Havill v. Gurley

Decision Date26 March 1980
Docket NumberNo. 79-362,79-362
PartiesEdward E. HAVILL, as Property Appraiser of Lake County, et al., Appellant, v. W. M. GURLEY, d/b/a Williams Distributing Co., Appellee. /T2-15.
CourtFlorida District Court of Appeals

Gaylord A. Wood, Jr., Fort Lauderdale, for appellant.

P. B. Howell, Jr., of Howell & Taylor, P. A., Leesburg, for appellee.

PER CURIAM.

The Lake County Property Appraiser appeals from a final judgment in favor of the plaintiff taxpayer who brought an action to contest the assessment for ad valorem tangible personal property and inventory taxes for the years 1977 and 1978.

The plaintiff/appellee, W. M. Gurley d/b/a Williams Distributing Co., hereinafter referred to as "taxpayer", is a wholesaler of petroleum product with his primary place of business in Memphis, Tennessee. He maintains a warehouse and office in Lake County, Florida. The taxpayer conceded that he has during the subject years maintained a limited standing inventory which acquired a tax situs in Lake County. This action concerns merchandise shipped from Memphis to the Lake County warehouse which was not returned for taxation by the taxpayer. The merchandise consists of containerized petroleum products, and related additives, packaged in cardboard containers. The taxpayer's salesmen take orders in Florida. The orders are telephoned to the Memphis office. When sufficient orders have been received to fill a tractor-trailer rig, the merchandise is shipped on pallets in taxpayer's trucks to the Lake County facility. Then the merchandise is unloaded and stacked in the warehouse complex until separated for delivery by smaller trucks to the customers who placed the orders. Remittance by the purchaser is made through a Lake County bank to the Memphis office.

The taxpayer's personal property tax returns for the years 1977 and 1978 excluded that portion of the inventory which the taxpayer claims was "in transit" and protected by the Commerce Clause. 1 The return was prepared by counting the merchandise on the premises, pricing it at wholesale cost and then deducting the retail price of the orders taken but not yet filled. The property appraiser attempted to obtain back-up information from the taxpayer concerning the valuation of the inventory, but the back-up information was not made available. As a result, the tangible personal property and inventory returns of other wholesale petroleum products distributors were obtained. The returned value of inventory of one of those businesses was then computed on a square-foot basis, and that dollars-per-square-foot factor was applied to the taxpayer's warehouse storage capacity. 2

The Lake County Board of Tax Adjustment approved the property appraiser's assessment. Undaunted, the taxpayer went to court. The taxpayer refused to make available to the property appraiser upon earlier request, or later in court, his income statement, balance sheet or Schedule "C" of his federal income tax return. Both 1977 and 1978 returns were based on a single day's count, rather than on the average value of the inventory during the year as required by Section 192.032(3), Florida Statutes (1977).

The trial court held that the interstate commerce character of the merchandise in transit was interrupted only at the staging area for the purposes of separating the goods and placing them in smaller vehicles for transport to the ultimate purchasers, which did not deprive the goods of the protection of the Commerce Clause. Therefore, the goods did not become standing inventory subject to ad valorem taxation in Lake County, Florida. The trial court reasoned that it did not seem equitable for the determination of whether the merchandise acquired a tax situs in Lake County, Florida, to depend upon the mere physical placing of a sticker or label designating the customer on packages or containers prior to shipment from Tennessee. The court held that the property appraiser's estimate was invalid, null and void, and further held that the values of the taxpayer's average inventory held for sale in Lake County were the values given by the taxpayer in his 1977 and 1978 returns.

We disagree. The merchandise was no longer in transit and became inventory subject to taxation once the merchandise reached the taxpayer's warehouse and was held there for an indeterminate length of time to be broken down and then distributed to customers. See State of Minnesota v. Blasius, 290 U.S. 1, 54 S.Ct. 34, 78 L.Ed. 131 (1933); Bacon v. Illinois, 227 U.S. 504, 33 S.Ct. 299, 57 L.Ed. 615 (1912); Brown v. Houston, 114 U.S. 622, 5 S.Ct. 1091, 29 L.Ed. 257 (1884); Mikos v. Ringling Bros.-Barnum & Bailey Combined Shows, Inc., 368 So.2d 884 (Fla. 2d DCA 1979); Arthur Walter Seed Co. v. McClure, 236 Ind. 666, 141 N.E.2d 847 (1957). In addition, even if the merchandise may be considered to be in transit, the application of Florida's ad valorem property tax in the case at bar does not violate the Commerce Clause, since the inventory in the warehouse has a sufficient nexus with the state to justify a tax, the tax is fairly related to benefits provided by the state to the taxpayer, the tax does not discriminate against interstate commerce, and the tax is fairly apportioned to local activities. See, Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977); see also, Green v. Western Union Telegraph Co., 123 So.2d 712, 715 (Fla.1960); Armstrong v. City of Tampa, 118 So.2d 195 (Fla.1960); State v. Maxwell Motor Sales Corp., 142 Minn. 226, 171 N.W. 566 (1919); see generally, Clark, A State's Tax Jurisdiction As Limited By The United States Constitution, 13 U.F.L.Rev. 401, 420 (1960); 71 Am.Jur.2d, State and Local Taxation, § 247. 3 Therefore, the reduction of the inventory estimate to account for merchandise in transit was erroneous. 4

The trial court also held that the property appraiser's valuation of the taxpayer's inventory was arbitrary and unreasonable. The county tax appraiser derived his values for the taxpayer's 1977 and 1978 inventory by multiplying the square-footage in the taxpayer's warehouse (18,800) by $33.50. The $33.50 was based on the square footage of the warehouse of another wholesaler, Roquemore Oil Co., in Orlando, Florida, divided by the value of its average monthly inventory for 1977 (11,000 square feet; $368,683.00). The trial court found this method of valuation unreasonable and arbitrary for two reasons. First, the taxpayer's business operation was different from Roquemore's. He handles many more oil product lines than Roquemore; Roquemore handles some expensive assessories not handled by the taxpayer; and the cost to the taxpayer of the products sold is less because of his multi-state operations and methods of purchasing. In addition, Roquemore's inventory value included underground storage tanks of bulk oil which the taxpayer did not have. Second, the tax assessor failed to consider that the taxpayer's warehouse was (by his own observation) approximately 60% full; whereas Roquemore's 11,000 square foot warehouse was operating in 1977 at almost 100% of its capacity. The record sustains the trial court's findings concerning the unreasonableness of the tax assessor's valuation in this case; and we have no basis to overturn that finding. Ray v. Dock and Marine Construction, Inc., 183 So.2d 237 (Fla. 3d DCA 1966); Frell v. Frell, 154 So.2d 706 (Fla. 3d DCA 1963).

Even if the taxpayer fails to file a tangible personal property tax return, the tax assessor cannot levy an arbitrary tax.

. . . To deny an owner who has failed to file his required tax return the right of having the validity of an assessment judicially or administratively reviewed is to deprive such owner of his property without due process of law and to expose him to the imposition of arbitrary penalties beyond those...

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2 cases
  • Diamond Shamrock Refining and Marketing Co. v. Nueces County Appraisal Dist.
    • United States
    • Supreme Court of Texas
    • June 15, 1994
    ...irrelevant.D.H. Holmes, 486 U.S. at 30-31, 108 S.Ct. at 1623-24 (citation omitted, emphasis added). See also Havill v. Gurley, 382 So.2d 109, 111 (Fla.Dist.Ct.App.1980) (Florida state ad valorem tax on merchandise shipped from Tennessee did not violate Commerce Clause "even if the merchandi......
  • Whitman v. Bystrom, S.F. WHITMA
    • United States
    • Court of Appeal of Florida (US)
    • February 5, 1985
    ...in later litigation concerning the accuracy of the assessment. See Palm Corp. v. Homer, 261 So.2d 822; see also Havill v. Gurley, 382 So.2d 109 (Fla. 5th DCA 1980).4 Although an individual's financial affairs are not clothed with a privilege or immune from inquiry, the confidential nature o......

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