In re Harris
| Decision Date | 14 March 1939 |
| Docket Number | 28314. |
| Citation | 88 P.2d 372,184 Okla. 459,1939 OK 147 |
| Parties | In re HARRIS. v. TAX COMMISSION. CLIFT |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
A claim filed by the State of Oklahoma with the assignee of an insolvent vendor for unpaid sales tax levied by the Oklahoma Consumers' Tax Law, Chapter 66, Article 7, Session Laws 1935, where the vendor had made an assignment for the benefit of creditors subsequent to the accrual of said tax, is entitled to preference in payment over the claims of the general creditors of the insolvent vendor, since in the levying and collecting of taxes the state exercises one of the inherent prerogatives of its sovereign power.
Appeal from District Court, Stephens County; Eugene Rice, Judge.
Proceeding in the matter of the assignment of C. A. Harris for the benefit of creditors, wherein J. G. Clift was appointed assignee for the benefit of the creditors of C. A. Harris. From an order directing the assignee to accord preference to a claim of the Oklahoma Tax Commission for sales tax over the claims of general creditors, in payment of the debts of C. A Harris, the assignee appeals.
Affirmed.
J. G Clift, of Duncan, pro se.
C. D Cund, of Oklahoma City, A. L. Herr, of Chickasha, and Wendell Barnes, of Oklahoma City, for defendant in error.
Tomerlin, Chandler, Shelton & Fowler and John W. Swinford, all of Oklahoma City, amici curiae.
This is an appeal from an order of the District Court of Stephens County directing J. G. Clift, assignee for the benefit of the creditors of C. A. Harris, to accord preference to a claim by the State for sales tax over the claims of general creditors in payment of the insolvent's debts out of the proceeds from the liquidation of the insolvent's assigned assets.
It is admitted that the tax became due before the assignment for the benefit of creditors was executed but apparently the Tax Commission had taken no legal steps for collection of the tax until filing a motion in the insolvency proceedings seeking preferred payment of the claim, which motion was upheld in the court's order of distribution. The question was presented to the lower court on an agreed statement of facts.
The first question presented is whether the claim of the Oklahoma Tax Commission for unpaid sales tax, under the Consumers' Tax Law, Chap. 66, Art. 7, S.L.1935, against the insolvent vendor, who subsequent to the accrual of said tax made an assignment for benefit of creditors, is a claim for taxes due the State of Oklahoma from said vendor as a taxpayer, or merely an ordinary debt owing from the vendor as agent to the state as principal.
It is the contention of the assignee that the vendor is required to act only as an agent in the collection of the sales tax and, though required to pay to the state the amount of the tax, his liability is only that of an ordinary debtor. We cannot agree with this contention. Although the title to the Act levying the tax, "Oklahoma Consumers' Tax", and the provision of section 8 thereof that the tax shall be paid by the consumer to the vendor tends to support the contention of the assignee, nevertheless a consideration of the Act in its entirety leads to the conclusion that the vendor stands in the same relationship to the state, with reference to the payment of the tax, as does the ordinary taxpayer. The following provisions disclose that to be the proper interpretation. It is the duty of all vendors to transmit each month returns to the Oklahoma Tax Commission showing the gross proceeds arising from all retail sales during the preceding calendar month, and to remit the tax computed thereon. Section 6. The tax is levied upon the gross receipts or proceeds of all sales as disclosed by the individual vendor's return to the Commission. Section 4. All penalties for failure to pay the tax are directed against the vendor. Sections 6, 7 and 8. The state may sue the vendor to collect the tax accrued and unpaid and may enjoin any vendor refusing to make a return or to remit the tax accrued from operating as a vendor until the required return is made and the tax remitted. Section 11. A tax warrant may be issued against the vendor for accrued taxes and upon said warrant being filed with the proper Court Clerk, the tax constitutes a lien upon the property, both real and personal, of the vendor. Section 13.
The foregoing provisions are penalties and liabilities ordinarily directed against an ordinary taxpayer. Similar provisions were relied upon by the New York Court of Appeals in Re Atlas Television Co., Inc., 273 N.Y. 51, 6 N.E.2d 94, as disclosing the legislative intent to create the relationship of sovereign and taxpayer between the vendor and the City of New York in a similar case arising under the sales tax law of the City of New York. We shall discuss this case more fully hereafter.
In providing a remedy for the aggrieved taxpayer, section 14 provides:
The vendee is not referred to in the foregoing section creating remedies for the aggrieved taxpayer. We think it clear that the legislature intended that the vendor be considered the taxpayer and he is so designated in the above section. The remedies for enforcing the collection of the sales tax are directed against the vendor and all remedies in favor of the taxpayer are given to the vendor. The vendor must pay the tax upon the basis of the gross proceeds of his retail sales and not upon the amount of the sales tax which he has collected from the vendee or consumer.
The assignee herein stresses section 6, paragraph (d) of said Consumers' Tax Act, which provides: "And for the purpose of collecting and remitting to the State the tax imposed by this Act, the vendor collecting such tax shall be, and is hereby declared to be, the agent of the State for such purposes, and the failure of any such vendor to remit or pay such tax to the State shall constitute embezzlement and be punishable as provided by law for the embezzlement of public funds."
The Gasoline Excise Tax, Laws 1933, Ch. 111, section 3, 68 Okl.St.Ann. § 683 contains a somewhat similar provision in the following language: "(b) Provided that in the collection of such excise tax by the distributor as such agent, such distributor or agent shall collect and receive such tax, at the rate required by law, as money, property and funds of and belonging to the State of Oklahoma, to be held in trust by such agent as funds and property of the State of Oklahoma, to be reported and paid over to the State of Oklahoma as provided by law."
Paragraph (c) of the above section 3 provides that if any distributor, as agent of the State of Oklahoma, fails to pay the tax over to the state when due and appropriates it to his own use or to the use of any other person in a manner not in the "due and lawful execution of his trust as such distributor and agent" he shall be deemed guilty of embezzlement. The two foregoing provisions have obvious differences, but the purpose of the two provisions is substantially the same. Both declare the vendor or distributor to be the agent of the state in collecting the particular tax.
In Gibson Co. v. Oklahoma Tax Commission, 180 Okl. 53, 68 P.2d 87, this court in determining whether the general principles of agency were applicable to the relationship created by the above section of the Gasoline Excise Tax held: "Notwithstanding the provisions of section 3, chapter 111, Sess.Laws 1933, 68 Okl.St.Ann. § 683, making every licensed distributor of gasoline an agent for the state for the collection of gasoline excise tax, said distributor stands in the same relationship to the state with reference to the payment of the tax as does the ordinary taxpayer."
Consequently, in view of this statement, designation of the vendor as agent of the state in the Consumers' Tax Law, supra, should not alter our conclusion that such vendor, for the purposes of the payment of the tax levied by said act, stands in the same relationship to the state as the ordinary taxpayer.
The question as to the vendor's relationship to the state under a sales tax ordinance has arisen in other jurisdictions. The City of New York enacted a sales tax pursuant to statutory authorization, and in Re Atlas Television Co., Inc., supra, the Court of Appeals of New York reversed the judgment of a lower court holding that the city's claim was not for taxes due the city from the insolvent vendor but for moneys collected by the insolvent as agent for the city. In that case the insolvent vendor had made an assignment for the benefit of creditors and the city sought to establish its claim for unpaid sales tax as a preferred claim against the assets of the insolvent vendor. In determining the insolvent vendor's relationship to the city that court said:
"It is the contention of the assignee that, even though the vendor of property is the person entitled to the 'receipts from every sale,' the tax laid is upon the purchaser, and that the vendor is required only to collect the tax as the collecting agent of the city and, though required to pay to the city the amount of the tax, his liability is only that of an ordinary debtor.
The statute contains provisions which lend support to the respondent's contentions. It places obligations upon both vendor and purchaser and describes these obligations as follows:
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