Indiana Dept. of State Revenue, Gross Income Tax Division v. Klink, 29058

• Decision Date: 27 May 1953
• Docket Number: No. 29058,29058
• Citation: 112 N.E.2d 581,232 Ind. 473
• Parties: INDIANA DEPARTMENT OF STATE REVENUE, GROSS INCOME TAX DIVISION v. KLINK.
• Court: Indiana Supreme Court

Page 581

112 N.E.2d 581

232 Ind. 473

INDIANA DEPARTMENT OF STATE REVENUE, GROSS INCOME TAX DIVISION v. KLINK.

No. 29058.

Supreme Court of Indiana.

May 27, 1953.

Edwin K. Steers, Atty. Gen., J. Emmett McManamon, Former Atty. Gen., John J. McShane, Chief Counsel, Indianapolis, Lloyd C. Hutchinson, Joseph E. Nowak, Robert F. Wallace, Earl E. Schmadel and George B. Hall, Deputy Attys. Gen., for appellant.

Winslow E. Van Horne, Auburn, for appellee.

GILKISON, Judge.

During the years 1947, 1948 and 1949 appellee was engaged in selling soil limestone and marl to farmers in DeKalb County, Indiana, upon contracts which required delivery to be made upon fields on farms in that county and vicinity. The material sold was consumed in the direct production of tangible personal property by agriculture or horticulture. Appellee's gross receipts from this business during these years respectively were $13,615.35, $17,623.10, and $18,373.43. Upon these gross receipts appellee paid gross income tax regularly at the rate of one-fourth of one per cent.

Appellant served notice upon appellee about October 27, 1950, of its intention to assess him for the years involved at the rate of one per cent. a total amount of $353.43, plus statutory interest.

On November 24, 1950, appellee filed with appellant his verified written protest and objection to the proposed increase in the rate of the tax with reasons. On the same date he filed his petition to transfer the cause to the DeKalb Circuit Court. To this petition appellant appeared by the attorney general and filed its answer. The cause was tried by the court and a finding and judgment was rendered for appellee.

Appellant's motion for new trial was overruled, and the appeal was perfected.

The evidence, indicates that the sales transactions in question were made by appellee with an agency of the U. S. Government known as A.A.A. and P.M.A. and a number of farmers in DeKalb County. Appellee quoted the agency a separate price on the sale and delivery of lime spread on the farmers' fields in each of the several townships of the county, varying slightly in proportion to the distance of the haul, and all of the involved receipts by him in the mentioned years were from slaes so made and delivered.

There is nothing in the evidence indicating that any additional charge was made for delivering the lime spread upon the farmers' fields. This method of delivery seems to be the standard and usual manner of delivering soil lime when sold for agricultural or horticultural use. So the question presented to us is, should the receipts from sales of large quantities of soil lime to farmers delivered spread on the fields, be taxed at one-fourth of one per cent. as claimed by appellee or at one per cent. as claimed by appellant?

The gross income tax statute cited as supporting appellee's contention is as follows:

'With respect to that part of the gross income of every person which is received from wholesale sales, except as hereinafter provided in subsection (e) of this section, the tax shall be equal to one-fourth of one percent (1/4 of 1%) of such part of the gross income. The term 'wholesale sales' means and includes only the following: * * * (2) slaes of any tangible personal property as a material which is to be directly consumed in direct production by the purchaser in the business of producing tangible personal property by * * * agriculture, or horticulture; * * *: Provided, further, That the term 'consumed' as used herein shall refer only to the immediate dissipation or expenditure by combustion, use, or application, * * *.' Burns' 1951 Replacement, § 64-2603(a)(2).

Appellant contends that the involved activities of appellee should be governed by one or both of the provisions of the gross income tax law as follows:

'With respect to that part of the gross income of every person which is received from any source not enumerated in subsections (a) to (f) inclusive, of this section, including, but not in limitation of the foregoing, gross inocme from * * * personal services, or services of any character whatsoever, * * * all funds received for the performance of contracts, * * * the tax shall be equal to one (1) per cent of such parts of the gross income. * * *' Burns' 1951 Replacement, § 64-2603(g).

'Any person receiving gross income taxable at different rates under the provisions of this act shall be subject to taxation upon his entire gross income at the highest rate applicable to any part of such gross income unless he shall segregate the parts of his gross income taxable at different rates upon his records and in the returns which he files pursuant to the provisions of this act. Such segregation shall be subject to the review of the department as hereinafter provided.' Burns' 1951 Replacement, § 64-2604.

In determining the question posed this court is governed by the rule that to authorize the collection of a gross income tax a transaction must come clearly within the statutory provisions providing therefor. In case of doubt the statute will be construed against the state and in favor of the taxpayer. Gross Income Tax Div. v. Crown Development Co., Inc., 1952, 231 Ind. 449, 455, 109 N.E.2d 426, 428, and c...