Hooten v. Carson
| Decision Date | 28 February 1948 |
| Citation | 209 S.W.2d 273 |
| Parties | HOOTEN v. CARSON et al. |
| Court | Tennessee Supreme Court |
Jordan Stokes, III, of Nashville, for appellant.
Roy H. Beeler, Atty. Gen., Wm. F. Barry, Sol. Gen., of Nashville, and Allison B. Humphreys, Jr., and Harry Phillips, Asst. Attys. Gen., for appellees.
This case involves the constitutionality of Chapter 3, Public Acts of 1947, commonly known as the "Retail Sales Tax" statute.
The plaintiff in error purchased certain articles of food at a retail store in Nashville, one of the H. G. Hill Stores, upon which the retailer demanded, and which plaintiff in error paid under protest, the tax which the statute exacted. Suit was instituted to recover the amount of the tax so paid, the basis of the right of recovery being that the statute was unconstitutional. Numerous grounds of invalidity are set forth in the bill, to which specific reference will be made later in this opinion.
A demurrer was filed to the bill, which challenged every ground of recovery. The chancellor sustained it and complainant appealed and has assigned errors.
We will discuss the several grounds of alleged unconstitutionality of the statute as set forth in the bill rather than copying here the several assignments of error.
The first contention made by appellant is that the tax is illegal because (a) "if the tax is a privilege tax it is unlawful because complainant exercised no taxable privilege in buying food to eat in order that he may continue to live; that he was simply pursuing his inalienable right to exist"; (b) "if it is an ad valorem, it is not equal and uniform as required by Article 2, § 28 of the Constitution of Tennessee."
In response to the foregoing the State says that the tax in question is a privilege tax and not a property or ad valorem tax. The issue thus presented must be decided in favor of the State and against appellant.
The caption of the Act expressly declares that it provides for the "levy and * * * collection of additional privilege taxes." Section 3 provides "that every person * * * who engages in the business of selling tangible personal property" is exercising a taxable privilege, etc. Tax statutes similar to the one here assailed have been enacted in one form or another in 28 States of the United States. We find, without exception, that the courts have uniformly held them to have imposed an excise or privilege tax and not a tax upon property. See Annotations in 89 A.L.R. pp. 1432 to 1442; 110 A.L.R. pp. 1485 to 1486. In the last annotation it is said: "In recent decisions the so-called `sales tax' has been regarded as an excise or privilege tax, and not a property tax." See also Western Lithograph Co. v. State Board of equalization, 11 Cal.2d 156, 78 P.2d 731, 117 A.L. R. 838, 846; 128 A.L.R. 894, 895.
In addition to the foregoing authority counsel for the State has cited cases from sixteen separate jurisdictions and also the following decisions by this Court: Memphis Dock, etc. v. Fort, 170 Tenn. 109, 92 S.W.2d 408; General Securities Co. v. Williams, 161 Tenn. 50, 29 S.W.2d 662; Bank of Commerce & Trust Co. v. Senter, 149 Tenn. 569, 260 S.W. 144; State v. Crawford, 39 Tenn. 460, 461.
Holding as we do that the statute levies a privilege tax upon retail sales, we deem it unnecessary to discuss the question that if it is an ad valorem tax it is unequal, etc.
The power to tax is inherent in the sovereign since it is necessary to the perpetuity of the government. Our Constitution, Art. 2, § 28, expressly provides that "the Legislature shall have power to tax Merchants, Peddlers, and privileges, in such manner as they may from time to time direct." See Jenkins v. Ewin, 55 Tenn. 456; Railroad v. Harris, 99 Tenn. 684, 709, 43 S.W. 115, 53 L.R.A. 921; Trentham v. Moore, 111 Tenn. 346, 353, 76 S.W. 904.
The power to tax privileges is not subject to any constitutional limitation except that the tax levied must not be arbitrary, capricious or wholly unreasonable. Friedman v. Mathes, 55 Tenn. 488, 489; American Steel & Wire Co. v. Speed, 110 Tenn. 524, 547, 75 S.W. 1037, 100 Am.St. Rep. 814; Jenkins v. Ewin, supra; Trentham v. Moore, supra.
In Kurth v. State, 86 Tenn. 134, 136, 5 S.W. 593, 594, it was held: "A privilege is whatever the legislature choose to declare to be a privilege, and to tax as such."
To the same effect see Edmonson v. Walker, 137 Tenn. 569, 582, 195 S.W. 168; Seven Springs Water Co. v. Kennedy, 156 Tenn. 1, 5, 299 S.W. 792, 56 A.L.R. 496; Foster & Creighton Co. v. Graham, 154 Tenn. 412, 285 S.W. 570, 47 A.L.R. 971. Many other cases might be cited, but the foregoing are sufficient. They have been uniformly followed in later decisions. We refer expressly to one where the Court sustained a privilege tax upon automobiles used for pleasure. Ogilvie v. Hailey, 141 Tenn. 392, 397, 210 S.W. 645.
Counsel for the State has cited a well considered opinion from foreign jurisdiction (South Dakota) in which the Court upheld a statute levying a sales tax upon "gross receipts." State ex rel. Botkin v. Welsh, 61 S.D. 593, 251 N.W. 189.
The main contention of appellant, challenging the validity of the statute, is that the tax is upon the consumer-buyer, and that this is not a privilege that may be taxed. Under Section 5 of the Act the tax is required to be collected from the consumer; that the amount must be added to the retail price of the article, etc. No retail dealer is permitted to advertise that the tax will not be collected. While the State concedes that the purchaser ultimately pays the tax, the Act expressly states that it is a privilege tax levied upon the merchant. The State can only enforce its claim for taxes solely against the merchant. All penalties for nonpayment run against the retailer. It is therefore earnestly insisted that "the tax in question is a tax upon the retail seller."
We are convinced from an examination of a number of leading tax cases that this contention is correct. It is conceded by appellant's counsel that he had the statute merely levied a tax upon sales, that the merchant could add the tax to the sale price and collect it without doing any violence to any constitutional right of the purchaser. Regardless of this admission, every one is conscious of the fact that taxes of every kind, levied upon any business, are passed on to the buying public. There is a strong and very just reason why the Legislature made it mandatory upon the seller to collect the tax from the purchaser. This express direction is found in many of the retail sales tax statutes. The courts, in discussing this provision, have held that it is a matter of reasonable regulation of trade practices. Thus in Doby et al. v. State Tax Commission, 234 Ala. 150, 174 So. 233, 237, the Supreme Court of Alabama, in dealing with the question, says: See also Tanner v. State, 28 Ala.App. 568, 190 So. 292; Rice v. Allen, 180 Miss. 659, 177 So. 763.
In the State of California there is a requirement in the sales tax statute that the seller collect the tax from the buyer. The Supreme Court of that State held that it was valid, holding that the tax is upon the privilege of transacting business. See also Western Lithograph Co. v. State Board, 78 P.2d 731; De Aryan v. Akers, 12 Cal.2d 781, 87 P.2d 695.
No question is made but that the State may tax the privilege of selling food. We think the mere fact that the State passes the tax to the buyer as a matter of reasonable tax practice and regulation does not impair the power of the State to declare it a privilege and tax it as such. The argument is made by appellant that the right to purchase food is a natural right and that such rights are not subject to a tax. To this the State replies that if the right to buy is a natural right, the right to sell is equally so, because "there can be no purchase without a sale."
Regardless of whether the right to buy or sell is a natural right, we think the law is well settled that the State in the exercise of its sovereign power may impose a privilege tax upon any and all business transactions to the end that the general public be protected from unfair trade practices, and where the tax is not capricious or unreasonable.
In Wiseman v. Phillips 191 Ark. 63, 84 S. W.2d 91, it was contended that one had an inalienable right to acquire possession of property. It was there held while the right might exist it was subordinate to the State's right to tax it as a privilege.
It would seem that the right of one to sell water from his own spring should be regarded as a nontaxable right, but in Seven Springs Water Co. v. Kennedy, 156 Tenn. 1, 5, 299 S.W. 792, 56 A.L.R. 496, this Court held that it was within the power of the Legislature to tax it as a privilege.
It is next insisted by appellant that he has no property other than a pension from the Federal Government and the money collected from him in the form of a sales tax is not taxable by the State. Our response to this insistence is that the State levies no tax upon money regardless of the source from which it came. The tax is upon the privilege of making retail sales.
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