Iowa Movers and Warehousemen's Ass'n v. Briggs, 2--57422

Citation237 N.W.2d 759
Decision Date21 January 1976
Docket NumberNo. 2--57422,2--57422
PartiesIOWA MOVERS & WAREHOUSEMEN'S ASSOCIATION, Appellant, v. Donald G. BRIGGS, Director of Iowa Department of Revenue, and Iowa Department of Revenue, Appellees.
CourtUnited States State Supreme Court of Iowa

Donald A. Wine and Robert F. Holz, Jr., of Thoma, Schoenthal, Davis, Hockenberg & Wine, and Buck & Meade, Des Moines, for appellant.

Richard C. Turner, Atty. Gen., George W. Murray, Sp. Asst. Atty. Gen., and Harry M. Griger, Asst. Atty. Gen., for appellees.

Considered en banc.


In this de novo appeal we consider problems in connection with the Iowa services tax and the Iowa income tax on foreign corporations, §§ 422.43, 422.33, Code 1975.

Plaintiff is an association of Iowa warehousemen. Plaintiff brought the present suit in equity for declaratory and injunctive relief against defendants Iowa Department of Revenue and its Director, whom we will call collectively the Department. In district court the suit involved several main issues: (1) the constitutionality of the application of the Iowa services tax to interstate warehousing activities, (2) estoppel of the Department to collect the services tax on such activities for a period in the past, (3) applicability of the tax to certain wrapping, packing, and packaging activities by warehousemen, (4) the constitutionality of the Iowa income tax on foreign corporations which would be exempt but for storing goods in Iowa, and (5) the standing of plaintiff to raise that fourth issue. The trial court found for the Department on all issues except the fourth, which it did not reach. Plaintiff appealed.

On this appeal, plaintiff abandoned its first issue, probably because of the 1947 decision of the United States Supreme Court in Independent Warehouses, Inc. v. Scheele, 331 U.S. 70, 67 S.Ct. 1062, 91 L.Ed. 1346 (tax upheld on warehousing goods under circumstances such as those here). Plaintiff also omitted its fourth issue, probably because of the trial court's ruling on the fifth issue. Plaintiff thus narrowed its appeal to the issues we have numbered (2), (3), and (5). Hence we proceed to the issues of estoppel, of wrapping, packing, and packaging, and of standing.

I. Estoppel. Iowa has had a sales tax and a complementary use tax for a number of years. In 1967 the General Assembly added as complementary to the sales tax a tax on the gross receipts from enumerated services, effective October 1 of that year. 62 G.A. ch. 348, §§ 20, 25. See Code 1975, §§ 422.42, 422.43 (part of the division on the sales tax). The act defined services broadly as acts performed within this state with respect to enumerated activities. Id. § 19(1) and (4). The enumeration included 'storage warehouse and storage locker' and 'warehouse' services, without stating that storage of interstate goods is exempt.

On September 30, 1967, the Iowa State Tax Commission promulgated services tax regulations. Regarding storage and warehouses the regulations stated, without any exception for interstate activities:

5.46(422) Storage warehouse and storage locker. Persons providing facilities for storing any type of personal property are rendering, furnishing, or performing a service the gross receipts from which are subject to tax. 'Storage warehouses and storage lockers' shall include, but are not limited to, any facility provided for the purpose of storing household or building furnishings, foods, clothes, and furs, luggage, automobiles, airplanes, or any other tangible personal property. (See 'Warehouses' Infra)

'5.53(422) Warehouses. Persons engaged in the business of warehousing goods for others are rendering, furnishing, or performing a service the gross receipts from which are subject to tax. A 'warehouse' is a building or place adapted to the reception and storage of goods and merchandise, and, in a more limited sense, is a building or place in which a warehouseman deposits the goods of others in the course of his business. 1971 I.D.R. 915--916.

The Tax Commission's regulations also covered administration of the services tax. The regulations stated that the rules governing the administration of the sales and use taxes apply to the administration of the services tax. 1971 I.D.R. 910. Those rules had long required that a taxpayer desiring an opinion or information make a written request stating all pertinent facts and include copies or abstracts of documents, and that a taxpayer desiring a formal ruling upon hearing before the Tax Commission make a written application therefor. Rules 1, 5, 1971 I.D.R. 839, 841.

The act also enumerated the service of advertising, without stating an exception for interstate activities. On September 28, 1967, broadcasters and newspaper publishers, and others allied with them, sued the Tax Commission claiming inter alia that the act violated the Commerce Clause in § 8 of Article I, United States Constitution. They showed, for example, that a newspaper published in Davenport, Iowa, circulated in both Iowa and Illinois, and that the signal of a Davenport radio station beamed into both states. The Tax Commission took the position that Iowa could tax the full advertising revenue because the paper was published in this state and the signal originated here. After trial in district court that case came to this court, which sustained the Tax Commission's position on November 12, 1968. Lee Enterprises, Inc. v. Iowa State Tax Comm'n, 162 N.W.2d 730 (Iowa). The plaintiffs in that case petitioned the United States Supreme Court for a writ of certiorari but dismissed their petition after the Iowa legislature repealed the tax on advertising altogether. 63 G.A. ch. 248, § 1. That case was litigated in the courts at the time of the events in the present case and plaintiff's executive secretary, Frank Burns, was aware of it. The Tax Commission's position in that case has a bearing on the parties' conduct here.

The first part of plaintiff's appeal is largely factual. We must thus deal with considerable evidence. We give weight to the trial court's findings but are not bound by them. Rule 344(f)(7), Rules of Civil Procedure.

Operators of Iowa warehouses hoped that storage in Iowa of interstate goods, that is, goods which had come into Iowa from other states or which were destined to leave Iowa, might be exempted under the Commerce Clause. They became active regarding that question, forming a committee to look into it and retaining an attorney to obtain a Tax Commission ruling on it.

Ernest Primmer, manager of a warehouse in Davenport, Iowa, testified that on October 3, 1967, he telephoned Earl Burrows, then chairman of the Tax Commission (predecessor of the Iowa Department of Revenue), to obtain some advice on the matter. Plaintiff offered as evidence of this call a telephone bill showing that on October 3, 1967, a long-distance call was made from Primmer's warehouse to the number of the Tax Commission in Des Moines. Plaintiff also offered some handwritten notes Primmer allegedly made during the call. Those notes stated among other things, 'No official Ruling for Tax Commission' and 'Unofficial Ruling.'

Primmer testified he explained to Burrows that part of his warehouse business involved the storage of merchandise shipped on consignment by a manufacturer or distributor and held in his warehouse until removal lot by lot to fill local orders. Primmer said Burrows indicated that the charge for storage of any goods which came into Iowa from another state would be exempt from the services tax, whether the goods were delivered from the warehouse to someone in Iowa or to someone in another state. Primmer also said he asked Burrows about application of the tax to stored goods which originated in Iowa but were ultimately delivered outside the state, and Burrows responded he did not know the answer to that question and gave the telephone to a person in his office named Bracewell, who he said was an attorney. Primmer testified Bracewell indicated that the receipts from storage of goods destined to leave Iowa were also exempt.

In a deposition read into evidence at trial, Earl Burrows said he did not recall the conversation with Primmer, although it could have taken place. He did indicate in his deposition that in 1967 he had felt warehouse storage charges on goods destined to leave Iowa were exempt from the tax. Mr. Harold Bracewell, who was an attorney for the Tax Commission in October 1967, testified that he did not recall the conversation which Primmer related. He also testified he definitely knew he was not in October 1967 advising anyone in the services tax.

The Iowa Department of Revenue replaced the Tax Commission on January 1, 1968. William Forst was director of the Department and Burrows was his deputy. In February 1968, Burns and a warehouseman named Little took Forst and other tax officials on a tour of a Des Moines warehouse in an attempt to increase understanding of the business. Forst testified by deposition, 'There was one thing I know, that when we left them we did not make any statement to them that their gross receipts from the performance of those services on tangible personal property moving in interstate commerce were exempt.' In its brief plaintiff states that 'the warehousemen do not claim that any specific advice on the taxation questions was given by Mr. Forst at (the warehouse tour). The warehouse tour was informational.'

Some confusion exists regarding the people who were present on this tour. Earl Burrows testified that he went on a tour of some warehouses; he thought this occurred in 1967. But he appeared to have a poor recollection of the tour; he was unable to recall which warehouses were toured or what other officials were with him, although he indicated he did not think Forst was along. Burrows testified that Forst went on some subsequent warehouse tours which he did not attend. Forst testified, however, that Burrows 'may have been' on the February 1968 tour. Warehousema...

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