Executone of Memphis, Inc. v. Garner

• Decision Date: 16 May 1983
• Citation: 650 S.W.2d 734
• Parties: EXECUTONE OF MEMPHIS, INC., Plaintiff-Appellee, v. Riley C. GARNER, as Trustee of Shelby County, Tennessee, and Martha B. Olsen, Commissioner of Revenue, State of Tennessee, Defendants-Appellants. 650 S.W.2d 734
• Court: Tennessee Supreme Court

Page 734

650 S.W.2d 734

EXECUTONE OF MEMPHIS, INC., Plaintiff-Appellee, v. Riley C. GARNER, as Trustee of Shelby County, Tennessee, and Martha B. Olsen, Commissioner of Revenue, State of Tennessee, Defendants-Appellants.

650 S.W.2d 734

Supreme Court of Tennessee at Jackson.

May 16, 1983.

Raymon Sauer, Memphis, for plaintiff-appellee.

Warner Hodges, III, Germantown, J. Robert Walker, Asst. Atty. Gen., Nashville, for defendants-appellants.

OPINION

DROWOTA, Justice.

The Defendants, the Trustee of Shelby County and the Commissioner of Revenue for the State of Tennessee, appeal from a summary judgment in favor of the Plaintiff, Executone of Memphis, Inc. The trial court found, after reviewing the documents supporting the parties' cross-motions for summary judgment, which documents set forth undisputed allegations, that the telephone systems sold by the Plaintiff were single articles of personal property for purposes of Shelby County's one and one-half percent (1 1/2%) sales tax. Shelby County enacted the local option sales tax pursuant to T.C.A. Secs. 67-3049--3056. Section 67-3050 provides "... the tax so levied [by the local governments] shall not exceed five dollars ($5.00) on the sale or use of any single article of personal property whenever the rate of the tax does not exceed one percent (1%) of the rates levied therein, nor more than seven and one-half dollars ($7.50) whenever the rate of the tax exceeds one percent (1%) of the rates levied therein ..."

In August of 1980, Vernon Jones, an auditor employed by the Sales Tax Division of the Tennessee Revenue Department, conducted an audit of the Plaintiff covering the period August 1, 1977, to July 31, 1980. Jones examined numerous business records of Executone, including sales journals, miscellaneous equipment and supplies accounts, exemption certificate files, and sales invoices, for the audit period. The audit resulted in a tax deficiency assessment by the Department of Revenue against Executone in the total amount of $6,646.54, plus penalty and interest. Of this total assessment, $6,453.18 relates to Executone's failure to charge the full local option sales tax due on certain transactions involving the installation of telephone systems. ¹ Executone collected the local tax on the sale price of individual parts of the systems installed for some of its customers, but only $7.50 per system (the maximum per-article tax) from other customers. The local tax deficiency was assessed against these latter accounts. The remaining $193.36 relates to Executone's failure to collect state tax on some taxable transactions. In computing the amount of the local option sales tax deficiency, the auditor used the selling price charged for the individual articles composing the telephone systems installed by Executone, as reported in the records of Executone. For articles priced at more than $500 each, only $7.50 local tax was assessed per item.

The Plaintiff paid the assessment under protest pursuant to T.C.A. Sec. 67-2303, and brought suit for recovery of the amount paid plus interest. In its complaint Executone alleged the additional tax was improperly assessed because the systems sold were single articles and that no part of the systems was useful without the other parts. The trustee denied the systems were single articles and alleged no knowledge regarding the usefulness of the parts of the systems. The Plaintiff moved for summary judgment, filing the supporting affidavit of Gary Snover, the president of Executone. Snover stated his familiarity with the books and records and methods of operation of the Plaintiff corporation. He stated further that no portion of the systems sold can be used without the other parts, and that, therefore, only a complete system is capable of being sold as an independent unit.

Before the court ruled on the summary judgment motion, Martha B. Olsen, Commissioner of Revenue, moved the court to allow her to intervene. The parties agreed to the commissioner's intervention and the court allowed it. She filed an answer denying the systems were single articles of personal property. Olsen moved for summary judgment, stating there were no genuine issues as to any material facts and relying upon the affidavit of Vernon Jones, the deposition of Gary Snover and a brief in support of her motion. The trustee then moved for summary judgment. The trial judge granted summary judgment for the Plaintiff, finding the Plaintiff's telephone systems were single articles of personal property. The court awarded the Plaintiff $6,453.18 plus interest at the rate of 10% per annum, from March 21, 1981, until paid. As $193.36 of the deficiency assessment was unrelated to the local tax deficiency, to arrive at the judgment, that amount was deducted from the assessment paid in protest.

Our threshold inquiry must be whether there is any dispute over material facts, since such a dispute would render summary judgment improper for any party. In the trial court, the parties' assertions that there were no factual issues were founded, primarily, on the lack of conflict in the documents supporting their summary judgment motions. These documents describe the telephone systems, going into some detail about the make-up of the systems and how they function. The entire lawsuit rested on the trial court's determination of the systems' status for tax purposes, and all the evidence was directed toward this end. As to that evidence, even now, there is no genuine dispute. ² On this appeal, however, the commissioner and the trustee argue that the primary issue before the trial court, i.e., whether the systems were single articles or not, was one of fact; and since the parties were not in agreement, summary judgment was improper.

The commissioner and the trustee cite Honeywell Inf. Sys. v. John King, 640 S.W.2d 553 (Tenn.1982), as authority for their position. The chancellor in that case found that each component of a computer system was taxable. On review, we held the chancellor's finding was one of fact. But when a trial court is called upon to make a finding of fact based on uncontroverted evidence, its conclusion is one of law, and the appellate courts will review that finding as a question of law. Billington v. Crowder, 553 S.W.2d 590,...