agents with delivery and installation at Dodgen's plant within the state.

Dodgen purchases specialized truck bodies, knocked down, from a Sioux City manufacturer in truck load lots and assembles them at its Humboldt plant for sale and distribution.

Under their method of operation, Dodgen's salesmen call upon customers in the customers' state which, for purposes here, is not Iowa. The salesmen would obtain a contract to purchase executed by the buyer plus a substantial downpayment, both were forwarded to Dodgen.

When a purchase contract for a truck is received, Dodgen then prepares the unit to conform to the contract's specifications including color, paint design and for mounting upon the purchaser's truck. When ready for installation, the customer is notified and he or his agent brings the truck on which the body is to be mounted to Dodgen's plant as the body and truck must match, the axle length, cab to axle length and weight distribution being critical. The power hookup must also be made in a satisfactory manner.

The body is then mounted on the truck and Dodgen's quality control man goes through a check list and has the customer or his representative sign acceptance of delivery. Settlement is made by payment of any balance due and the owner or his agent returns with the truck to the purchaser's place of residence, which in all cases here involved is outside Iowa. It is there placed in use and in no instance has the unit been brought back or used in Iowa.

There is no issue of use tax in this case.

Dodgen made sales, among others, to customers who reside in Minnesota and Nebraska. It was agreed that at the time neither state had sales or use taxes.

II. In its propositions relied on for reversal, the commission asserts the trial court erred in ruling that the controverted sales transactions were made outside of Iowa and were interstate sales or transactions in interstate commerce.

It is the commission's position that the questionable sales were intrastate sales of tangible personal property wherein title thereto and delivery thereof occurred in Iowa and were therefore subject to the sales tax under section 422.43 and Tax Commission, I.D.R., 55, 1962.

The trial court concluded the sales involved were transactions in interstate commerce; section 422.43 does not impose sales tax on such sales whether the sale is made outside or in Iowa; the sales do not lose their identity as interstate sales because delivery is made to the out-of-state buyer in Iowa instead of to a common carrier agent of the buyer or some other type of agent.

It was the trial court's opinion the legislature intended and the commission has so interpreted Division IV of chapters 422 and 423 of the 1962 Code that the retail sales tax would apply to 'sales of tangible personal property sold at retail In the state to consumers or users' and the use tax would be imposed on property sold intrastate in other states but for use in Iowa, thus covering all sales where the property is to be used or consumed within the borders of the state of Iowa; that the sales tax statute was not intended to reach transactions in interstate commerce.

At trial it was Dodgen's contention the sales sought to be taxed are sales in interstate commerce and as such are not subject to the Iowa Sales Tax. Trial court so held in voiding the tax assessments and penalties herein made by the tax commission. The commission contends the state of Iowa is not per se prohibited under the commerce clause of the United States Constitution from imposing a retail sales tax on transactions which affect interstate commerce; it may impose a sales tax on sales transactions whereby title to and delivery of doods occur in the taxing state regardless of the fact the goods are subsequently transported in interstate commerce for use in another state. We agree.

III. 'The commerce clause of the Constitution (art. 1, section 8, cl. 3) expressly commits to Congress and impliedly withholds from the several states the power to regulate commerce among the latter. Such commerce is not confined to transportation from one state to another, but comprehends all commercial intercourse between different states and all the component parts of that intercourse. * * * "Commerce' is a term of the largest import. It comprehends intercourse for the purposes of trade in any and all of its forms, including the transportation, purchase, sale, and exchange of commodities.' * * * 'Buying and selling and the transportation incidental thereto constitute commerce.' * * * '(C)ontracts to buy, sell, or exchange goods to be transported among the several states' (are) 'part of interstate trade or commerce. * * *" Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 282, 290--291, 42 S.Ct. 106, 108, 66 L.Ed. 239, 243--244.

'Nor is this conclusion opposed by cases decided in this court * * * in which we have had occasion to define the line between state and Federal authority under facts presented, which required a definition of interstate commerce where the right of state taxation was involved, * * *. In those cases we have defined the beginning of interstate commerce as that time when goods begin their interstate journey by delivery to a carrier or otherwise, thus passing beyond state authority into the domain of Federal control. * * * None of them indicates, much less decides, that interstate commerce does not include the buying and selling of products for shipment beyond state lines. * * *' Lemke v. Farmers' Grain Co., 258 U.S. 50, 55, 42 S.Ct. 244, 246, 66 L.Ed. 458, 462.

'The precise boundary between national and state power over commerce has never yet been, and doubtless never can be, delineated by a single abstract definition. The most widely accepted general description of that part of commerce which is subject to the federal power is that given in 1824 by Chief Justice Marshall in Gibbons v. Ogden, 9 Wheat. 1, 189, 190, 6 L.Ed. 23: 'Commerce, undoubtedly, is traffic, but it is something more--it is intercourse. * * * Commerce is interstate, he said, when it 'concerns more states than one.'

'* * *

'* * * No commercial enterprise of any kind which conducts its activities across state lines has been held to be wholly beyond the regulatory power of Congress under the Commerce Clause. * * *' United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 550--553, 64 S.Ct. 1162, 1172--1173, 88 L.Ed. 1440.

We concede the sales here in question involve, in part, transactions in interstate commerce.

'While the general principles applied in these cases are not to be denied, there is a class of cases which hold that contracts between citizens of different states are not the subjects of interstate commerce simply because they are negotiated between citizens of different states, or by the agent of a company in another state, where the contract itself is to be completed and carried out wholly within the borders of a state, although such contracts incidentally affect interstate trade.' Ware & Leland Co. v. Mobile County, 209 U.S. 405, 411, 28 S.Ct. 526, 528, 52 L.Ed. 855, 858.

'* * * (A)s we held in the (Department of Treasury of State of Indiana v.) Wood Preserving Corp. case (313 U.S. 62, 67--68, 61 S.Ct. 885, 888, 85 L.Ed. 1188), neither the Commerce Clause nor the Fourteenth Amendment prevent the imposition of the tax on receipts from an Intrastate transaction even though the total activities from which the local transaction derives may have incidental interstate attributes.' International Harvester Co. v. Department of Treasury, 322 U.S. 340, 344, 64 S.Ct. 1019, 1021, 88 L.Ed. 1313. (Emphasis supplied).

The ultimate question here presented then, is whether these sales transactions, concededly in part in interstate commerce, entail...