Indiana Dept. of State Revenue v. Stark-Wetzel & Co.

• Citation: 276 N.E.2d 904,28 Ind.Dec. 323,150 Ind.App. 344
• Decision Date: 22 December 1971
• Docket Number: STARK-WETZEL,No. 1071A203,No. 2,1071A203,2
• Parties: INDIANA DEPARTMENT OF STATE REVENUE, Appellant, v.& CO., Inc., Appellee
• Court: Court of Appeals of Indiana

Page 904

276 N.E.2d 904

150 Ind.App. 344

INDIANA DEPARTMENT OF STATE REVENUE, Appellant, v. STARK-WETZEL & CO., Inc., Appellee.

No. 1071A203.

Appellate Court of Indiana, Division No. 2.

Dec. 22, 1971.

Theodore L. Sendak, Atty. Gen. of Ind., Hugh Couch, Larry J. McKinney, Mark Peden, Deputy Attys. Gen., for appellant

Dutton, Kappes & Overman, Theodore D. Nering, III, Philip S. Kappes, Indianapolis, for appellee.

SHARP, Judge.

This is an appeal from a judgment under the Indiana Gross Income Tax Act ordering a refund of taxes to the Appellee, Stark-Wetzel & Co., Inc. The sole issue before the trial court was the correct interpretation of § 1(s) of the Indiana Gross Income Tax Act which is Ind.Ann.Stat. § 64--2601(s) (Burns 1961), I.C.1971 6--2--1--1 which reads as follows:

'In the case of wholesale grocers who are engaged in the business of selling stocks of groceries, tobacco products and expendable household supplies, gross income shall be deemed to mean the gross earnings, computed upon an annual basis, which are derived from wholesale sales of stocks of groceries, tobacco products and expendable household supplies to retail Ind.Ann.Stat. § 64--2603(f) (Burns 1961), I.C.1971 6--2--1--3(f) also provides:

food establishments, and such wholesale grocers shall be subject to the rate of taxation as prescribed in section 3(f) (§ 64--2603(f)) of chapter 50 of the Acts of the Indiana general assembly of 1933, as the same has been amended: Provided, That for the purpose of this subsection only gross earnings shall be construed to mean the gross receipts derived from the sale at wholesale of stocks of groceries, tobacco products and expendable household supplies which are customarily sold through retail food establishments, less the cost of the stocks of groceries, tobacco products and expendable household supplies sold during such period, without any deductions of any other kind or character.'

'With respect to that part of the gross income of every person received from operating any bank, trust company, building and loan association, insurance and/or casualty company, finance company, small loan company, or any other business of similar nature, including all others mentioned in subsection (n) of section 1 (§ 64--2601), the tax shall be equal to two per cent (2%) of such part of the gross income.'

The issue to be decided here is whether the Appellee, Stark-Wetzel & Co., Inc. is liable under the Indiana Gross Income Tax at 1933 as amended at the rate of 1/2% of gross income, applicable to wholesalers, or is liable at the rate of 2% of gross earnings, the same as wholesale grocers who are engaged in the business of 'selling stocks of groceries, tobacco products and expendable household supplies . . . to retail food establishments.' The Appellant, Indiana Department of State Revenue, contends that Stark-Wetzel & Co., Inc. is not a wholesale grocer and is liable at the rate of 1/2% of gross income and Stark-Wetzel & Co., Inc. contends that as far as the sales here in issue are concerned, it is a wholesale grocer and is liable on such sales at the rate of 2% of gross earnings. In its complaint filed on April 26, 1969, the Appellee, Stark-Wetzel & Co., Ind. made claim for certain taxes paid for the taxable years 1965, 1966 and 1967. The trial court on March 15, 1971 entered its findings of fact and conclusions of law as follows:

FINDINGS OF FACT

1. Plaintiff is an Indiana corporation, defendant is the proper party defendant and subject to suit for refund of taxes, all things necessary to be done as a prerequisite to such a suit have been done, and the Court has jurisdiction over the parties and the subject matter of this action.

2. The sales made by plaintiff during 1965, 1966 and 1967 which have been segregated and referred to in a stipulation entered into by plaintiff and defendant were sales at wholesale to retail food establishments.

3. Such sales were sales of stocks of groceries within the meaning of the word 'groceries' as used in subsection (s) of Section 1 of the Gross Income Tax Act.

4. As to that portion of the sales of plaintiff for which claim for refund was filed, plaintiff was in 1965, 1966 and 1967 a wholesale grocer within the meaning of Section 1(s) of the Gross Income Tax Act.

5. The stipulation entered into by the parties which was appended as Exhibit 'A' to the 'Report of the Court on Conference of Attorneys' on June 24, 1970 and which was approved by the Court in its pre-trial entry on August 6, 1970, correctly calculates the amount of refund of taxes to which plaintiff is entitled.

6. The facts stated in plaintiff's complaint are true.

7. There is now due plaintiff from defendant the sum of $175,911 plus interest at the rate of 6% per annum from

the date of overpayment, the sum of $188,586 plus interest at the rate of 6% per annum from the date of overpayment, the sum of $199,609 plus interest at the rate of 6% per annum from the date of overpayment.

CONCLUSIONS OF LAW

1. The law is with the plaintiff and against the defendant.

2. The Gross Income Tax levied and collected by the State of Indiana (on those certain sales which have been segregated and referred to in a stipulation entered into by plaintiff and defendant) should have been by and pursuant to the provisions of Section 1(s) of the Gross Income Tax Act of 1933 as amended.

3. The last four sentences of paragraph two of Instruction 4--154 of Gross Income Tax Regulations do not correctly state the meaning of Subsection 1(s) of the Gross Income Tax Act of 1933, as amended.

4. The Gross Income Tax levied and collected upon those certain sales upon which plaintiff's claim for refund was based was wrongful and illegal for the reason that it was contrary to Section 1(s) of the Gross Income Tax Act of 1933, as amended.

5. Plaintiff is entitled to a judgment against defendant in the amount of $175,911 together with interest at 6% per annum from the date of overpayment: $188,586 together with interest at 6% per annum from the date of overpayment: and $199,609 together with interest at 6% per annum from the date of overpayment.

On the basis of the foregoing findings of fact and conclusions of law, the trial court entered its judgment on behalf of the Appellee. The motion to correct errors of the Indiana Department of State Revenue was overruled and such is the sole assignment of error here.

There is an abundance of evidence in the transcript and referred to in the briefs which pertains to the economic facts of life for the meat-packing industry in general and the Stark-Wetzel & Co., Inc. in particular over the last twenty years. The essential questions are whether or not during the 1965--67 period Stark-Wetzel & Co., Inc. was a 'wholesale grocer' and sold 'stocks of groceries' as those terms appear in the relevant provisions of the statute in question. Considering the evidence in the light most favorable to the decision of the trial court, we find that there is substantial evidence of probative value to support each and all of the findings of fact made by the trial court. The essential question, therefore, is whether or not the trial court reached correct conclusions of law based upon such findings of fact.

The Revenue Department asserts that the taxpayer was not a 'wholesale grocer' because it engaged in the manufacturing and processing of meat and meat products and that such manufacturing and processing of meat and meat products was a substantial percentage of its total business. The Revenue Department appears to argue that given the overall nature of the Appellee's business of manufacturing and processing meat and meat products, no other part of its sales, regardless of their nature, could qualify as a sales of a 'wholesale grocer.' Witnesses on behalf of the Department of State Revenue testified that a wholesale grocer might well also engage in manufacturing and processing. The fact that a large percentage of the Appellee-taxpayer's business involves meat does not in itself preclude the taxpayer from being a 'wholesale grocer.' Meat is within the general classification of groceries and may be one of the types of products sold by a 'wholesale grocer.' As one witness on behalf of the Indiana Department of State Revenue stated, 'There is no wholesale grocer in the world who handles all conceivable kinds of groceries. It would be physically impossible.' Each wholesale grocer may place emphasis on that portion of its product line where it believes it has strength or advantage. It is obvious from the evidence that the Appellee-taxpayer had strength and advantage in meat, meat products and frozen food areas and has concentrated in these areas. These facts standing alone certainly do not preclude the taxpayer from being a 'wholesale grocer.'

The Department of State Revenue argues that the taxpayer is mainly engaged in manufacture and therefore, cannot be for any part of its business a 'wholesale grocer' under the cited provisions of the Indiana Gross Income Tax Act.

Under the Indiana Gross Income Tax Act, the general character of the taxpayer is not, in itself, controlling. A single taxpayer may receive part of its income from manufacturing, part of its income from wholesaling and part of its income from retailing. Under the Indiana Gross Income Tax Act, all income will be taxed at the highest applicable rate unless the taxpayer segregates the sources of its income. If such segregation exists (as it does in this case), then three different rates may apply. Early in the history of the Indiana Gross Income Tax Act, our Supreme Court in Storen v. J. D. Adams Manufacturing Co., 212 Ind. 343, 7 N.E.2d 941 (1937) said:

'It is appellee's contention that sale is an indispensable incident to the business of manufacturing, and that whether a person is engaged in manufacturing is not determined by the manner in which he sells his goods, and that those engaged in manufacturing are, under the statute, taxable at the rate of one-fourth of one per...