Reichman-Crosby Co. v. Stone

• Court: Mississippi Supreme Court
• Citation: Reichman-Crosby Co. v. Stone, 204 Miss. 122, 37 So.2d 22 (Miss. 1948)
• Decision Date: 11 October 1948
• Docket Number: 36818.
• Parties: REICHMAN-CROSBY CO. v. STONE, Chairman State Tax Commission.

37 So.2d 22

204 Miss. 122

REICHMAN-CROSBY CO. v. STONE, Chairman State Tax Commission.

No. 36818.

Supreme Court of Mississippi

October 11, 1948

W. W. Venable, of Clarksdale (deceased), and Creekmore & Creekmore, of Jackson, for appellant.

J. H. Sumrall, of Jackson, for appellee.

McGehee Justice.

This is a suit to recover, in the manner provided by law, the sum of seventy-five dollars in Use Taxes paid, under protest, to the appellee, A. H. Stone, Chairman of the Tax Commission of Mississippi, by the appellant Reichman-Crosby Company, nonresident corporation of Tennessee. A demurrer filed by the Tax Commission was sustained by the trial court to the declaration of the appellant, and upon failure of the plaintiff to amend, the suit was dismissed and final judgment was entered denying the recovery sought.

On this appeal the constitutional power and authority of the state to levy the tax against the user of the tangible personal property purchased by residents of this state upon orders taken by the nonresident seller's travelling salesmen who resided in Memphis where the orders were sent for acceptance or rejection, is not questioned.

The appellant challenges only the right of this state to require such a nonresident seller of tangible personal property to collect from its purchasers and pay the tax to the appellee 'at the time of making sales,' which are consummated at Memphis, Tennessee by delivery of the property to a common carrier for transportation to the purchasers in this state since, according to the provisions of our Use Tax Law, it is declared that the tax 'shall not apply with respect to the * * * use * * * of any article of tangible personal property sold * * * outside of this state until the transportation thereof has finally ended and such article has become commingled with the general mass of property within this state.' Code 1942, § 10148.

The power of the state to require the nonresident seller to act as its tax collector in the premises is further challenged on the ground that such seller in the case at bar is not doing business in this state under the principles announced by any prior decision of this Court where the seller has no office, place of business or resident agent in this state, and has not qualified to do business here under our laws, and has not appointed a resident agent for the service of process here, and is engaged in no local activity in Mississippi within the meaning of our previous decisions as to what constitutes doing business in this state; that is to say, the appellant questions the constitutional power and authority of the state to make a tax collector out of a nonresident seller over which it has no territorial jurisdiction, since the seller is not present here within the contemplation of our own legal jurisprudence and within the meaning of all the decisions of the Supreme Court of the United States, except that which was rendered in the case of General Trading Company, doing business as Minneapolis Iron Store v. State Tax Commission of the State of Iowa, 322 U.S. 335, 64 S.Ct. 1028, 88 L.Ed. 1309, which is deemed not to be controlling in the instant case for the reasons to be hereinafter stated.

The property for the use of which the tax was demanded and paid by the appellant is alleged in the declaration to have been sold on orders taken by the nonresident salesmen, who were soliciting agents of the appellant, and which had been delivered to a common carrier at Memphis for transportation to purchasers residing in Mississippi, resulting in the completion of such sales in Tennessee.

The tax is levied against the user of the property in Mississippi, and our Use Tax Law, Chapter 120, Laws of 1942, Secs. 10146 to 10167, both inclusive, Code of 1942, provides that the same 'shall not apply with respect to the * * * use * * * of any article of tangible personal property sold * * * outside of this state until the transportation thereof is finally ended and such article has become commingled with the general mass of property within the state * * *.'

The act further provides that 'Every person maintaining a place of business in this state and making sales of tangible personal property for use in this state, * * * shall at the time of making the sales * * *, whether within or without the state, collect the tax imposed by this act from the purchaser * * * [and] receipt therefor in the manner and in the form prescribed by the commissioner if the commissioner shall, by regulation, require such receipt'; that 'the term 'retailer maintaining a place of business in this state' or any similar term, shall mean and include any retailer, distributor, wholesaler or manufacturer * * * having or maintaining within this state * * *an office, distribution house, salesroom or house, warehouse or other place of business, or any agent operating within this state under the authority of the retailer, distributor, wholesaler or manufacturer * * *, irrespective of whether such place of business or agent is located within this state permanently or temporarily, or whether such retailer, distributor, wholesaler or manufacturer * * *, is admitted to do business within this state under its general laws.' (Italics ours.)

The act assesses and levies by a general provision a tax upon 'any person who uses, * * * any property upon which a tax, is herein imposed * * * upon which the tax has not been paid to the commissioner, as herein provided,' and declares that such person shall be liable therefor and shall pay the tax upon notice and demand by the commissioner as therein provided.

The act also provides that, 'The tax herein imposed, * * * in addition to being a tax against the property, business, trade or occupation, it shall constitute a debt due the state by the person owing the tax, or the person required or authorized to collect it.' (Italics ours.)

It is further provided in the act that, 'It shall be unlawful for any person subject to the provisions of this act to fail or refuse * * * to pay the tax herein imposed * * *;' and that 'any person violating any of the provisions of this act shall be guilty of a misdemeanor, and on conviction thereof shall be fined not more than five hundred dollars ($500.00) or if he be an individual, imprisoned not exceeding six months in the county jail, or punished by both such fine and imprisonment, at the discretion of the court'; and it is further provided that anyone failing

or refusing to comply with the provisions of the act 'may be proceeded against by injunction to prevent the continuance of his business in this state.'

The use tax imposed is equal to two per cent of the purchase price of the property, and it does not apply where the property has already been included in the measure of our Two Per Cent Sales Tax Law or the sales tax imposed by some other state in an amount equal to or greater than such Use Tax.

It is declared that the primary purpose of the tax is 'to protect, insofar as may be proved practicable, the merchants, dealers, manufacturers * * * who meet the requirements of the Mississippi sales tax laws, against the unfair competition of importations of goods * * * into Mississippi without the payment of the retail sales tax imposed for the sale of goods, wares or merchandise usually carried for sale in this state * * *.'

As hereinbefore stated, it is not contended that the tax is unconstitutional as against the user of tangible personal property purchased outside of the state over whom the state has jurisdiction and who enjoys the protection of its laws in the use and enjoyment thereof, but that as to the seller it is unconstitutional (1) for the reason that it violates the commerce clause as a burden on interstate commerce, in that the nonresident seller is required to become a surety or be responsible for the collection of the tax before any liability therefor has become fixed against the purchaser, and is not in a position to protect himself in the manner available to a local retail merchant in the state, who is able to collect the tax when the sale is being consummated by placing the goods back on the shelf if the purchaser fails to pay a two per cent sales tax; that is to say, that he must credit the purchaser and run the risk as to being reimbursed after the property comes to rest in this state and the liability of the user accrues, or he must forego making the sale; and (2) that he is denied the equal protection of the laws guaranteed by the Federal Constitution for the reasons stated under numeral No. one; and (3) that the requirement as to him violates the due process clause of the Federal Constitution, Amendment 14, in that although he is not present in the taxing state subject to its jurisdiction, he is required to take notice of the statutes of a foreign state at the time of making a sale in his own state and collect the proper amount imposed by the Use Tax Law, notwithstanding that such taxing state has not conferred upon him the right to engage in interstate commerce [37 So.2d 25] --a right guaranteed by the federal government, and which the state government is prevented from withholding, in the exercise of which right the law of the state affords no protection as a local activity.

It is unnecessary that we emphasize these contentions, because to merely state them is to show their correctness, unless their force is negatived by decisions of the Supreme Court of the United States, since under our own decisions a nonresident seller engaged exclusively in interstate commerce in the manner hereinbefore mentioned is neither subject to the state's taxing power nor to the state's jurisdiction to subject it to personal liability for failure to collect and pay a tax levied against the citizens of this state.

The right of a...