Schemmer v. Iowa State Tax Commission

• Decision Date: 16 October 1962
• Docket Number: No. 50608,50608
• Citation: 254 Iowa 315,117 N.W.2d 420
• Parties: W. A. SCHEMMER, d/b/a W. A. Schemmer Construction Company, Appellant, v. IOWA STATE TAX COMMISSION: Leon N. Miller, Commissioner, Chairman, Emlin Bergeson, Commissioner, Martin Lauterbach, Commissioner, Appellees.
• Court: Iowa Supreme Court

Page 420

117 N.W.2d 420

254 Iowa 315

W. A. SCHEMMER, d/b/a W. A. Schemmer Construction Company, Appellant, v. IOWA STATE TAX COMMISSION: Leon N. Miller, Commissioner, Chairman, Emlin Bergeson, Commissioner, Martin Lauterbach, Commissioner, Appellees.

No. 50608.

Supreme Court of Iowa.

Oct. 16, 1962.

Parrish, Guthrie, Colflesh & O'Brien, Des Moines, and Maurice E. Stark, Fort Dodge,. for appellant.

Evan Hultman, Atty. Gen., of Iowa, and William E. Adams, Asst. Atty. Gen., Des Moines, for appellees.

LARSON, Justice.

This is an appeal from a district court judgment dismissing plaintiff's petition challenging the findings, rulings and order of the State Tax Commission assessing against him tax and penalty under the provisions of Chapter 422 of the 1958 Code, I.C.A. It involves two questions: (1) whether certain sales were made in Nebraska or Iowa, and (2) whether under the circumstances sales tax was due on his cost of transportation. The trial court held for defendant on both issues. We think further proceedings are necessary before the first issue can be equitably determined, but agree with the court on the second.

Most of the relevant facts were stipulated and there is little disagreement as to them. W. A. Schemmer, d/b/a W. A. Schemmer Construction Company, plaintiff during the period involved, was engaged in quarrying and selling rock in various forms near Logan, Iowa. Under contracts such as Exhibit '6', he furnished many tons of Rip-rap stone to general contractors who were doing government work on the Missouri River. Under these agreements he agreed to furnish rock, meeting certain specifications f. o. b. barges at designated spots on the river. He was to be paid a fixed sum for each ton so delivered. In the exhibit it was $2.50 per ton for 30,000 tons, and $2.20 for the balance.

Following an audit of his books by the Tax Commission representatives in 1953, it was found a number of sales had been made upon which sales tax had not been paid, and that in a number of instances the taxpayer's sales price included the cost of transporting the goods to the purchaser, but he had failed to collect or pay sales tax on the transportation cost thereon. As sales tax on this had not been previously imposed, plaintiff objected and a hearing was had before the State Tax Commission. It found this taxpayer, during the period from April 1, 1953, through March 31, 1957, had made 'sales within the State of Iowa on which sales tax was not collected' and that in a number of instances his 'sales price included the cost of transporting the goods to the purchaser', but that he had 'collected sales tax only on the cost of the goods so delivered', and that deficiency was created and 'there is presently owing on said assessment taxes in the amount of $6,677.50 plus statutory penalty in the amount of $1,507.04. It was concluded that all sales referred to in the first finding 'are subject to Iowa Sales Tax', and that all sales in the latter finding under section 422.43 of the Code, I.C.A. and Rule 41 of the Tax Commission are subject to an additional sales tax to the extent of the cost of transportation. Its order confirmed the amount found due and the penalty, and an assessment was levied in those amounts.

It appears from the record uncertainty as to where the deliveries of rock were made could only be resolved by a determination of the boundary line between Nebraska and Iowa, and that upon the survey it could be determined what sales were made in Iowa and what sales, if any, were made in Nebraska. The Tax Commission was to request a survey from the Conservation Commission, and the parties seemed to have agreed to adjust the tax assessment on that basis. Although the survey was expected before the district court hearing, it has not yet been made. It was stipulated that a memorandum report of the director of the sales tax division to the special counsel disclosed, 'We have used an 1890 governmental engineer survey as our yardstick in determining the recognized boundary between Nebraska and Iowa and in doing it, an adjustment of $1,145.95 in tax would apply against the unpaid liability, but no conclusions were reached on the accuracy of the 1890 survey as an earlier one was supposed to have been made and, if it is accepted, it would assumably be more beneficial to the taxpayer. We therefore have not made the $1,145.95 adjustment as the boundary question is still in dispute.' After the assessment disallowing any adjustment, plaintiff pursued his remedy and filed his petition in equity under the provisions of section 422.55, Code 1958, I.C.A.

Under a stipulation it was agreed that plaintiff employed independent contractors to haul rock from the quarry to the users or consumers under a 'hauling contract' set out in Exhibit '7', that he kept books showing the amount each trucker hauled and what sums were paid for that service by plaintiff. He contends such services were not subject to sales tax, that they were transportation services exempt under section 422.42(2), Code 1958, I.C.A., and that they were not a part of the gross receipts from the sale of tangible personal property.

I. All sales of tangible personal property, consisting of goods, wares, or merchandise, except as specifically exempted by statute, sold at retail in Iowa to consumers or users, are subject to a sales tax of two per cent. Section 422.43, Code of Iowa 1950, 1954, 1958, 1962, I.C.A. The rate was raised to two and one half per cent for a temporary period in 1955. No sales tax is imposed upon transportation service as such. In fact the gross receipts from 'the sales, furnishing or service of transportation service' are specifically exempt from such tax. Section 422.45(2), Code of Iowa 1950, 1954, 1958, 1962, I.C.A. In addition, Rule 41 of the State Tax Commission provides in part: 'Freight, delivery and other transportation charges. Where a seller supplies tangible personal property from stock, the transportation charges for shipment or delivery from the seller to the consumer or user, shall become part of the purchase price on which sales tax is computed, except and unless such delivery or transportation charges are billed separately.'

It is appellant's contention here that the taxing and exemption statutes are clear and unambiguous, that they impose no tax on charges for transportation, and that any such construction by the tax commission thereof in Rule 41 was unwarranted. It is true sometimes attempts to construe a code section result in greater ambiguity, but under our decisions on these sections we have ourselves distinguished those transportation charges which are subject to a tax from those which are not. Dain Mfg. Co. v. Iowa State Tax Commission, 237 Iowa 531, 22 N.W.2d 786; City of Ames v. Iowa State Tax Commission, 246 Iowa 1016, 71 N.W.2d 15; Clarion Ready Mixed Concrete Co. v. Iowa State Tax Commission, 252 Iowa 500, 107 N.W.2d 553.

II. If the sale of tangible personal property is separate from the sale of transportation service, although related, and is so understood and agreed by the parties to the transaction, the sale of transportation service is not subject to the sales tax. Clarion Ready Mixed Concrete Co. v. Iowa State Tax Commission, supra. The commission's reference to separate billing in Rule 41 would, of course, be applicable only when there were two distinct sales, and the billings would amount to little more than evidence such was the agreement between the parties. Our decision here is not placed upon that rule in imposing the tax even if that construction was given to it. However, in passing, we may say its apparent purpose was to require separate billing when the taxpayer contends two sales were made, one for the property and one for the transportation service. It really related to proof of a material fact acceptable to the commission. Clearly, unless the sales are separate and distinct, the keeping of records of transportation costs separate from other costs to the seller of tangible personal property such as we have here would not relieve the transaction from a sales tax.

In Clarion Ready Mixed Concrete Co. v. Iowa...