Oxford v. Nehi Corp.
| Decision Date | 09 April 1959 |
| Docket Number | No. 20380,20380 |
| Citation | 109 S.E.2d 329,215 Ga. 74 |
| Parties | Dixon OXFORD, State Revenue Commissioner, v. NEHI CORPORATION. |
| Court | Georgia Supreme Court |
Syllabus by the Court.
The judgment of the Court of Appeals (Oxford v. Nehi Corporation, 98 Ga.App. 779, 106 S.E.2d 857), is affirmed.
Eugene Cook, Atty. Gen., Ben F. Johnson, Jr., Robert H. Walling, John M. Bowling, Deputy Asst. Attys. Gen., for plaintiff in error.
J. Robert Elliott, W. Willis Battle, Columbus, for defendant in error.
John Izard, Jr., Furman Smith, Atlanta, for parties at interest, not parties to record.
This case originated in a suit by Nehi Corporation against the State Revenue Commissioner to recover stated sums alleged to have been collected illegally or erroneously by the Commissioner as income taxes for the years 1950-1954 inclusive. The case was tried by the court without the intervention of a jury upon the following agreed stipulation of facts:
1. 'Plaintiff is a Delaware corporation with its principal office located in Columbus, Muscogee County, Georgia. The principal business of Plaintiff is the manufacture and sale of flavor concentrates used by bottlers in the production of soft drinks. These concentrates are manufactured by Plaintiff solely at its plant in Columbus, Georgia. Plaintiff maintains inventories of these concentrates as its plant in Columbus, Georgia, and also at a warehouse owned and operated by Plaintiff in Los Angeles, California.
2. 'Plaintiff's only customers are bottlers of soft drinks located in all of the forty-eight states and various foreign countries, and substantially all of its orders for flavor concentrates are received by mail from these bottlers.
3. 'Plaintiff derives its income from the manufacture and sale of tangible personal property and is entitled to use the three factor formula prescribed by Code Section 92-3113(4) in the allocation and apportionment of its income. No questions exist between the parties with respect to the amount of Plaintiff's total net income for each of the tax years in question, or the 'average inventory ratio' of the 'salaries and wages ratio' of the apportionment formula; the only question is with respect to the make-up of the 'gross receipts ratio', under Code section 92-3113(4)(c) and the facts here stipulated.
4. 'During each of the tax years in question, Plaintiff's gross receipts were derived from three types of shipments of the concentrates which it manufactured for sale: (a) Shipments from its Georgia plant to bottlers located in Georgia; (b) shipments from its Georgia plant to bottlers located in states other than Georgia and various foreign countries; and (c) shipments from its California warehouse to bottlers located in states other than Georgia.
5. 'All shipments from its Georgia plant, irrespective of destination, were made pursuant to orders received, accepted and handled entirely at Plaintiff's principal office in Columbus, Georgia.
6. 'Substantially all of Plaintiff's shipments were effected by common carriers, and Plaintiff prepaid transportation charges thereon. Most of such shipments were made on bills of lading which named Plaintiff as consignee and which were attached to sight drafts drawn against the bottler for whom the shipments were intended; such bill of lading, with drafts attached, were forwarded to local banks for collection, and when collected, the bills of lading were endorsed to the bottler who could then claim the shipment from the carrier. In all cases Plaintiff assumed the responsibility for shipments lost or damaged in transit and, with respect to all shipments, it was agreed between Plaintiff and its customers that the products shipped by Plaintiff would be actually delivered to its customers at destination, Plaintiff retaining title until the shipments reached their destination.
7. 'For each of the tax years in question, Plaintiff filed its Georgia income tax returns with the State Revenue Commissioner and computed and paid its income taxes on the basis of including as gross receipts from business done in Georgia the gross receipts from all shipments made from its Georgia plant irrespective of the destination of such shipments (i. e. the gross receipts described in (a) and (b) of paragraph 4) and excluding therefrom the gross receipts from all shipments made from its California warehouse (i. e. the gross receipts described in (c) of paragraph 4). At no time has the State Revenue Commissioner disputed Plaintiff's returns for these years with respect to this make-up of the gross receipts factor.
8. 'On May 29, 1956, Plaintiff filed with the State Revenue Commissioner claims for the refund of a portion of the taxes paid as aforesaid. In these claims, Plaintiff took the position for the first time that its gross receipts from business done in Georgia included only the gross receipts from shipments made from its Georgia plant to its bottlers located in Georgia (i. e. gross receipts described in (a) of paragraph 4); this decision was prompted by the decision of the Court of Appeals in State v. Coca-Cola Bottling Co., 93 Ga.App. 609, 92 S.E.2d 548; rehearing denied March 15, 1956.
9. 'On November 8, 1956, the State Revenue Commissioner denied the aforesaid claims for refund on the grounds that the aforesaid decision of the Court of Appeals, having been reversed by the Supreme Court, 212 Ga. 630, 94 S.E.2d 708, was not controlling.
10. 'For each of the tax years in question, Plaintiff returned and paid state income taxes in Georgia, Alabama and California; the income tax liability to Alabama was incurred by reason of Plaintiff's operating there a bottling plant separate from its concentrate business.
11. 'The only issue in this case is whether, under the facts here stipulated as applied to Code section 92-3113(4)(c), gross receipts from business done in Georgia includes only gross receipts from shipments made from Plaintiff's Georgia plant to its Georgia bottlers (i. e. only the gross receipts described in (a) of paragraph 4), as contended by Plaintiff, or whether it includes all gross receipts from shipments made from its Georgia plant to both its Georgia bottlers and to its bottlers located in other states and foreign countries (i. e. the gross receipts described in both (a) and (b) of paragraph 4), as contended by Defendants.'
A judgment was rendered in favor of the taxpayer, and affirmed by the Court of Appeals (two judges dissenting), Oxford v. Nehi Corporation, 98 Ga.App. 779, 106 S.E.2d 857. This court granted the Revenue Commissioner's petition for the writ of certiorari.
The controlling question in this case is the meaning and effect of subsection (4)(c) of section 1 of the act of 1950 (Ga.L.1950, p. 299), which amended Code (Ann.) § 92-3113. Said subsection reads as follows: Subsection (4)(c) is the third factor in the Three-Factor Formula for the apportionment of corporate income where the income is derived from the manufacture, production or sale of tangible personal property. The portion of net income therefrom attributable to property owned or business done within the State of Georgia is the portion arrived at by the application of this three-factor formula.
The Revenue Commissioner contends that this subsection, when construed with the whole of Code (Ann.) § 92-3113 and Code (Ann.) § 92-3002(n), means that, where products are produced, manufactured or stored in this State and shipped to customers outside this State, the gross receipts derived therefrom are to be included in the Georgia gross receipts unless the sales for such products were negotiated or effected through offices of the taxpayer outside the State. The taxpayer contends that the receipts which are to be included in the numerator of the Georgia gross-receipts ratio are, first, all receipts from products shipped to customers in this State, and, second, all receipts from products delivered within this State to customers; and that the character of the receipts is not determined as to where the sale of the products was negotiated or where title to the products passed.
A brief history of the Three-Factor Formula will be helpful in determining the meaning of Code (Ann.) § 92-3113(4)(c). The first Income Tax Law of 1929 (Ga.L.1929, p. 92) did not provide for the apportionment of corporate income by the use of any formula. The Income Tax Act of 1931 (Ga.L.1931, Ex.Sess., pp. 24, 36) provided for the allocation and apportionment of corporate income as follows: 'Where income is derived from the manufacture or sale of tangible personal property, the portion thereof attributable to business within the State shall be taken to be such percentage of the total of such income as the tangible property and business within the State bear to the total tangible property and total business, the percentage of tangible property and of business being separately determined and the two percentages averaged.' This provision was re-enacted in the amendment of 1935 (Ga.L.1935, pp. 121, 132). Many provisions of the Income Tax Acts of 1931 and 1935 were repealed or amended by the act of 1937 (Ga.L.1937, p. 109). Section 9 of this act completely repealed and replaced Code (Ann.) § 92-3113, as amended by the 1935 act, and adopted for the first time the Three-Factor Formula for...
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...No specific attack was made on the gross receipts formula or the reasonableness of the same to the taxpayer. In Oxford v. Nehi Corporation, 215 Ga. 74, 109 S.E.2d 329, no question was raised or decided as to the validity or reasonableness of the gross receipts formula. We there dealt only w......
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