Olympic Motors Inc. v. McCroskey

• Decision Date: 17 December 1942
• Docket Number: 28722.
• Citation: 15 Wn.2d 665,132 P.2d 355
• Parties: OLYMPIC MOTORS, Inc., v. McCROSKEY et al., State Tax Commission.
• Court: Washington Supreme Court

132 P.2d 355

15 Wn.2d 665

OLYMPIC MOTORS, Inc., v. McCROSKEY et al., State Tax Commission.

No. 28722.

Supreme Court of Washington

December 17, 1942

Department 1.

Action by Olympic Motors, Inc., against Floyd T. McCroskey and others, constituting the State Tax Commission, to restrain the defendants from collecting certain sales taxes by distraint. From a judgment of dismissal, plaintiff appeals.

Affirmed.

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

Carl R Heussy and Stewart N. Lombard, both of Seattle, and Lester T Parker, of Aberdeen, for appellant.

Smith Troy, Stanbery Foster, and Jess N. Rosenberg, all of Olympia for respondent.

MILLARD, Justice.

Plaintiff corporation is a dealer in automobiles and trucks. As a part of its business it sells motor vehicles on conditional sales contract, under the provisions of which the title to the vehicle is retained by plaintiff seller until full performance by the purchaser of all of the conditions of the contract. Those contracts also provide for repossession of the vehicles by plaintiff in the event of a default by the purchaser.

Plaintiff repossessed a number of motor vehicles pursuant to the conditional sales contracts. Plaintiff made regular reports to the state tax commission for the years 1938 and 1939 at which times plaintiff paid the sales tax upon the amount of the conditional sales after deduction therefrom of the unpaid balances due upon the conditional sales contracts under which it had repossessed the vehicles.

On threat of the state tax commission to collect the taxes by distraint by virtue of tax commission rule 203 authorized by Laws of 1935, chapter 180, § 208, if plaintiff refused the commission's demand of payment of a sales tax upon the deductions of unpaid balances described above plaintiff instituted this action to restrain the commission on the theory that rule 203 is void in that it is not authorized by any of the provisions of Laws of 1935, chapter 180.

Plaintiff's second cause of action challenges the validity of rule 108 promulgated by the tax commission, which contemplates the exaction of sales tax upon the sales price of an article taken in trade when that article is resold.

Defendant's demurrer on the ground that the complaint did not state facts sufficient to constitute a cause of action was sustained and judgment of dismissal was entered. Plaintiff appealed.

Two questions are presented by this appeal: (1) Where property is sold under a conditional sales contract and is repossessed after part payment, is the sales tax to be computed on the full amount of the sale or only upon amounts actually collected thereunder?

(2). Is a 'trade-in' delivered by the purchaser to a seller as part of the purchase price subject to a sales tax?

Stated another way, the second question is: May a sales tax be exacted upon the sales price of an article taken in trade when that article is resold?

The sales tax statute (Laws of 1935, chapter 180, as amended by Laws of 1939, chapter 225) imposes an excise tax on retail sales of personal property which shall be paid by the buyer to the seller who is required to collect from the buyer the full amount of the tax payable in respect to each taxable sale, which tax required to be collected by the seller shall be deemed to be held in trust by the seller until paid to the state tax commission.

The tax commission is authorized by Laws of 1935, chapter 180, § 208 to prescribe rules in conformity to the statute necessary in enforcing provisions of the revenue act. Pursuant to that grant of power the tax commission promulgated rule 203 which reads as follows:

'Persons making conditional sales or other installment sales of tangible personal property must report the total selling price of such sales in the bi-monthly tax period in which the contracts of sale are entered into.

'The foregoing is true irrespective of the fact that such sellers arrange to receive payment of tax in installments or that a contract may be discounted or pledged with or sold to a finance company. In the latter case, although as a part of the agreement with the seller the finance company actually makes collection of the tax from the buyer as the installments fall due, the finance company should not report to the Tax Commission in the amount of tax collected since the total tax already has been reported by such seller.

'No deduction for credit losses in case of repossession is allowed under the Retail Sales Tax or Compensating Tax.'

The statute provides that from and after the first day of May of each year there is levied and there shall be collected a tax on each retail sale equal to a specified per cent of the selling price. Laws of 1941, chapter 76, § 2. The pertinent statutory provisions defining terms read as follows:

'* * * The term 'selling price' means the consideration, whether money, credits, rights, or other property, expressed in the terms of money, paid or delivered by a buyer to a seller, all without any deduction on account of the cost of tangible property sold, the cost of materials used, labor costs, interest, discount, delivery costs, taxes or any other expenses whatsoever paid or accrued and without any deduction on account of losses; * * *.'

'The meaning attributed, in title II of this act, to the words and terms * * * 'sale,' * * * shall apply equally in the provisions of this title.' § 8, chapter 178, Laws of 1941.

'The word 'sale' means any transfer of the ownership of, title to, or possession of property for a valuable consideration and includes any activity classified as a 'sale at retail' or 'retail sale' under sub-section (d) of this section. It includes conditional sale contracts, leases with option to purchase, and any other contract under which possession of the property is given to the purchaser but title is retained by the vendor as security for the payment of the purchase price. * * *' § 2, chapter 178, Laws of 1941.

Our sales tax statute from the time of its origin in 1935 has provided for the levy and collection of a tax on each retail sale in this state equal to a specified per cent of the selling price; that is, the imposition of the tax is upon each sale at the rate of a specified per cent of the selling price and not upon the amount collected.

The legislature defined 'selling price' as the consideration, whether money, credits, rights or other property, expressed in the terms of money, paid or delivered by a purchaser to a seller for the transfer of the ownership of, or title to, property, without any deduction on account of the cost of property sold, labor costs, etc., and without any deduction on account of losses. Laws of 1935, chapter 180, § 17 as amended by Laws of 1941, chapter 178, § 8.

While one may sell is personal property under a conditional sales contract and waive his right to collect the full purchase price at the time of sale in favor of the alternative right of repossession, that waiver has no effect on the sales tax liability. There is no necessity for interpretation or construction of the language of the statute as same is clear and unambiguous. The legislature definitely, specifically...