McLeod v. J. E. Dilworth Co.

• Decision Date: 26 April 1943
• Docket Number: Nos. 4-6973, 4-6974.,s. 4-6973, 4-6974.
• Citation: 171 S.W.2d 62
• Parties: McLEOD v. J. E. DILWORTH CO. SAME v. REICHMAN-CROSBY CO.
• Court: Arkansas Supreme Court

171 S.W.2d 62

McLEOD v. J. E. DILWORTH CO.

SAME v. REICHMAN-CROSBY CO.

Nos. 4-6973, 4-6974.

Supreme Court of Arkansas.

April 26, 1943.

Rehearing Denied May 31, 1943.

Appeal from Chancery Court, Pulaski County; Frank H. Dodge, Chancellor.

Suits by Murray B. McLeod, Commissioner of Revenues, against J. E. Dilworth Company, and against Reichman-Crosby Company, to recover retail sales taxes or gross receipts taxes. The chancery court dismissed the suits, and the Commissioner appeals.

Affirmed.

Leffel Gentry, of Little Rock, for appellant.

Bradley & Patten, of Little Rock, J. Fred Brown, of Memphis, Tenn., and Daggett & Daggett, of Marianna, for appellees.

Coleman, Mann, McCulloch & Goodwin, of Little Rock, amici curiæ.

McFADDIN, Justice.

These cases involve the retail sales tax law (Act 154 of 1937) and the gross receipts tax law (Act 386 of 1941).

Appellee J. E. Dilworth Company is a corporation organized under the laws of Tennessee, with its home office and place of business in Memphis, Tennessee. It is not qualified to do business in Arkansas, and has no sales office, branch plant, or other place of business in this State. Orders for its machinery and mill supplies are procured in Arkansas by two traveling representatives (both domiciled in Memphis). The orders are subject to the approval of the home office. When the order is approved in Memphis, the merchandise is shipped f. o. b. Memphis, title to the merchandise being relinquished upon delivery to the common carrier. The traveling representatives do not collect any money. Appellee also receives orders by mail and telephone from Arkansas customers, which orders are accepted in Tennessee, and merchandise delivered to a common carrier in Tennessee with no title retained. The appellee is engaged in the general interstate business. Arkansas customers sometimes go to the office of the company in Memphis and buy goods direct, loading the same on the purchaser's truck and bringing the merchandise back to Arkansas.

The appellee Reichman-Crosby Company is likewise a corporation organized under the laws of Tennessee, with its principal place of business in Tennessee; and its business, in all instances, is conducted and handled exactly as the business of the J. E. Dilworth Company, as above recited.

The Commissioner of Revenues of the State of Arkansas filed separate suits against the two appellees in the Pulaski Chancery Court alleging in each suit that the respective appellee, by reason of the transactions involved — that is, the traveling salesmen soliciting orders and the appellee shipping the goods to purchasers f. o. b. Memphis — was liable to the State of Arkansas for the retail sales tax or the gross receipts tax of two per cent, as hereinbefore mentioned. The Commissioner of Revenues, in filing suit in the Pulaski Chancery Court, demanded that the defendants (appellees) severally furnish information as to the amount of the sales mentioned herein so that the Commissioner might levy the tax.

The appellees severally entered appearance, answered the complaint and furnished the requested information; but all the time contended that the tax could not be assessed, because the sales were consummated in Tennessee and delivery of merchandise was made in Tennessee, and the transactions were not taxable by the State of Arkansas under the Acts here involved. The appellees contended that the legislative Acts of the State of Arkansas and the regulations pertaining thereto, in so far as they involved appellees' transactions, were void, as being contrary to and infringing upon the Commerce Clause of the Constitution of the United States (Article I, section 8) and the Due Process Clause of the Constitution of the United States (Amendment 14).

The Chancery Court made a finding that the Commissioner of Revenues could not require the appellee companies to collect and remit the Arkansas sales tax or gross receipts tax, and that the Commissioner of Revenues could not recover taxes from the appellees in either of these cases. Accordingly, the Chancery Court dismissed the complaints and these appeals followed.

The legal questions in these appeals are:

(1) Whether these cases are ruled by Mann v. McCarroll, 198 Ark. 628, 130 S.W. 2d 721.

(2) Whether the decision of the United States Supreme Court in the case of McGoldrick v. Berwind-White Coal Mining Co., 309 U.S. 33, 60 S.Ct. 388, 84 L.Ed. 565, 128 A.L.R. 876, justifies this court in sustaining the tax here sought to be imposed notwithstanding the decision in Mann v. McCarroll, supra.

I. In the briefs and in the oral argument, there was considerable discussion of the extent and limits of the holding of this court in Mann v. McCarroll, 198 Ark. 628, 130 S.W.2d 721, 727, so a review of that case is essential at the outset.

In Mann v. McCarroll, the plaintiffs sought to enjoin the Revenue Commissioner from collecting sales tax under Act 154 of 1937. The Chancery Court sustained a demurrer and dismissed the complaints. On appeal, the appellants (plaintiffs and interveners below) presented the case to this court by using the dilemma form of argument; that is, on one horn of the dilemma the appellants argued that if the tax be a "use" tax, then the tax would be unconstitutional, arguing that the State could not impose a "use" tax; and on the other horn of the dilemma, the appellants argued that if the tax be a "sales" tax, then it would be a burden on interstate commerce and unconstitutional and void under the facts and circumstances in that particular case.

In the opinion, this court explored the first horn of the dilemma, and held that the tax was not a use tax, saying: "We are, therefore, of the opinion that this sub-division does not levy or impose a use tax and until such tax is levied and imposed, of course, the question does not arise as to its validity, whether it be a property tax or otherwise." That conclusion ended the use tax argument.

Whether a "use tax" is constitutional or unconstitutional was not there decided; and Mann v. McCarroll does not foreclose the question — which is still open before this court — as to whether a use tax is constitutional; and any statement therein to the contrary is dicta. We point this out so that the dicta in one decision will not be seized on as the ratio decidendi in the next decision; and we point this out for the further reason that no constitutional question is ever to be considered as decided in any case unless that question is necessary for decision in the case.

The second horn of the dilemma presented to the court in Mann v. McCarroll was...