Security Life & Acc. Co. v. Heckers

• Decision Date: 20 March 1972
• Docket Number: No. 24516,24516
• Citation: 177 Colo. 455,495 P.2d 225
• Parties: SECURITY LIFE AND ACCIDENT COMPANY et al., Plaintiffs in Error, v. John H. HECKERS, Executive Director of Revenue, Defendant in Error.
• Court: Colorado Supreme Court

Page 225

495 P.2d 225

177 Colo. 455

SECURITY LIFE AND ACCIDENT COMPANY et al., Plaintiffs in Error, v. John H. HECKERS, Executive Director of Revenue, Defendant in Error.

No. 24516.

Supreme Court of Colorado, En Banc.

March 20, 1972.

Dawson, Nagel, Sherman & Howard, Arthur K. Underwood, Jr., Donald W. Roe, Denver, for plaintiffs in error.

Duke W. Dunbar, Atty. Gen., John P. Moore, Deputy Atty. Gen., Harold L. Neufeld, Asst. Atty. Gen., Denver, for defendant in error.

KELLEY, Justice.

Security Life and Accident Co., Academy Life Insurance Co., and Western Farm Bureau Life Insurance Co., plaintiffs in error, filed claims for refunds of sale and use taxes paid by them pursuant to C.R.S.1963, 138--5--1 et seq. The claims were filed with John H. Heckers, Executive Director of Revenue of the State of Colorado, who denied the claims. The District Court upon review affirmed the action of the director. We find no error and likewise affirm.

The parties dispute the impact of 1965 Perm.Supp., C.R.S.1963, 72--1--14 on the sales and use tax. In short, the issue is whether Section 72--1--14(1)(c), originally enacted in 1907, exempts insurance companies doing business in this state from the payment of sales and use taxes imposed by Sections 138--5--1 to 138--5--32 enacted in 1935. For the purposes of our discussion, the following portions of Section 72--1--14 are pertinent:

'(1) (a) All insurance companies doing business in this state shall pay to the department of revenue, a tax of two and one-fourth per cent on the gross amount of all premiums collected . . ..' (By the provisions of 72--1--3 this tax is to be used to pay 'all expenses' of the insurance department.)

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'(1) (c) The taxes aforesaid shall constitute all taxes collectible under the laws of this state against any such insurance companies, and no other occupation tax or other taxes shall be levied or be collected from any insurance company by any county, city or town within this state, but this chapter shall not be construed to prohibit the levy and collection of state, county, school and municipal taxes upon the real and personal property of such companies.'

It appears by stipulation that in the past the companies have paid both sales and use taxes on the purchase of articles which 'were necessary, usual and proper for these companies in the life insurance business, but were not articles whose possession and use were peculiar to or limited to such life insurance companies.' Further, Academy Life paid sales and use taxes on purchases until December, 1966; Western Farm Bureau Life until February, 1968; and Security Life and Accident Company until March, 1968.

It is conceded that the companies' claim to exemption is based solely upon Section 72--1--14(1)(c) and not upon any express exemption contained in the sales and use tax law. See Sections 138--5--14 and 138--5--34.

We start with the basic proposition that taxation is the rule and exemption therefrom the exception. The burden is on the taxpayer who claims an exemption to clearly establish the right to such exemption. Weed v. Montfort Feed Lots Inc., 156 Colo. 577, 402 P.2d 177; Carpenter v. May Department Stores Company, 111 Colo. 479, 143 P.2d 270; Bedford v. Hartman Brothers, Inc., 104 Colo. 190, 89 P.2d 584; Phipps v. Commissioner of Internal Revenue, 91 F.2d 627, cert. denied 302 U.S. 742, 58 S.Ct. 144, 82 L.Ed. 574, 112 A.L.R. 1441.

We must consider the history of the legislation and the administrative interpretation relevant to the legislation. In 1956 the Department of Revenue published a bulletin containing the 'Retail Sales Tax and Use Tax Law, Revised and Amended, also Rules and Regulations Relating Thereto.' Rule and Regulation No. 65 states:

'65. Insurance Companies. Since both the sales tax and the use tax are excise taxes on the sale or use of property rather than taxes on a business or occupation, insurance companies are not exempt from the tax on their purchases. . . .'

There is no suggestion that the insurance companies did anything other than acquiesce in the Rule 65 interpretation up to the filing of the claims for refund. This change of position by the companies occurred after the 1965 amendment of Section 72--1--14(1)(c). There was for a period of almost thiety years a general recognition, of almost thirty years a general recognition, but also by the taxpayers of the taxpayer's liability.

Similarly, the legislature acquiesced in this interpretation. On several occasions the legislature has amended the sales and use tax statutes without adding insurance companies to the list of entities exempted from those taxes. This fact likewise lends support to the interpretation of the Department of Revenue as expressed by Rule 65. In a 1938 opinion in a case involving the sales tax law, on this particular point, this court stated:

'Further supporting our view in the matter is the circumstance that after the rule of construction promulgated by the treasurer had been in force for almost two years, the legislature reenacted the present sales tax law, chapter 230 S.L.1937, making no change whatever in section 2(n) of the act. Likewise no change in the provision here involved was made by the amendment of the use tax act, S.L.1937, c. 230, p. 1075. Presumptively at the time the legislature adopted the 1937 acts it was aware of the construction theretofore given the previous statutes and was satisfied therewith. These reenactments, therefore, in effect amounted to a legislative confirmation of the prior existing rules of interpretation.' Bedford v. Colorado Fuel & Iron Corporation, 102 Colo. 538, 81 P.2d 752.

At the time the sales and use tax legislation was passed, the legislature was aware of the existence of Section 72--1--14(1)(c) and in spite of that knowledge, sales and use taxes were imposed on All sales and purchases of property at retail; upon telephone and telegraph services; for gas and electric service; upon meals, food and public accommodations. The provisions for exemptions of certain commodities in the Sales and Use Tax Act do not cover the kinds of purchases here stipulated to, nor do the insurance companies fall within the classifications of the entities exempted under the Act. Sections 138--5--14, 138--5--34.

Both sides agree that the provisions of any law or statute which is reenacted, amended or revised, so far as they remain the same, are to be construed as a continuation of such laws and not as new enactments. C.R.S.1963, 135--1--4.

'It is our function in interpreting statutes . . . to ascertain and carry out the intent of the framers thereof. Contemporaneous construction of legislation, acquiesced in for many years by the authorities charged with its enforcement, is entitled to great weight in determining the intent of the framers. In the absence of clear error such a long established construction should not be overturned or disregarded by this Court.' Bowman v. Eldher, 149 Colo. 551, 369 P.2d 977. See also Schlagel v. Hoelsken 162 Colo. 142, 425 P.2d 39, cert. denied 389 U.S. 827, 88 S.Ct. 81, 19 L.Ed.2d 83; Lavington v. Gano, 112 Colo, 510, 150 P.2d 312.

The insurance companies contend nevertheless that by the amendment of Section 72--1--14(1)(c) in 1965 expressly subjecting insurance companies to the special premium tax under the Medical Disaster Insurance Fund Act that this somehow shows an intent on the part of the legislature to exempt them from the sales and use tax.

This Act...