Merriwether v. State

• Decision Date: 13 October 1949
• Docket Number: 3 Div. 512.
• Citation: 42 So.2d 465,252 Ala. 590,11 A.L.R.2d 918
• Parties: MERRIWETHER v. STATE.
• Court: Alabama Supreme Court

42 So.2d 465

252 Ala. 590, 11 A.L.R.2d 918

MERRIWETHER v. STATE.

3 Div. 512.

Supreme Court of Alabama

Oct. 13, 1949

John W. Lapsley, of Selma, and Richard T. Rives, of Montgomery for appellant.

A. A. Carmichael, Atty. Gen., and Hugh F Culverhouse, Asst. Atty. Gen., for appellee.

LAWSON Justice.

The ultimate question for decision presented by this appeal is whether sales tax is due the State of Alabama by appellant, a wholesale and retail dealer in automobile parts, equipment and supplies, on sales of such articles made by appellant during a period beginning March 1, 1942, and ending December 31, 1946, to regularly licensed retail automobile dealers who were engaged in the business of reselling such articles, and who represented to appellant that the articles so purchased were to be resold by them, but were in fact used by the said retail automobile dealers in reconditioning their own used cars for sale at retail after being reconditioned.

On July 22, 1947, the State Department of Revenue entered a final assessment against appellant, Lee Merriwether, doing business as Genuine Auto Parts Company, for additional sales tax for the period of time above mentioned, in the amount of $1912.32, which amount includes interest and penalty.

Within thirty days from the date on which the said assessment was made and entered on the minutes of the Department of Revenue, appellant, the taxpayer, filed notice of an appeal with the secretary of the Department of Revenue and with the register of the circuit court of Montgomery County. At the time of taking the appeal, appellant executed a supersedeas bond, which was approved by the register of the circuit court of Montgomery County, in double the amount of the assessment, conditioned to pay all taxes, interest and costs found to be due. § 140, Title 51, Code 1940.

Thereafter on November 5, 1947, appellant filed a bill in equity in the circuit court of Montgomery County assailing the correctness and validity of the assessment of the Department of Revenue in so far as it was based on gross receipts of sales made by him in the manner described in the first paragraph of this opinion. The prayer of the bill was, in effect, that the court declare that no sales tax was due on the gross receipts of sales so made and that the court set aside and cancel the assessment made by the Department of Revenue and render a judgment or decree fixing the correct amount of additional sales tax, penalty and interest the by the taxpayer for the period covered by the assessment. This procedure is in accordance with the established practice. State v. Louis Pizitz Dry Goods Co., 243 Ala. 629, 11 So.2d 342.

Thereupon the State demurred to the bill which is the proper method in a case of this kind to raise an issue of law on the facts alleged. State v. Louis Pizitz Dry Goods Co., supra.

The trial court sustained the demurrer of the State and the taxpayer has appealed to this court.

Counsel for appellant, the taxpayer, refer to the bill filed in the circuit court of Montgomery County, in equity, as a petition and to appellant as petitioner. We will do likewise.

The Alabama sales tax has been held to be a consumer's tax in the sense that the ultimate burden of the tax must be passed on to the consumer. King & Boozer v. State, 241 Ala. 557, 3 So.2d 572, and cases cited. However, as to taxable sales, the burden is upon the seller to collect from the purchaser the amount of tax due on a sale and the State looks to the seller for the tax. Doby et al. v. State Tax Commission, 234 Ala. 150, 174 So. 233, 237; Tanner v. State, 28 Ala.App. 568, 190 So. 292, certiorari denied, 238 Ala. 269, 190 So. 295. So, hereafter, when we speak of the liability of petitioner for sales tax we have reference to his obligation to collect from the purchaser and remit to the State on all taxable sales.

The petition, in substance, alleges that during the period of time covered by the assessment petitioner was engaged principally in the business of a wholesale dealer in automobile parts, equipment, supplies, paints, and other like materials, although he occasionally sold such articles at retail directly to the ultimate consumer; that petitioner's books were kept in such a manner as to show separately the sales made at wholesale and those made at retail and that petitioner separately reported the wholesale sales and retail sales and separately reported the amount of money derived from wholesale and retail sales.

But we are not concerned here with the manner in which petitioner kept his books. The petition affirmatively shows that petitioner failed to pay sales tax on gross receipts received by him during the period covered by the assessment from the sale of automobile parts, equipment, supplies, paints and other like materials to retail automobile dealers and which articles of merchandise were used by the said automobile dealers 'in the business of rebuilding or reconditioning second-hand or used automotive vehicles for sale at retail, which said vehicles, after being so rebuilt or reconditioned, were in fact sold at retail.'

So, the question here is, do the averments of the petition show, as against the demurrer interposed, that the petitioner was not liable for sales tax on such sales? If this is so, the trial court erred in sustaining the State's demurrer. If such is not the case, the demurrer was properly sustained.

The petition seeks to establish petitioner's nonliability for the tax on several grounds. We will deal with them separately but not in the order in which they appear in the petition.

It is averred in the petition, in substance, that the sales tax law was not intended to apply to sales of automobile parts, supplies, etc., to be used in reconditioning used automotive vehicles for sale at retail, in that the gross proceeds of the sale or sales of used automotive vehicles are expressly exempt from sales tax (subsec. p, § 755, Title 51, Code 1940), and that the legislature did not intend to deny to the sellers of used automotive vehicles the full benefit of such exemption by requiring them to pay a tax on parts, supplies, etc., purchased by them with which to recondition used automotive vehicles for resale.

In November, 1937, this court had before it for determination a case very similar to the instant case. It was a declaratory judgment proceeding instituted by G. W. Cody, doing business as the Cody Supply Company, against the State Tax Commission. Cody v. State Tax Commission, 235 Ala. 47, 177 So. 146.

It was expressly held in that case that Cody and those in similar businesses are liable for the sales tax on automobile parts, tires, accessories, solder, paint and similar materials, sold to automobile repair shops to be used, and which are in fact used, by the repair shops in reconditioning their own second-hand automobiles for resale.

Petitioner in this case is in the same business as was Cody. The automobile dealers in this case are in the same position as were the operators of automobile repair shops in the Cody case, supra.

Petitioner is familiar with the holding in the Cody case, but insists that it is apparently in conflict with the case of Doby v. State Tax Commission, 234 Ala. 150, 174 So. 233. But we see no conflict in the holdings of those cases. The Doby case, supra, dealt with the liability of the repair shop operator for sales tax under certain circumstances, that is, his obligation to collect the tax from his customers and to remit to the State. The Cody case, supra, dealt with the obligation of the automobile supply house operator to collect the sales tax from the repair shop operator when he sold supplies to him and to remit to the State. Mr. Justice Foster, who wrote the opinion for the court in the Cody case, supra, pointed out this distinction in the following language: 'The Doby case, supra, dealt with the liability of the operator of the shop. In it, the statement was clearly made the the liability for the tax payable by the seller to the operator of the shop was not involved nor decided. But that is now the purpose of this suit.' 235 Ala. 49, 177 So. 148.

Petitioner contends that the opinion in the Cody case, supra, failed to take cognizance of the fact that the gross proceeds of the sale or sales of used automotive vehicles was expressly exempt from sales tax. It is true that at the time the Cody case was decided the sales tax law then in effect contained such an exemption. But it was not necessary to make reference thereto for it had no bearing on the question presented. Merely because the legislature saw fit to exempt from sales tax the gross proceeds received from the sale of used automotive vehicles, it does not follow that it intended to exempt the sale of materials, supplies and equipment purchased for the purpose of reconditioning such vehicles for resale. We cannot say that the legislature intended to single out either the seller or purchaser of used automotive vehicles as a favored class. Unquestionably, there was some good reason for the exemption granted on sales of used automotive vehicles, and we think it likely that the reason for the exemption was the fact that the legislature recognized that a sales tax is due on the sale of a new car and on the sales of parts, accessories, and supplies purchased and used for the purpose of reconditioning the car for resale.

There is no merit in petitioner's contention that if such sales by the automotive supply house to the automobile dealer are held to be taxable, it would in effect amount to taxing the same article twice, in that, except for the exemption afforded to the sale of used automotive vehicles, a tax would be due on such sales. But there was such an exemption during the period covered by the assessment involved. W...