Howard Pore, Inc. v. Nims

• Decision Date: 08 September 1948
• Docket Number: Motion No. 33.
• Citation: 33 N.W.2d 657,322 Mich. 49
• Parties: HOWARD PORE, Inc., et al. v. NIMS, State Commissioner of Revenue.
• Court: Michigan Supreme Court

322 Mich. 49

33 N.W.2d 657

HOWARD PORE, Inc., et al.

v.NIMS, State Commissioner of Revenue.

Motion No. 33.

Supreme Court of Michigan.

Sept. 8, 1948.

Original mandamus proceeding by Howard Pore, Inc., and others, against Louis M. Nims, State Commissioner of Revenue of the State of Michigan, to compel defendant to rescind amendments to rules and regulations of the department fixing gross proceeds subject to sales tax on sales of automobiles accompanied by trade-ins, and for other relief.

Writ denied.

DETHMERS, J., dissenting, and BOYLES, J., dissenting in part.Before the Entire Bench.

Clark, Klein, Brucker & Waples, Wilber M. Brucker and Robert A. Sullivan, all of Detroit, for petitioners.

Edmund E. Shepherd, Sol. Gen., of Lansing, Victor H. Meier, Asst. Atty. Gen., and W. Ralph Delaney Sp. Asst. Atty. Gen., for defendant.

CARR, Justice.

The general sales tax law of the state, Act No. 167, Pub.Acts 1933, as amended,¹ imposes, subject to specified exceptions and deductions, an annual privilege tax on all persons engaged in the business of making sales of tangible personal property at retail. The amount of such tax is determined on the basis of 3% of the gross proceeds of such sales. Section 1 of the statute as originally enacted defined the term ‘gross proceeds' as follows:

‘(c) The term ‘gross proceeds' means the amount received in money, credits, property or other money's worth in consideration of sales at retail within this state, without any deduction on account of the cost of the property sold, the cost of materials used, and cost of labor or services purchased, amounts paid for interest or discounts, or any other expenses whatsoever, nor shall any deduction be allowed for losses. Credits or refunds for returned goods may be deducted.’

The subdivision quoted was amended by Act No. 313, Pub.Acts 1939, and Act No. 59, Pub.Acts 1941, by adding thereto certain provisos, but without changing the language as above set forth. Consideration will be hereinafter given to the effect of said amendments.

The plaintiffs in the instant case (other than the two associations named in the caption) are licensed automobile dealers carrying on business in this state. The defendant is the state commissioner of revenue and as such is charged with the administering of the sales tax law and empowered to adopt rules and regulations for its enforcement. Under date of March 5, 1948, defendant adopted an amendment to the prior regulation concerning the determination of the taxes payable to the state on retail sales of new articles of merchandise, made in the course of business, involving the turning in by purchasers of used or second-hand articles by way of part consideration. The regulation as so amended contemplates the fixing of the gross proceeds of such a transaction on the basis of the actual value of the trade-in received by the dealer. At the same time defendant adopted amendments to the prior rule with reference to the method of computing the taxes on transactions of such character involving sales of new automobiles. Plaintiffs contend that the contemplated method of determining the amount of the sales tax is not, as applied to the sale of a new automobile when a used or second-hand car is taken in part payment, in conformity with the statute. They ask in their petition that defendant be required by writ of mandamus to rescind the amendments in question to the rules and regulations of the department and determine the amount of the sales tax, in each instance of the character stated, on the basis of the cash payment received by the dealer plus the credit, if any, allowed by him for the used car turned in by the purchaser. The claim of plaintiffs is summarized in their brief as follows:

‘It is the position of plaintiffs that the term ‘gross proceeds' as set forth in subsection (g) makes it the statutory duty of defendant in the case of retail sales of chattels, paid partly in cash and partly in used merchandise, to collect retail sales tax on the price fixed by the parties, with the used merchandise being accepted at the figure fixed by the buyer and seller. It is plaintiffs' further position that if defendant is permitted to enforce the regulations promulgated by him under date of March 5, 1948, which in the case of sales at retail, partly in cash and partly in used merchandise, would result in a collection of sales tax upon the sum of money paid and the actual market value of the second hand article, he would not be following his statutoryobligations in regard to the collection of sales taxes. If plaintiffs' contentions, as outlined in this brief, are accepted by the court and the term ‘gross proceeds' is construed in the case of a sale of a chattel at retail partly for cash and partly for used merchandise, to mean cash plus the value of the used commodity as agreed by the parties, it is clear that defendant is not following the positive provisions of the statute in promulgating and enforcing the new and revised regulations, which admittedly are based upon a market value concept instead of agreed value concept.’

Defendant filed his answer to the petition of the plaintiffs, denying the right to the relief sought. He contends in substance that the statutory definition of the term ‘gross proceeds' must be construed as meaning the actual consideration received, whether in property or money, by the dealer by way of payment for the article sold, that the legislature in the enactment of the statute intended such result, and that in consequence a used article of merchandise turned in by the purchaser by way of part compensation for the new article must be fairly and reasonably valued for the purposes of the computation of the state tax. The answer further alleges that the practice has recently grown up in the automobile business of taking in a used car on the sale of a new machine on the basis of a credit representing a fractional part only of the actual value. It is further asserted in the answer that dealers in new automobiles refuse to make a sale unless a second-hand car is turned in on the transaction. In substance it is the position of the defendant that under this practice there is no attempt to reach a fair valuation of the used car, and that certain dealers are taking advantage of the desires and necessities of purchasers and are in practical effect selling new cars for considerations in excess of the manufacturers' list prices and in excess of the selling prices reported to the state under the general sales tax law. It is insisted also by defendant that the amendments to the rules and regulations that plaintiffs seek to have rescinded were not intended to change, and did not in fact actually change, the prior rules and regulations, and that the sole purpose of their adoption was to clarify the procedure to be followed in computing the tax on transactions where said articles of merchandise are received by a dealer on the basis of an arbitrary credit not fairly and reasonably commensurate with their actual value.

In their reply plaintiffs deny in general terms many of the avernments of fact set forth in the answer. However, no request for a reference to take proofs has been presented by counsel on either side of the case. We must in consequence determine the matters at issue on the basis of the rocord as made and in the light of established principles applicable in mandamus proceedings. Under such established principles the relief sought may not properly be granted unless the right thereto clearly appears. See Rupert v. Van Buren County Clerk, 290 Mich. 180, 287 N.W. 425;Powers v. Secretary of State, 309 Mich. 530, 16 N.W.2d 62.

It is evident that the gist of the controversy is whether the ‘agreed value,’ or the ‘actual value’ determined on a fair and reasonable basis, of the property turned in by the purchaser, is to be used in computing the amount of the tax in instances of the character here involved. The question at issue is primarily one of statutory construction. The legislature provided for the computation of the sales tax on the basis of the gross proceeds of the business in which in taxpayer is engaged, said tax being on the privilege of carrying on business. Montgomery Ward & Co., Inc. v. Fry, 277 Mich. 260, 269 N.W. 166;C. F. Smith Co. v. Fitzgerald, 270 Mich. 659, 259 N.W. 352. The term ‘gross proceeds' was defined, in the provision of the statute above quoted, in clear and definite terms. The basic rule of construction is to ascertain and give effect to the legislative intent. The language used being clear and unambiguous, the intent so manifested must be recognized. City of Grand Rapids v. Crocker, 219 Mich. 178, 189 N.W. 221;Boyer-Campbell Co. v. Fry, 271 Mich. 282, 260 N.W. 165, 98 A.L.R. 827;Gardner-White Co. v. State Board of Tax Administration, 296 Mich. 225, 295 N.W. 624.

Giving to the language used by the legislature its ordinary meaning, the conclusion follows that the amount due the state on each taxable transaction of the character in question must be determined on the basis of what the seller has received, in money, property, or other thing of value, by way of consideration for the sale. Had it been intended to permit the payment of the tax on the basis of cash received and the credit for property taken in part payment at an agreed amount arrived at without any attempt at a fair valuation, we think appropriate language to indicate such intent would have been used. The duty of the court is to apply the statute as enacted. It must be borne in mind that in the instant case we are not dealing with transactions in which the parties to a sale undertake by some reasonable method to arrive at the fair value of the property received by the sellor, or with instances in which a subsequent sale of the articles traded in discloses that the amount allowed was either greater or less than the actual selling value at the time of the resale. Rather we are concerned with transactions involving the...