Johnson County Farm Bureau Co-op. Ass'n, Inc. v. Indiana Dept. of State Revenue, No. 49T05-8912-TA-00066

• Docket Nº: No. 49T05-8912-TA-00066
• Citation: 568 N.E.2d 578
• Case Date: March 21, 1991
• Court: Tax Court of Indiana

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568 N.E.2d 578 JOHNSON COUNTY FARM BUREAU COOPERATIVE ASSOCIATION, INC., Petitioner,
v.
The INDIANA DEPARTMENT OF STATE REVENUE, Respondent. No. 49T05-8912-TA-00066. Tax Court of Indiana. March 21, 1991.

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Michael J. Rusnak, Peter H. Donahoe, Locke Reynolds Boyd & Weisell, Indianapolis, for petitioner.

Linley E. Pearson, Atty. Gen. of Indiana by Ted J. Holaday, Deputy Atty. Gen., Indianapolis, for respondent.

FISHER, Judge.

Johnson County Farm Bureau Cooperative Association, Inc. (Johnson County) appeals the Indiana Department of Revenue's (Department) denial of its claims for refund. Johnson County claimed refunds of gross income taxes, penalties, and interest initially in the amount of $10,640.17 for the calendar years 1979, 1980, 1981, and subsequently in the amount of $9,102.89 for 1983, 1984, and 1985.

During the assessment period, Johnson County, an agricultural membership cooperative, was a grain dealer engaged in the business of selling feed, fertilizer, seed, fuel oil, garden supplies, tools, and other agricultural items as well as receiving, processing, storing, and merchandising whole grain and soybeans. Johnson County reported its gross income tax liability on a "gross earnings" basis pursuant to the grain dealer statute in effect for the years at issue, IC 6-2-1-1 for 1979, 1980, and 1981 and IC 6-2.1-1-5 for 1983, 1984, and 1985 (Grain Dealer Statutes). Johnson County claimed in its Petition for Original Tax Appeal filed on December 14, 1989, that the Department erroneously computed

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Johnson County's gross income tax liability by not deducting the cost of shipping whole grain and soybeans to its customers (freight-out) as part of the "cost of the whole grain and soybeans" as provided in the Grain Dealer Statutes. ISSUE

The sole issue raised is whether the Department erred by denying Johnson County a deduction for freight-out costs when computing its gross earnings under the Grain Dealer Statutes.

DISCUSSION AND DECISION

Johnson County asserts that the phrase "cost of the whole grain and soybeans" as used in the Grain Dealer Statutes includes the cost of freight-out expenses. The 1971 Grain Dealer Statute, governing the years 1979, 1980, and 1981, defined gross earnings as, "gross receipts of such whole grain and soybeans, less the cost of the whole grain and soybeans, sold during such period, without any deductions of any other kind or character. IC 6-2-1-1(q) (emphasis added). The 1981 recodification of the Grain Dealer Statute, governing the years 1983, 1984, and 1985, defined gross earnings as, "the gross receipts from the sales of whole grain and soybeans, less the cost of the whole grain and soybeans, without any deductions of any other kind or character." IC 6-2.1-1-5 (emphasis added).

A. AMBIGUITY

The Grain Dealer Statutes do not define "cost of the whole grain and soybeans." If the meaning of a statute's language is reasonably susceptible to more than one construction, the court will construe the statute to determine the apparent legislative intent. Gary Community Mental Health Center, Inc. v. Indiana Dep't of Public Welfare (1987), Ind.App., 507 N.E.2d 1019, 1022 (citing Frame v. South Bend Community School Corp. (1985), Ind.App., 480 N.E.2d 261, 263). Johnson County and the Department offer different interpretations of the phrase "cost of the whole grain and soybeans," nevertheless, "simple disagreement between the parties does not necessarily constitute ambiguity." Indianapolis Public Transportation Corp. v. Indiana Dep't of Revenue (1987), Ind.Tax, 512 N.E.2d 906, 908, aff'd, 550 N.E.2d 1277 (1990). The court is persuaded ambiguity exists, however, when parties advance well reasoned, albeit differing, theories about a statute's meaning. Public Transportation, 512 N.E.2d at 908.

The phrase "cost of the whole grain and soybeans" is capable of at least two interpretations. First, "cost" could include, as the Department argues, the amount paid for the grain plus acquisition expenses. Second, "cost" could include, as Johnson County asserts, the total amount incurred in order to sell the grain, the price of the grain itself, freight-in, and freight-out. Both interpretations are reasonable and can be supported by authority. Accordingly, the court finds the statute ambiguous and appropriate for judicial interpretation.

B. STATUTORY CONSTRUCTION

The intent of the legislature embodied in a statute constitutes the law. Wedmore v. State (1954), 233 Ind. 545, 551, 122 N.E.2d 1, 4 (citing State ex rel. Rogers v. Davis (1951), 230 Ind. 479, 482, 104 N.E.2d 382; Haynes Automobile Co. v. City of Kokomo (1917), 186 Ind. 9, 12, 114 N.E. 758; Thorn v. Silver (1909), 174 Ind. 504, 515, 89 N.E. 943; City of Lebanon v. Dale (1943), 113 Ind.App. 173, 178, 46 N.E.2d 269). The foremost goal of statutory construction therefore is to determine and give effect to the true intent of the legislature. Scheid v. State Bd. of Tax Comm'rs (1990), Ind.Tax, 560 N.E.2d 1283, 1286 (quoting Park 100 Dev. Co. v. Indiana Dep't of State Revenue (1981), Ind., 429 N.E.2d 220, 222). The legislature enacted statutory rules of construction as aids in determining the legislature's intended meaning. W.H. Dreves, Inc. v. Osolo School Township of Elkhart County (1940), 217 Ind. 388, 395, 28 N.E.2d 252, 254. "The construction of all statutes of this state shall be by the following rules, unless such a construction is plainly repugnant to the intent of the legislature or of

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the context of the same statute." IC 1-1-4-1. Thus, the rules of construction have effect only to the extent they uncover the legislature's intent from the statute's context.

1.

"Words and phrases shall be taken in their plain, or ordinary and usual, sense. But technical words and phrases having a peculiar and appropriate meaning in law shall be understood according to their technical import." IC 1-1-4-1(1). It is axiomatic in Indiana that the plain, ordinary, and usual meaning of non-technical words in a statute is defined by their ordinary and accepted dictionary meaning. See Hatcher v. Indiana State Bd. of Tax Comm'rs (1990), Ind.Tax, 561 N.E.2d 852, 854; Scheid, 560 N.E.2d at 1286; State Dep't of Revenue v. Bethel Sanitarium, Inc. (1975), 165 Ind.App. 421, 425, 332 N.E.2d 808, 811. The word "cost" has an ordinary and accepted meaning. "Cost" is defined by WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 515 (1981) as, "the amount or equivalent paid or given or charged or engaged to be paid or given for anything bought or taken in barter or for service rendered: CHARGE, PRICE." Consequently, the plain, ordinary, and usual dictionary meaning of "cost" includes only the expenses of acquiring a property, such as freight-in, but not the expenses of selling a property, such as freight-out.

2.

Determining the meaning the legislature intended, however,

involves far more than picking out dictionary definitions of words or expressions used. Consideration of the context and the setting is indispensable properly to ascertain a meaning. In saying that a verbal expression is plain or unambiguous, we mean little more than that we are convinced that virtually anyone competent to understand it, and desiring fairly and impartially to ascertain its signification, would attribute to the expression in its context a meaning such as the one we derive, rather than any other; and would consider any different meaning, by comparison, strained, or farfetched, or unusual or unlikely.... Implicit in the finding of a plain, clear meaning of an expression in its context, is a finding that such meaning is rational and 'makes sense' in that context.

Hutton v. Phillips (1949), 45 Del. 156, 160, 70 A.2d 15, 17 (emphasis added).

"[W]ords and phrases should be taken in their plain, ordinary and usual sense, unless such a construction is plainly repugnant to the intent of the legislature or the context of the statute," Scheid, 560 N.E.2d at 1286, or a contrary purpose is clearly shown by the statute itself. Marion County Sheriff's Merit Bd. v. Peoples Broadcasting Corp. (1989), Ind., 547 N.E.2d 235, 237 (citing Clipp v. Weaver (1983), Ind., 451 N.E.2d 1092; Overlade v. Wells (1955), 234 Ind. 436, 127 N.E.2d 686). Since words that have one meaning in a particular context frequently have a different meaning in another context, it is necessary to consider the context to determine the significance of the words used in a statute. United States v. Raynor (1938), 302 U.S. 540, 58 S.Ct. 353, 82 L.Ed. 413, rev'g 89 F.2d 469, cert. granted, 302 U.S. 667, 58 S.Ct. 21, 82 L.Ed. 514. Accordingly, "legislative intent as ascertained from an Act as a whole will prevail over the strict literal meaning of any word or term used therein." Scheid, 560 N.E.2d at 1286 (quoting Park 100, 429 N.E.2d at 222). The word "cost" as used in the Grain Dealer Statutes must be construed therefore according to its common dictionary meaning unless that meaning is repugnant to the legislature's intended statutory purpose, considering the context of the statute.

3.

The parties agree the purpose of the Grain Dealer Statutes is to provide special tax consideration through a specific deduction intended to benefit grain dealers. Uncommon to most other taxpayers, grain dealers traditionally operate on low profit margins, do not pay freight-in costs, but do pay freight-out costs. When a buyer pays for grain, a large component of the grain

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dealer's gross receipts represents a reimbursement for his freight-out costs. Therefore, if only acquisition costs, including freight-in, were deductible when computing gross earnings, as the Department urges, the Grain Dealer Statutes would confer little or no benefit to grain dealers. Taxable gross earnings would not fairly represent grain dealer's actual gross earnings. Indeed, gross income tax would be assessed on freight-out costs, forcing higher prices or lower profit on sales to more distant customers. The tax driven disincentive may...