General Carpet Contractors, Inc. v. Tidwell
| Decision Date | 03 June 1974 |
| Citation | 511 S.W.2d 241 |
| Parties | GENERAL CARPET CONTRACTORS, INC., Plaintiff-in-Error, v. George M. TIDWELL, Commissioner of Revenue, Defendant-in-Error. |
| Court | Tennessee Supreme Court |
Forest M. Norville, Memphis, for plaintiff in error, Bruce, Southern, Perkins & Johnson, Memphis, of counsel.
David M. Pack, Atty. Gen., Everett H. Falk, Asst. Atty. Gen., Nashville, for defendant in error.
For convenience, the parties will be referred to as they appeared in the trial court: that is, plaintiff-in-error as the plaintiff and defendant-in-error as the defendant.
Plaintiff brought suit in the Circuit Court of Shelby County to recover $8,079.00 in use taxes, including penalty and interest, paid under protest to defendant. The action was heard by the circuit judge without a jury. The trial judge found the assessment and collection of the taxes were proper and dismissed the suit. Plaintiff has perfected an appeal to this Court.
The salient facts are basically undisputed. Plaintiff sold and installed carpet to four tax exempt institutions, David Lipscomb College, Benton County Board of Education, Department of Mental Health. and the Haywood County Board of Education. Because the above named institutions were able to present certificates of tax exemption, plaintiff did not attempt to collect any sales taxes on the sale of the carpet. In addition to installing carpet for the above named institutions, plaintiff, also, installed carpet for the McNairy County Board of Education, although the McNairy County Board of Education did not purchase the carpet from plaintiff.
Pursuant to the statutory mandate of T.C.A. Section 67--3004 and Rule 7 of the Tennessee Sales and Use Tax Rules and Regulations as promulgated by the Commissioner of Revenue, the State collected from the plaintiff use taxes on the value of the carpet installed at the various tax exempt institutions.
T.C.A. Section 67--3004 provides in part:
'Where a contractor or subcontractor hereinafter defined as a dealer, uses tangible personal property in the performance of his contract, or to fulfill contract or subcontract obligations, whether the title to such property be in the contractor, subcontractor, contractee, subcontractee, or any other person, or whether the title holder of such property would be subject to pay the sales or use tax, except where the title holder is a church and the tangible personal property is for church construction, such contractor or subcontractor shall pay a tax at the rate prescribed by § 67--3003 measured by the purchase price or fair market value of such property, whichever is greater, unless such property has been previously subjected to a sales or use tax, and the tax due hereon has been paid.'
Rule 7 of the Tennessee Sales and Use Tax Rules and Regulations provides, in part:
'Contractors engaged in constructing or improving real property whether on a lump sum or a cost-plus basis, or purchasers and consumers of the material used by them, are required to pay the sales or use tax on such materials or equipment purchased or imported into this State for use in connection with their contracts.'
Counsel for plaintiff asserts two arguments in support of his insistence the trial judge erred in holding the assessment of the use tax was proper. First, Counsel argues the installation of the carpet did not constitute an improvement of realty; therefore, the use tax does not apply because the contemplation of T.C.A. Section 67--3004 and Rule 7 is that the personal property must be consumed in the construction or improvement of realty. Next, Counsel argues, assuming arguendo, that the installed carpet did improve the realty, the use taxes nevertheless do not apply because the plaintiff did not 'use' the carpet within in the meaning of the term 'use' as defined in T.C.A. Section 67--3002(h).
The method used to install the carpet was described in plaintiff's brief as follows:
'. . . the carpeting in all instances was laid by employing the 'tackless' strip method as disinguished from gluing it to the floor. When the
Plaintiff contends the question of whether the laying of the carpet was an improvement of the realty is analogous to a question of whether it became a fixture, that is, if the carpet laid by the 'tackless' strip method became a fixture, then the carpet was consumed in the improvement of the realty and the use tax applies. If, on the other hand, the carpet retained its identity as personal property and did not become a fixture, it cannot be argued the carpet was consumed in the improvement of the realty and the use tax does not apply. Counsel cites in his brief several cases wherein courts from other jurisdictions have concluded that carpet attached by the 'tackless' strip method is not considered as a fixture. Plough v. Peterson, 140 Cal.App.2d 595, 295 P.2d 549 (Cal.Dist.Ct. of App. 1956).
As both parties recognize in their briefs, the question of when carpet is considered a fixture and as a result passes with the realty, in the event the realty is transferred, is resolved by ascertaining the intent of the parties.
This Court, in Savage & Co. v. Mayfield, 157 Tenn. 676, 11 S.W.2d 855 (1928), quoting in part from Union Bank v. Wolf, 114 Tenn. 225, 86 S.W. 310 (1905) and Cannon v. Hare, 1 Tenn.Ch. 22 (1872), said:
'The tendency of modern decisions is...
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Woods v. M.J. Kelley Co.
...is taxed to the contractor who uses and installs those materials to fulfill his contractual obligation. General Carpet Contractors, Inc. v. Tidwell, 511 S.W.2d 241 (Tenn.1974). The concept of use has not been confined to physical manipulation of the property. The taxable privilege of use ex......
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Friessen Const. Co., Inc. v. Erickson, 11647
...a contractor who installs carpet owned by a tax exempt institution is liable for the use tax on the carpet. General Carpet Contractors, Inc. v. Tidwell, Tenn.1974, 511 S.W.2d 241. The Tennessee Court thus has also construed the sections at issue so as to allow a tax in a situation such as i......