State v. Coca-Cola Bottling Co.

• Decision Date: 11 July 1958
• Docket Number: COCA-COLA,No. 20095,20095
• Citation: 104 S.E.2d 574,214 Ga. 316
• Parties: STATE of Georgia et al. v.BOTTLING CO.
• Court: Georgia Supreme Court

Page 574

104 S.E.2d 574

214 Ga. 316

STATE of Georgia et al. v. COCA-COLA BOTTLING CO.

No. 20095.

Supreme Court of Georgia.

July 11, 1958.

Rehearing Denied July 22, 1958.

Syllabus by the Court

The first portion of Code (Ann.Supp.) § 92-3113 (Ga.L.1950, pp. 299, 300) subjects all corporations owning property or doing business in this State, from which the entire income is derived, to the full amount of the tax therein imposed upon the entire net income. And since the petition of this taxpayer shows all its income was derived from shipments upon unsolicited orders received by it at its office in Georgia, the statute imposes the tax upon its entire net income, and the portion of the statute relating to apportionment does not apply to it.

(a) The court erred in overruling the State's demurrer to the amended petition, seeking to recover, on a basis of apportionment, a portion of taxes paid for the years 1949, 1950, and 1951.

(b) The court also erred in sustaining the demurrer to the State's counter-suit to recover an amount erroneously refunded by the State on the 1949, 1950 and 1951 taxes.

Coca-Cola Bottling Company sued the State of Georgia and the State Revenue Commissioner, seeking to recover alleged overpayment of income tax for the year 1949, 1950, and 1951. The petition, in substance, shows that the petitioner's office and place of business is located in Fulton County, Georgia; that it holds the exclusive right from Coca-Cola Company to sell Coca-Cola syrup in Georgia and a number of other States; that for the years named its entire income was derived from unsolicited orders received without expense to it from buyers throughout the various States embraced in its franchise; that it gave shipping directions from its Atlanta office to Coca-Cola Company, which filled said orders; and that all goods were shipped upon the terms of payment therefor at the point of destination. The petitioner contended that upon this basis of operation it comes under that portion of Code (Ann.Supp.) § 92-3113 (Ga.L.1950, pp. 299, 300), relating to apportionment because, it contends, part of its income came from business done elsewhere than in this State. By the data and figures set forth it was contended that petitioner was entitled to a fair apportionment of its income which would entitle it to a refund for the years stated of $35,547.62.

The first trial resulted in a verdict and judgment in favor of the petitioner for the amount sued for, and this judgment was affirmed in State of Georgia v. Coca-Cola Bottling Co., 93 Ga.App. 609, 92 S.E2d 548; but on certiorari the Supreme Court in State of Georgia v. Coca-Cola Bottling Co., 212 Ga. 630, 94 S.E.2d 708, reversed the Court of Appeals, which in turn reversed the trial court. Thereupon the petitioner amended its petition by striking portions thereof seeking apportionment upon the basis of the three-factor formula provided in Code (Ann.Supp.) § 92-3113, supra, and alleged that it had neither inventory nor salary expenses--two of the three factors, and prayed apportionment upon a just basis to be fixed by the court. The State filed its countersuit, alleging that the Revenue Commissioner in 1954 errorneously calculated petitioner's taxes for the year 1949, 1950, and 1951 and refunded a stated amount based upon the three-factor formula which the Supreme Court held in State of Georgia v. Coca-Cola Bottling Co., 212 Ga. 630, 94 S.E.2d 708, supra, could not be used, and prayed for judgment therefor against the petitioner. The trial court sustained petitioner's demurrer and dismissed the countersuit and overruled the State's demurrer to the amended petition; and the State excepted to both judgments and carried the case to the Court of Appeals. That court was unable to render judgment because of equal division of the judges thereof--Judges Felton, Gardner, and Twonsend being in favor of affirmance and Judges Carlisle, Quillian, and Nichols being in favor of reversal. Under the Constitution, art. 6, sec. 2, par. 8 (Code Ann.Supp. s2-3708) this equal division of the Judges of the Court of Appeals gives the Supreme Court jurisdiction of the case.

Eugene Cook, Atty. Gen., Ben F. Johnson, Jr., Hugh Gibert, Broadus B. Zellers, Deputy Asst. Attys. Gen., for plaintiff in error.

Edward R. Kane, Jones, Williams, Dorsey & Kane, for defendant in error.

Louis Regenstein, Jr., Smith, Kilpatrick, Cody, Rogers & McClatchey, Powell, Goldstein, Frazer & Murphy, Alston, Sibley, Miller, Spann & Shackelford, Sutherland, Asbill & Brennan, Bird & Howell, Arnall, Golden & Gregory, Atlanta, Swinson, Elliott & Schloth, J. Robert Elliott, W. Willis Battle, Columbus, for parties at interest.

DUCKWORTH, Chief Justice.

It is time to move on from the perimeter matters dealt with in State of Georgia v. Coca-Cola Bottling Co., 93 Ga.App. 609, 92 S.E.2d 548, and State of Georgia v. Coca-Cola Bottling Co., 212 Ga. 630, 94 S.E.2d 708, to the heart of this case for a final and comprehensive decision. The words 'doing business' contained in Code (Ann.Supp.) § 92-3113 (Ga.L.1950, p. 299) when construed as the Court of Appeals, and as this court has repeatedly construed that term in Montag Brothers v. State Revenue Commissioner, 50 Ga.App 660, 179 S.E. 563; Parke, Davis & Co. v. Cook, 198 Ga. 457, 31 S.E.2d 728, 156 A.L.R. 1360; Suttles v. Owens-Illinois Glass Co., 206 Ga. 849, 59 S.E.2d 392; Redwine v. Dan River Mills, 207 Ga. 381, 61 S.E.2d 771; Redwine v. United States Tobacco Co. 209 Ga. 725, 75 S.E.2d 556; Redwine v. Schenley Industries, 210 Ga. 769, 83 S.E. 2d 16; and Stockham Valves & Fittings v. Williams, 213 Ga. 713, 101 S.E.2d 197-- constitute the answer to the questions raised by the pleaded facts. After our decision on the former appearance, holding that the three factor formula provided in Code (Ann.Supp.) s92-3113, supra, could not be applied, the taxpayer amended its petition by striking all reference to that formula, and added allegations: That 'The plaintiff earned its income by buying and selling Coca-Cola syrup. It had no cost of selling. All its orders for Coca-Cola syrup came to it unsolicited.' The amendment further alleged that, at all times during the years 1949, 1950, 1951, plaintiff's principal office and place of business was located in Fulton County, Georgia. There is not a single word in the amended petition to even suggest that the plaintiff had or maintained a branch office or place of business at which any of its business was transacted which produced any part of its income. Therefore, under the definition of 'doing business' repeatedly stated in the foregoing decisions, we now hold that the entire income here involved was produced by the taxpayer by its doing business at its sole office and place of business in Fulton County, Georgia.

We now look to the taxing statute to determine if all or only a part of that income is taxable. The very first sentence of Code (Ann. Supp.) § 92-3113, supra, is: 'The tax imposed by this law shall apply to the entire net income, as herein defined, received by every corporation, foreign or domestic, owning property or doing business in this State.' The second sentence, in part, is: 'Every such corporation shall be deemed to be doing business within this State if it engages within this State in any activities or transactions for the purpose of financial profit or gain * * *.' Then to insure against misunderstanding, the second paragraph of the section provides: 'If the entire business income of the corporation is derived from property owned or business done in this State, the tax shall be imposed on the entire business income * * *.' A further clause in the first paragraph, to wit, 'whether or not it maintains an office or place of doing business within this State,' relates back to the previous words, 'if it engages within this State in any activities or transactions,' and assumes the existence of 'activities or transactions.' This court recently held that in the absence of such activities or transactions a tax was not imposed. Stockham Valves & Fittings, Inc., v. Williams, 213 Ga. 713, 101 S.E.2d 197, supra.

Where light rather than confusion is sought, the imposition of the tax upon the entire net income of corporations derived from doing business in this State is perfectly obvious. As to all such net income the tax is imposed, and the remainder of the section relating to an apportionment of income where it is derived only in part from property owned or business done within this State and in part from property owned or business done elsewhere is wholly inapplicable. A judicial search for an answer to what part of the income derived from business done within this State must end precisely at this point. Sallies into complicated, confused, and possibly contradictory provisions relating to the three factor apportionment formula contribute nothing to a clear understanding of the portion applicable when there is no apportionment. It is quite evident that both the taxing authorities and the taxpayer have added to their confusion by such needless sallies.

Essentially what is the nature of an income tax is important in seeking the subjects upon which it is imposed. It is not a property--either tangible or intangible--tax. It is a tax upon the net income received by all corporations having...