Klickitat County v. Jenner

• Citation: 15 Wn.2d 373,130 P.2d 880
• Decision Date: 12 November 1942
• Docket Number: 28745.
• Parties: KLICKITAT COUNTY et al. v. JENNER, Tax Commissioners.
• Court: United States State Supreme Court of Washington

130 P.2d 880

15 Wn.2d 373

KLICKITAT COUNTY et al. v. JENNER, Tax Commissioners.

No. 28745.

Supreme Court of Washington

November 12, 1942

Department 1.

Action by Klickitat County, Yakima County, and Clark County against T. M. Jenner, T. S. Hedges and Floyd T. McCroskey, as Tax Commissioners of the State of Washington, to restrain defendants from collecting sales taxes on the construction cost of courthouses erected by plaintiffs. From a judgment dismissing the action, the plaintiffs appeal.

Judgment affirmed.

Appeal from Superior Court, Thurston County; D. F. Wright, judge.

Donald Simpson, of Vancouver, Edgar H. Canfield, of Goldendale Lloyd L. Wiehl, of Yakima, and R. DeWitt Jones, of Vancouver for appellants.

Smith Troy, Ralph B. Sproule, and Max Kaminoff, all of Olympia, for respondents.

DRIVER Justice.

This action was brought to restrain defendant state tax commissioners from collecting sales taxes on the construction cost of courthouses erected by plaintiff counties. A general demurrer to the amended complaint was sustained. Plaintiffs refused to plead further, and judgment was entered dismissing the action. Plaintiffs appealed.

The appeal involves the validity and construction of certain state Revenue Act amendments contained in chapter 178, Laws of 1941, p. 480, which became effective May 1, 1941. According to the allegations of the amended complaint, as modified by written stipulations of the parties, each of the courthouse buildings had been constructed under a contract providing that the contractor was to furnish all necessary equipment, materials, and labor. The buildings were completed at the time the judgment of dismissal was entered.

Appellant Klickitat county's contract was entered into subsequent to May 1, 1941. The other contracts were made prior to May 1st, but the buildings were only partly completed on that date. Tax commission rule 171, adopted by respondents, set out as an exhibit to the amended complaint, provides that a contractor engaged in the business of erecting buildings or otherwise altering, repairing, or improving real property of or for a consumer is a seller, and is required to collect the retail sales tax from the consumer upon the total contract price. The rule also prescribes the method of computation of the sales tax to be employed as to construction contracts entered into Before May 1, 1941, and partly performed Before and completed after that date. In accordance with the provisions of the rule, respondents demanded of each of the appellants Yakima county and Clark county a three per cent sales tax on the portion of its courthouse completed after May 1st, and demanded of appellant Klickitat county a like tax on the entire courthouse construction charge of the contractor.

Appellants advance a number of contentions, each of which will be stated and then discussed. The first one, in the language of their brief, is that 'Rule 171 [of the tax commission] is inconsistent with the statute in classifying the appellant counties as 'consumers' and the construction of county courthouses as 'retail sales." To determine what meaning the legislature intended to give to the key terms 'consumers' and 'retail sales,' it is necessary to review the pertinent provisions of the retail sales law and its subsequent amendments.

The law was originally enacted as chapter 180, Laws of 1935, p. 706. Although its sections were numbered consecutively throughout from 1 to 218, inclusive, it was segregated into main divisions designated as titles, there being Titles I to XX, inclusive. Title II was the 'Business and Occupation Tax,' with which we are not directly concerned here; and Title III was the 'Tax on Retail Sales.' Title II, § 5(d), p. 711, defined the term 'retail sale' as follows:

'The term 'sale at retail' on 'retail sale' means every sale of tangible personal property other than a sale to one who purchases for the purpose of resale in the regular course of business or for the purpose of consuming the property purchased in producing for sale a new article or substance, of which such property is an ingredient or component, or a chemical used in processing same. * * *

'The term 'sale at retail' or retail sale' shall be construed to include all sales of tangible personal property to persons: (1) who use such property in the business of erecting buildings or otherwise improving, altering, or repairing real property of others; (2) who use such property in connection with the business of cleaning, decorating, beautifying, repairing, curing, healing or otherwise improving or altering the person or personal property of others; * * *.'

Section 17(c), p. 722, of Title III, the sales tax division, provides that 'The meaning attributed, in title II of this act, to the words and terms * * * 'sale at retail,' 'retail sale,' * * * shall apply equally in the provisions of this title.'

The above-quoted portions of chapter 180, Laws of 1935, were not substantially altered by the Revenue Act amendments contained in chapter 227, Laws of 1937, p. 1138. The legislatures of 1939 and 1941, however, did make certain material changes.

In order to avoid needless repetition, we quote what we consider the pertinent provisions of § 5(d) of the Revenue Act as amended by chapter 225, Laws of 1939, p. 979, indicating by italics the portion of the 1939 amendment omitted when the section was again amended by chapter 178, Laws of 1941, p. 483, § 2(d), Rem.Supp.1941, § 8370-5(d), and indicating by capital letters the two words added to the 1939 amendment by the 1941 statute:

'The term 'sale at retail' or 'retail sale' means every sale of tangible personal property other than a sale to one who purchases for the purpose of resale in the regular course of business or for the purpose of consuming the property purchased in the producing for sale a new article or substance, of which such property is an ingredient or component or a chemical used in processing same. The term 'sale at retail' or 'retail sale' shall be construed to include: (1) The production, fabrication or printing of tangible personal property for consumers thereof upon special order and shall also include the production, fabrication or printing of tangible personal property for consumers thereof who furnish either directly or indirectly the materials used in such work; (2) the installation, cleaning, decorating, beautifying, repairing or otherwise altering or improving the REAL OR personal property of consumers or for consumers thereof; (3) the renting or leasing of tangible personal property; (4) the sale of tangible personal property to persons who use such property in the business of erecting buildings or otherwise improving, altering, or repairing real property of others, or in performing public improvement contracts, irrespective of whether the work is performed by any such persons under lump sum contract, time and material contract, day labor or otherwise. * * *'

It will be noted that, by its 1941 amendment to the revenue act, the legislature, in effect, excluded from the 'retail sale' category the sale of tangible personal property to a building contractor and brought within that category the repairing or otherwise altering or improving, and so forth, of real property 'of consumers or for consumers.'

The 1939 legislature, by chapter 225, p. 984, § 2, added to § 5 of the 1935 act, as amended by the Laws of 1937, a new subsection, which reads:

'(r) The word 'consumer' means any person who purchases, acquires, owns, holds or uses any article of tangible personal property other than for the purpose of resale in the regular course of business or for the purpose of consuming such property in producing for sale a new article or substance of which such property is an ingredient or component or chemical used in processing same. The word 'consumer' includes persons engaged in the business of erecting buildings or improving real property of others, or in performing public improvement contracts and persons engaged in rendering personal and professional services.'

This new subsection was carried forward in the 1941 law. Laws of 1941, chapter 178, p. 487, § 2, Rem.Supp.1941, § 8370-5(r).

Section 17(c) of the Revenue Act of 1935, from which we quoted earlier in this opinion, was re-enacted as subsection (d) by the Laws of 1939, chapter 225, p. 990, § 7, and was carried forward in chapter 178, Laws of 1941, § 8, p. 494, Rem.Supp.1941, § 8370-17(d). For convenience of reference, we quote it again: 'The meaning attributed, in title II of this act, to the words and terms * * * 'sale at retail,' 'retail sale,' * * * shall apply equally in the provisions of this title [Title III].' In neither the 1939 nor the 1941 amendments was there, in Title III, any adoption by reference of the meaning attributed to the word ' consumer' in Title II.

We think that the legislature, by its various amendments of the revenue act above outlined, clearly indicated its intention to exempt from payment of the retail sales tax building contractors who repair or improve the real property of others, and to impose the tax upon the persons for whom the services are performed by the contractor. Such legislative intent is evidenced by the deletion of sales of materials to building contractors (in the performance of public improvement contracts, as well as others) from the definition of a 'retail sale' in the 1941 statute and by the inclusion, in that definition, of 'repair, alteration, improvement,' and so forth, of real property of consumers or for consumers.

Appellants argue that this construction of the revenue act, which is the one placed upon it by the tax commission in its rule 171, is not consistent with the statutory definition of 'consumer' as inclusive of...