Mossberg-Hubbard Division of Wanskuck v. Norberg, MOSSBERG-HUBBARD
| Decision Date | 22 July 1981 |
| Docket Number | MOSSBERG-HUBBARD,No. 79-229-M,79-229-M |
| Citation | 432 A.2d 1176 |
| Parties | DIVISION OF WANSKUCK v. John H. NORBERG, Tax Administrator. P. |
| Court | Rhode Island Supreme Court |
This is a petition for certiorari to review a District Court judgment affirming a decision of the tax administrator assessing a sales tax against the petitioner, Mossberg-Hubbard Division of Wanskuck (Mossberg-Hubbard), in the amount of $16,389.39 plus any applicable interest.
The relevant facts are not in dispute. Mossberg-Hubbard, a division of Wanskuck company with a place of business in Cumberland, Rhode Island, manufactures packaging reels and spools for the wire and textile industries and sells them to customers both in and outside the State of Rhode Island. Certain of the out-of-state customers of Mossberg-Hubbard maintain their own fleets of trucks which are either owned by the individual customer or by a corporation controlled by the customer. On sales to such customers, the invoice reflects that the shipment of goods between Mossberg-Hubbard and the customer is f.o.b. the customer's plant outside the State of Rhode Island. Therefore, the title and the risk of loss remain with Mossberg-Hubbard until the goods have reached the customer's out-of-state plant. It follows that because the risk of loss is borne by Mossberg-Hubbard through an agreement with their out-of-state customer, Mossberg-Hubbard insures the goods against loss during shipment. Moreover, because the out-of-state customer bears the cost of freight by using their own trucks, Mossberg-Hubbard credits the freight charge back to the customer on the invoice.
As a result of an audit, the tax administrator sent a notice of deficiency in the amount of $18,279.24 to Mossberg-Hubbard for uncollected sales taxes on the transactions described above. Mossberg-Hubbard thereupon requested a hearing on the matter and sought a refund of the deficiency. Relying on an agreed statement of facts submitted by the parties, the tax administrator in a written decision abated the assessment by $1,889.85 but denied a refund of the remaining $16,389.39. Pursuant to G.L. 1956 (1980 Reenactment) § 44-19-18, Mossberg-Hubbard appealed the decision of the tax administrator to the District Court. The District Court trial justice affirmed the decision of the tax administrator. Mossberg-Hubbard thereupon sought and was granted a writ of certiorari by this court. Mossberg-Hubbard Division of Wanskuck v. Norberg, R.I., 404 A.2d 848 (1979).
The issues raised in this appeal are these: (1) whether the transfer in this state of reels and spools from Mossberg-Hubbard to their out-of-state customers constitutes a taxable sale pursuant to G.L. 1956 (1970 Reenactment) § 44-18-7(A), as amended by P.L. 1973, ch. 263, § 1, 1 and (2) whether the exercise of the state's taxing power on the transactions in question effectively establishes a double tax and, hence, an unconstitutional burden on the flow of interstate commerce.
Mossberg-Hubbard contends first that the transfer of goods in Rhode Island to an out-of-state customer f.o.b. the customer's plant and the transportation of those goods by vehicles owned by the customer do not constitute transfers of title or possession and hence do not constitute taxable sales under G.L. 1956 (1980 Reenactment) § 44-18-7(A). The tax administrator argues that because the transfer of possession of the goods was accomplished in Rhode Island and because the vehicles used for delivery were at all times in the control of Mossberg-Hubbard's out-of-state customers, a taxable sale did occur within the meaning of § 44-18-7(A).
In construing this section, we have held that a mere transfer of possession, which does not have the economic effect of a transfer of title, will not be treated as a sale. See Sportfisherman Charter, Inc. v. Norberg, 115 R.I. 68, 73, 340 A.2d 143, 146 (1975). However, when "a transaction (is) set up to be ostensibly a mere transfer of possession, lease or rental, while in actual economic fact it was in lieu of a transfer of title, exchange, or barter, the tax administrator might in his discretion treat (the transaction) as a sale." Id. at 73-74, 340 A.2d at 146. In determining what constitutes a transaction in lieu of a transfer of title, the tax administrator is afforded broad discretion; his determination need only be reasonable. Id. at 74, 340 A.2d at 147.
Our review of the District Court decision affirming the tax assessment is limited to a review of any question of law involved. G.L. 1956 (1977 Reenactment) § 42-35-16. We examine the record to determine whether there is "any competent evidence * * * to support the decision of the trial justice and whether his decision is affected by any errors of law." G. H. Waterman & Co., Inc. v. Norberg, R.I., 412 A.2d 1132, 1134 (1980); see Herald Press, Inc. v. Norberg, R.I., 405 A.2d 1171, 1177 (1979).
Mossberg-Hubbard relies on the provisions of the Rhode Island Uniform Commercial Code for the proposition that the transfer of goods from Mossberg-Hubbard to its out-of-state customers is neither a transfer of title nor a transfer of possession in lieu of title. Mossberg-Hubbard contends that pursuant to the f.o.b. destination contract between the parties in the instant case, the out-of-state customer's duty to pay is conditioned upon the proper delivery by Mossberg-Hubbard to the out-of-state plant; the risk of loss and the duty to maintain insurance remain with Mossberg-Hubbard until delivery; Mossberg-Hubbard retains the right to stop shipment at any time before delivery; and the out-of-state customer retains a right to refuse nonconforming goods upon delivery. See G.L. 1956 (1969 Reenactment) §§ 6A-2-507(1), 6A-2-319(1)(b), 6A-2-705, and 6A-2-601. Accordingly, Mossberg-Hubbard argues that all of these economic factors do not support the proposition that the transfer of the goods in question was either a transfer of actual title or the economic equivalent to a transfer of title. Mossberg-Hubbard characterizes the transaction as a transfer of "naked custody" for the limited purpose of delivery to the out-of-state customer's plant, a transfer that is not sufficient to support the imposition of a Rhode Island sales tax. Moreover, Mossberg-Hubbard contends that the fact that the goods were delivered in trucks owned by the out-of-state customer does not compel a different result.
We hold, however, that Mossberg-Hubbard's contention that the Uniform Commercial Code is applicable is misplaced. As we have stated previously, "when an administrative agency has interpreted the parameters of particular statutory terms in a field over which it has been given authority, it is not bound by the meaning ascribed to similar concepts in the (Uniform Commercial) Code." Rice Machinery, Inc. v. Norberg, R.I., 391 A.2d 66, 74 n.12 (1978); G.L. 1956 (1969 Reenactment) § 6A-2-401, Comment 1.
In the instant case, both the tax administrator and the District Court trial justice cited in their decisions the interpretive sales-tax regulation that states:
"Where tangible personal property pursuant to a sale is delivered in this state to a buyer or an agent of his other than a common carrier the retail sales tax applies notwithstanding that the buyer may subsequently transport the property out of state * * *."
Regulations and Rules Issued by the Tax Administrator under the Sales and Use Tax Law at...
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