State v. Capital Coal Company

• Decision Date: 21 March 1939
• Docket Number: 2095
• Citation: State v. Capital Coal Company, 54 Wyo. 176, 88 P.2d 481 (Wyo. 1939)
• Parties: STATE v. CAPITAL COAL COMPANY ET AL
• Court: Wyoming Supreme Court

88 P.2d 481

54 Wyo. 176

STATE v. CAPITAL COAL COMPANY ET AL

No. 2095

Supreme Court of Wyoming

March 21, 1939

APPEAL from the District Court, Laramie County, SAM M. THOMPSON Judge.

Action by the State of Wyoming, for the State Board of Equalization against the Capital Coal Company and the Union Pacific Railroad Company to recover sales taxes on amounts paid by defendant coal company to co-defendant for intrastate transportation of coal. Judgment for plaintiff, and defendants appeal.

Judgment reversed.

For the defendants and appellants, there was a brief by Richard J Jackson, C. R. Ellery, John U. Loomis and E. T. Lazear, all of Cheyenne, and oral argument by Messrs. Jackson and Ellery.

The sales tax, sought to be collected in this action is for service in transporting coal intrastate. The tax authorized by the statute, Ch. 74, Laws 1935, is upon retail sales only. No tax is authorized upon sales at wholesale. The evidence clearly shows that the Capital Coal Company purchased the coal at wholesale and that it was transported as such. No sales tax is collectible upon this service. State Board of Equalization v. Oil Co. (Wyo.) 65 P.2d 1095. The judgment of the trial court should be reversed.

For the respondent there was a brief by Ray E. Lee, Attorney General; Thomas F. Shea, Deputy Attorney General; and Wm. C. Snow, Assistant Attorney General, and oral argument by Mr. Lee.

The amount paid for all transportation is subject to a sales tax. Ch. 74, Sec. 4 (B) Laws 1935. Bend v. White 13 Pet. 261. Eq. Life Assurance Soc. v. Clements, 140 U.S. 226. In re Cadwells Estate, 26 Wyo. 412. State v. Peet (Vt.) 68 A. 661. State v. Nicholson, 240 P. 837. Knoxville v. Servin, 89 S.W.2d 348. Arnold v. United States, 147 U.S. 494. The answer of Capital Coal Company alleges that it was engaged in the wholesale and retail coal business in Cheyenne. The business of said defendant therefore, is that of selling coal to consumers in Cheyenne. No body employes it to haul coal. The service performed by the defendant, Union Pacific R. R. Co., does not become an ingredient or component part of the service performed by the Capital Coal Company. Transportation service performed by carriers is taxed. Defendant, Union Pacific R. R. Co., is a carrier. Henneford v. Silas Mason and Co., Inc., 300 U.S. 577. State v. Contracting Co., 302 U.S. 134. The tax upon the transportation of material was sustained in Wheeler Lumber Company v. United States, 281 U.S. 572. The fact that there may be two sales taxes paid by the final purchaser does not render the tax invalid. Ingles v. Riley, 53 P.2d 939. Exemptions are strictly construed against the tax payer. Dobey v. Commission, 174 So. 233. Commissioner v. Cadillac Co., 88 S.W.2d 1007. It was the duty of the Railroad Co. to collect the tax upon transportation from the Capital Coal Company. Monamotor Oil Co. v. Johnson, 292 U.S. 86. We submit that the consideration paid by the Capital Coal Co. to the Union Pacific R. R. Co. for transporting coal is subject to a sales tax. Both defendants are liable for the payment of the tax. The judgment should be affirmed.

KIMBALL, Justice. RINER, Ch. J., and BLUME, J., concur.

OPINION

KIMBALL, Justice.

The appeal is from a judgment in favor of the State of Wyoming in an action by it to recover from defendants sales taxes under the Emergency Sales Tax Act of 1935 (Sess. Laws, 1935, ch. 74) on amounts paid by one defendant, Capital Coal Company, to the other defendant, Union Pacific Railroad Company, for intrastate transportation of coal from the mines to Cheyenne, Wyoming, during five months in 1936 and three months in 1937 before the act of 1935 was superseded by the Selective Sales Tax Act of 1937 (Sess. Laws, 1937, ch. 102).

The coal company refused to pay the tax to the railroad company, and both defendants now challenge the judgment, on the ground that the purchases of the transportation services should be deemed wholesale sales as defined by section 2(f) of the applicable act.

The coal company was engaged in the business of selling coal at wholesale and retail at Cheyenne. It bought the coal at the mines in carload lots f. o. b. cars at nearby shipping points which, as to coal produced in Wyoming, were Hanna, Rock Springs and Kemmerer. The coal was all graded and screened at the mines, was ready for resale by the coal company on its arrival at Cheyenne, and was all resold. About 90 per cent of it was delivered directly from the cars by the coal company to its customers.

As explained in State Board of Equalization v. Stanolind Oil & Gas Co., 51 Wyo. 237, 65 P.2d 1095, the only services taxed by the Emergency Sales Tax Act of 1935 were transportation and telephone and telegraph services. By section 4(b) a tax of two per cent. was levied on amounts paid carriers for all intrastate transportation. In the bill for the act as introduced the only basis for distinguishing non-taxable wholesale sales from taxable retail sales in cases of services was a part of section 2(f) which provided:

"Each purchase of service as defined by Section 4(b) of this act, by a person engaged in compounding and selling a service of a like kind, which is subject to tax under Section 4(b) of this act and actually used in compounding such taxable service shall be deemed a wholesale sale and shall be exempt from taxation under this act."

This part of section 2(f) was not amended by the legislature and appears as copied above in the act as passed. The coal company in contending that this provision is applicable argues that the transportation of coal from the mines to Cheyenne was actually used by the coal company in compounding a like taxable service which the coal company was rendering in delivering coal to its customers by trucks after the coal had been transported to Cheyenne by rail. A short and sufficient answer to this is that the coal company in delivering coal to its customers by truck was not compounding and selling a service which was subject to tax under section 4(b).

Section 2(f) of the bill as introduced contained, also, this provision:

"Each purchase of tangible personal property or product made by a person engaged in the business of manufacturing, compounding for sale, profit or use, any article, substance or commodity which enters into and becomes an ingredient or component part of the tangible personal property or product which he manufactures or compounds or the container, label, or the shipping case thereof shall be deemed a wholesale sale and shall be exempt from taxation under this act."

This provision of the bill was materially changed by amendment. In the act as passed it reads, still as part of section 2(f), as follows (the added words being italicized):

"Each purchase of tangible personal property or service, made by a person engaged in the business of producing, furnishing, manufacturing, or compounding for sale, profit or use, any article, substance, service or commodity, which is actually used in the production of, or enters into the processing of, or becomes an ingredient or component part of the article, substance, service, or commodity which he manufactures or compounds, produces, or furnishes, or the container, label, or the shipping case thereof, shall be deemed a wholesale sale and shall be exempt from taxation under this act."

These amendments, as noted in our decisions in State Board of Equalization v. Oil Wells Supply Co., 51 Wyo. 226, 65 P.2d 1093, and State Board of Equalization v. Stanolind Oil & Gas Co., 51 Wyo. 237, 65 P.2d 1095, enlarged the class of sales deemed wholesale sales by making it include sales both of tangible property and services which, though actually used and consumed by the purchaser, became in an economic sense a part of a commodity that was resold. In the Stanolind Oil and Gas Company case we held that purchases of transportation of crude oil through a pipe line from the producing wells to refineries where the oil was manufactured into gasoline and other petroleum products were wholesale sales of services as defined by the section as amended and passed. The only ground for distinguishing that case from the one at bar is that the oil was subjected to the refining process after its transportation and before it was resold, while in this case the coal was ready for resale as soon as it reached Cheyenne. But what we said in the former case as to the intention of the legislature, as shown by the amendments, is pertinent here. The purchased transportation in question in this case became a part of the coal resold to the coal company's customers in the same sense that the cost of transportation of the crude oil became a part of the products resold by the refiners in the former case.

The provision in question, as applied in this case, may be read as follows:

Each purchase of * * * service (transportation) made by a person engaged in the business of * * * furnishing * * * for sale profit or use any * * * commodity (coal) which * * * enters into the processing of, or becomes an ingredient or component part of the * * * commodity which he * * * furnishes, * * * shall be deemed a wholesale sale and...