Henderson v. Gill
| Decision Date | 13 October 1948 |
| Docket Number | 235 |
| Citation | 49 S.E.2d 754,229 N.C. 313 |
| Parties | HENDERSON et al v. GILL. |
| Court | North Carolina Supreme Court |
In this action the plaintiffs seek to recover back taxes paid the defendant under protest under circumstances set forth in the agreed statement of facts upon which the case was heard. These may be summarized as follows:
The plaintiffs are partners doing business under the trade name 'Henderson Flower Shop.' They were required to make reports on sales previously made by them. The sales were of flowers partly raised by them in a hot house, or green house of their own, and cultivated by plaintiffs, some sold as cut and some after fabrication or shaping in the form of wreaths and designs, and partly flowers bought at wholesale and retailed through the shop.
The first report of plaintiffs' sales was made in March 1946. At that time the books of plaintiffs were opened to defendant's auditor and collector, and a full disclosure was made of plaintiffs' sales, the manner of their acquisition of their stock, and all other matters necessary to determine the taxes due the State on said sales.
The plaintiffs were then advised of the amount of taxes due, and the method by which the computation had been made to arrive at the taxes due. Plaintiffs were advised that they were not liable for sales tax on flowers sold as cut from the green house, and were not liable to be taxed on the labor and service entering into the cost price of the fabricated flowers; were liable for the tax on retail sale of flowers bought from others at wholesale, but not, however, on the service and labor that entered into the retail cost. The said agent found that the plaintiffs were liable for tax on 40 per cent of the total sales and were not liable on 60 per cent and computed the tax which plaintiffs paid. Plaintiffs were thereupon instructed that they should hereafter report their sales on that basis, using as a model the report made out by him. At the stated times they were required to make their reports, from May 1945 down to and including the last report in 1946, all of plaintiffs' reports were prepared and made according to these instructions--every report showing that plaintiffs were paying three cents sales tax on 40 per cent of their sales and were paying no tax on 60 per cent of their sales, which continued to represent the tax due on the basis of the instruction.
The plaintiffs contend that they are not liable for the tax on sale of flowers as cut from the greenhouse, and raised by them through cultivation of their own soil, nor upon the labor and service of making into wreaths or designs of these or flowers bought at wholesale, and that they have paid all sums due the State in sales tax liability as the same became due, and owe the State nothing on their demand for delinquent taxes, which they, nevertheless, paid under compulsion and are justly entitled to recover back. They plead further that because of the advice and instructions given them by defendant's agent, which they followed, they are now unable to collect the three-cent tax from their customers.
They further contend upon the foregoing facts that because of misleading advice and instructions given the plaintiffs by defendant's agent whereby they are deprived of the opportunity to collect sales tax from purchasers as required by law, and by reason of laches in the matter of collection defendant is estopped from the collection of the said tax.
The controversy was submitted to Judge Moore for hearing and decision without a jury. Judge Moore adjudged that plaintiffs recover nothing. Plaintiffs appealed.
W. H. McElwee, of No. Wilkesboro, for plaintiffs-appellants.
Harry McMullan, Atty. Gen. and James E. Tucker and Peyton B. Abbott, Asst. Attys. Gen., for the State.
The plaintiffs, having paid the tax under protest, base their right of recovery back upon either of two propositions: (a) That under the facts of this case the defendant is estopped from collection of the taxes now classified as delinquent because of the misdirection and laches of the collecting agency; and (b) that they were and are in fact and law not liable for the tax on the items of sale excluded by the Revenue Department's auditor and agent, these being of the same character as now taxed.
1. From the stipulated facts it appears that the first report of sales made by the plaintiffs was formulated by an official auditor from the Revenue Department on a full disclosure of sales previously made, and with a knowledge of the sources and manner of acquisition of the products and materials sold.
It may be conceded that since the original report prepared by the auditor and subsequent reports made upon the same basis came to the Department in due time and, presumptively at least, received the attention of the Commissioner, who is imprimis charged with interpretation of the statute as an administrative duty; and if the reports were sufficiently analytical to show the incidence of the tax and its basis according to the audit and instruction given these taxpayers, it might be inferred that the exemptions or non-liability as to certain items were the subject of an administrative ruling, or are to be so considered, regardless of any defect in the authority of the agent to bind the Commissioner. But that is not enough.
The case of plaintiffs has an appeal stronger than that which usually supports a plea of estoppel. The official representations made to them are now conceded to have been incorrect and misleading and because of the multitude of the transactions and want of any record of the purchasers they were thus deprived of the opportunity to collect the three per cent tax on sales made on products they were advised were exempt. Moreover, it must be noted that these plaintiff merchants were statutory agents for the collection of the tax on sales which were definitely imposed upon the consumer, and their responsibility arises on the assumption that they must so collect.
These facts, however potent in creating an estoppel in ordinary transactions between individuals, do not estop the State in the exercise of a governmental or sovereign right. Taylor v. Shufford, 11 N.C. 116, 15 Am.Dec. 512; Candler v. Lunsford, 20 N.C. 542; State v. Bevers, 86 N.C. 588; State v. Finch, 177 N.C. 599, 99 S.E. 409; Bigelow on Estoppel, p. 372.
Although some other jurisdictions, on considerations regarded as more practical, if not more just, view the matter differently, the majority view seems necessary to prevent a chaotic condition and endless dispute in the collection of taxes and is so deep-rooted in our system that we are not at liberty to depart from it on the mere occurrence of a hard case.
The action here is against the State, by statutory permission G.S. s 105-406. The imposition and collection of taxes are, of course, governmental functions; and the State cannot, by the conduct of its agents be estopped from collecting taxes lawfully imposed and remaining unpaid; and under the law as we understand it neither can their conduct or advice create an estoppel against the State by these retail merchants on the theory of their mere agency since they are the agent of the...
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