Johnston v. Gill

• Decision Date: 22 November 1944
• Docket Number: 453
• Citation: 32 S.E.2d 30,224 N.C. 638
• Parties: JOHNSTON v. GILL, Com'r of Revenue.
• Court: North Carolina Supreme Court

32 S.E.2d 30

224 N.C. 638

JOHNSTON v. GILL, Com'r of Revenue.

No. 453

Supreme Court of North Carolina

November 22, 1944

Civil action to recover taxes paid under protest.

The parties waived trial by jury and submitted the controversy to the judge presiding on the following agreed statement of fact:

'First The plaintiff is a resident of the City of CharlotteMecklenburg County, North Carolina.The defendant is a resident of the City of Raleigh, Wake County, North Carolina and is the duly appointed, qualified and acting Commissioner of Revenue of the State of North Carolina.This action is against the defendant in his official capacity.

'Second Continuously since 1 July 1933, the plaintiff has maintained in Charlotte a place for the transaction of his business, which was as follows:

'Plaintiff was a representative of two tailoring establishments which are situated in Chicago, Illinois, i.e., The Federal Tailoring Company, 119 South Wells Street, Chicago, and Jerome Tailoring Service, 402 South Market Street, Chicago.Neither of these establishments had any property within the State of North Carolina, except the samples consigned to plaintiff as hereinafter stated, or was qualified to do business therein.Plaintiff advertised his business as 'Chicago Woolen Mills', and offered to the public to take orders for men's clothing.Plaintiff kept in his place of business samples consigned to him by the Chicago tailoring establishments.Customers desiring to have clothing made would come to plaintiff's place of business or would leave notice with, or telephone, plaintiff to come to their homes.At either his place of business or the home of the customer, plaintiff would exhibit the samples which had been furnished him by the Chicago tailoring companies, and from these samples the customer would select a sample or samples of the desired material.Plaintiff would then measure the customer for the desired clothing, entering the measurements on printed forms similar to the forms hereto attached and marked 'Exhibit A.'Thereupon plaintiff would collect from the customers a partial payment of the purchase price, which was in all cases less than the commission to which plaintiff was entitled for the sale.Plaintiff would then send the order for the clothing to one of the two Chicago tailoring companies, where the clothing was made and sent direct to the customer through the United States mails as a C.O.D. transaction.Periodically, the Chicago tailoring companies would remit to plaintiff the amount of commission to which he was entitled.Plaintiff did not deliver any clothing ordered or collect any money except the original down payment.

'Third: In October 1942, the defendant, through one of his auditors, W. R. Ward, examined the records of plaintiff and assessed plaintiff with use tax under the asserted authority of Schedule I of the Revenue Act of 1939, as amended.The use tax was computed on the basis of 3% of the purchase price of each suit or other article of clothing shipped to customers in North Carolina in the manner outlined in paragraph 2.The assessment was as follows:

Total amount of tax $62.68

Add:Penalty 6.27

Add:Interest 2.51

------

Total tax, penalty and interest 71.46

This assessment covered the period from 1 July 1941, to 30 September 1942.

'Fourth: Upon the refusal of plaintiff to pay said use tax assessment, the defendant issued execution against plaintiff's property.Plaintiff thereupon paid under protest said tax assessment of $71.46, and duly made demand for a refund thereof.Defendant refused to refund the amount of the assessment and still refuses to do so.Plaintiff has complied with all requirements of law governing his right to institute this action to recover said assessment.

'Fifth: The sole question for the determination of the Court is whether the assessment of use tax against plaintiff referred to in paragraph 3 was in all respects lawful and valid.If said assessment was for any reason not lawful and valid, and plaintiff was not liable to defendant for said sum of $71.46, or any part thereof, judgment should be rendered that plaintiff have and recover of defendant the sum of $71.46 (or any lesser sum found by the Court to be proper), together with interest thereon at the rate of 6% from 8 February 1944, until paid, and for the costs of this action.However, if the Court should find that said tax assessment was in all respects lawful and valid, and that plaintiff was liable to defendant for said taxes, penalty and interest in the amount of $71.46, judgment should be rendered that plaintiff take nothing by this action, and that defendant have and recover his costs.'

The court, being of the opinion that the tax was lawfully levied and collected, rendered judgment that plaintiff recover nothing and that his action be dismissed.Plaintiff excepted and appealed.

Murray Allen, of Raleigh, and Thaddeus A. Adams, of Charlotte, for plaintiffappellant.

Harry McMullan, Atty. Gen., and William J. Adams, Jr., Asst. Atty. Gen., for defendantappellee.

BARNHILL Justice.

Plaintiff maintains a place of business in Charlotte, N. C., conducted under a trade name of his own choosing.His business is to sell tailor-made clothing on commission.His method is to take orders, make the necessary measurements and forward the order to the tailoring company which furnished the sample selected by the customer.It does not appear that orders were subject to acceptance by the tailoring companies.Plaintiff collects a 'down payment' which ordinarily is less than his full commission.The tailoring companies with which plaintiff is associated and to which he sends orders periodically make settlement with plaintiff for unpaid commissions due.

Is plaintiff a 'retailer' within the meaning of the North Carolina statute, G.S. Ch. 105, Art. 8, Schedule I, and if so, is the tax imposed a tax upon the privilege of doing interstate business?These are the questions plaintiff poses by this appeal.

Every retailer engaged in the business of selling or delivering tangible personal property for storage, use, or consumption in this State is required at the time of selling or delivering such tangible personal property or collecting the sales price thereof to add to the sales price the amount of the tax imposed for the storage, use, or consumption thereof within this State.When so added, said tax is made a part of the purchase price as the debt of the purchaser to the retailer until paid.The retailer is made liable for the collection thereof and for its payment to the commissioner 'notwithstanding (a) that the purchaser's order or the contract of sale is delivered, mailed, or otherwise transmitted by the purchaser to the retailer at a point outside of this state as a result of solicitation by the retailer through the medium of a catalog or other written advertisement, or (b) that the purchaser's order or the contract of sale is made or closed by acceptance or approval outside of this state or before said tangible personal property enters this state, or (c) that the purchaser's order or the contract of sale provides that said property shall be, or it is in fact, procured or manufactured at a point outside of this state and shipped directly to the purchaser from the point of origin, or (d) that said property is mailed to the purchaser in this state from a point outside this state or delivered to a carrier at a point outside this state, f.o.b., or otherwise, and directed to the purchaser in this state, regardless of whether the cost of transportation is paid by the retailer or by the purchaser, or (e) that said property is delivered directly to the purchaser at a point outside this state, if it is intended to be brought to this state for storage, use, or consumption in this state. ' G.S. s 105-223.

"Retailer' means and includes every person engaged in the business of making sales of tangible personal property, or peddling the same, or soliciting or taking orders for sales, whether for immediate or future delivery, for storage, use or consumption in this state,' G.S. s 105-219(g), and "Engaged in business in this state' shall mean the selling or delivering in this state or any activity in this state in connection with the selling or delivering in this state of tangible personal property for storage, use, or consumption in this state,' G.S. s 105-2...