State v. Mobile Stove & Pulley Mfg. Co.

• Decision Date: 14 December 1950
• Docket Number: 1 Div. 378
• Citation: 255 Ala. 617,52 So.2d 693
• Court: Alabama Supreme Court
• Parties: STATE v. MOBILE STOVE & PULLEY MFG. CO., Inc.

Page 693

52 So.2d 693

255 Ala. 617

STATE v. MOBILE STOVE & PULLEY MFG. CO., Inc.

1 Div. 378.

Supreme Court of Alabama.

Dec. 14, 1950.

As Extended on Denial of Rehearing May 24, 1951.

A. A. Carmichael, Atty. Gen., and M. Roland Nachman, Jr., Asst. Atty. Gen., for appellant.

Smith, Hand, Arendall & Bedsole and Thos. G. Greaves, Jr., all of Mobile, for appellee.

LAWSON, Justice.

The State Department of Revenue, entertaining the view that the amount of sales tax paid by Mobile Stove & Pulley Manufacturing Company, Inc., a corporation (hereinafter referred to as the taxpayer), for a period of approximately five years was incorrect, gave notice thereof to said taxpayer, who appeared in protest of any increased assessment. §§ 766, 767, Title 51, Code 1940.

On September 22, 1948, the Department of Revenue made a final assessment against taxpayer of a deficiency of sales tax liability for the period from February 1, 1943, to December 1, 1947, in the amount of $1,032.11 as tax, plus interest and penalty. Art. 10, Title 51, Code 1940.

The taxpayer, being dissatisfied with the assessment thus finally fixed, prosecuted an appeal to the circuit court of Mobile County, in equity, as authorized by § 768, Title 51, and in the mode prescribed by § 140, Title 51, Code 1940. The procedure followed by the taxpayer to have the assessment of the Department of Revenue reviewed is not questioned. State v. Louis Pizitz Dry Goods Co., 243 Ala. 629, 11 So.2d 342; Merriwether v. State, 252 Ala. 590, 42 So.2d 465, 11 A.L.R.2d 918.

Taxpayer complained as to only a part of the assessment made by the Department of Revenue, as appears from the averments of its bill filed in the circuit court of Mobile County, in equity, the material parts of which are as follows:

'4. Appellant shows unto the Court that said assessment was and is illegal and void, to the following extent: Included within the gross receipts from sales, upon which tax was assessed by the State Department of Revenue, were receipts totaling $7,009.32 derived by appellant from sales of patterns during the period covered by said assessment. Each of such sales was made to buyers outside Alabama, in interstate commerce. The tax assessed against such receipt amounted to $140.18 and an appropriate portion of the penalty and interest assessed against the appellant resulted from the assessment of such tax. Appellant denies that its sales of such patterns were subject to sales tax, and denies that any part of its receipts from such sales should have been taken into account in the making of said assessment, for the following reasons:

'(a). The State of Alabama is prohibited from taxing such sales, or the receipts therefrom, under the Constitution or laws of the United States of America and under the Constitution of Alabama.

'(b). No provision of the laws of Alabama provides for the assessment sought to be made with respect to such sales or any part of the proceeds thereof.

'(c). Such sales were made in interstate commerce and are, therefore, not subject to the sales tax assessed.' (Emphasis supplied.)

Upon a hearing on appeal in the circuit court, a decree was entered upholding the contention of the taxpayer. In pertinent part the decree reads:

'* * * that included within the gross receipts from sales upon which said assessment was based were receipts totaling Seven Thousand Nine Dollars and Thirty-Two Cents ($7,009.32), derived by appellant from sales of patterns; that the facts with respect to such sales are correctly set forth in the appellant's appeal from assessment and such sales are not subject to taxation for the reasons therein assigned; and that the sales tax sought to be assessed with respect to such sales amounted to One Hundred Forty Dollars and Eighteen Cents ($140.18), plus penalty and interest thereon;

'Now, therefore, it is hereby ordered, adjudged and decreed that said assessment is invalid and excessive to the extent of One Hundred Forty Dollars and Eighteen Cents ($140.18), plus penalty and interest thereon, the amount assessed because of said sales of patterns; that said part of said assessment is hereby set aside and declared null and void; * * *.'

The State of Alabama has prosecuted this appeal, as authorized by § 140, Title 51, supra.

In § 140, Title 51, supra, is the provision that the assessment made by the Department of Revenue should be deemed, on appeal to the circuit court, to be prima facie correct, and where the appeal is taken by the taxpayer the burden shall be on it to show that such assessment is incorrect. A like provision is found in § 767, Title 51, supra, dealing specifically with the sales tax, the closing sentence being: 'Any assessment made by the department shall be prima facie correct upon appeal.' See, State v. Mims, 249 Ala. 217, 30 So.2d 673; State v. Levey, 248 Ala. 656, 29 So.2d 129; State v. Pullman-Standard Car Mfg. Co., 235 Ala. 493, 179 So. 541, 117 A.L.R. 498.

Taxpayer sought to meet the burden which was upon it by the testimony of only one witness, namely, Mr. C. S. Latshaw, its president. No witnesses were called by the State.

Counsel for taxpayer argue that the trial court, after hearing Mr. Latshaw's testimony, concluded that taxpayer had met the burden upon it of showing that the assessment was incorrect; that such conclusion was based upon a finding of fact; and that, therefore, this court should indulge every presumption in favor of the ruling of the trial court.

We think no such presumption can be indulged in this case. We are, of course, aware of the well established rule that a presumption should be indulged in favor of the conclusion of the trial judge, who sees and hears the witnesses, when there is a conflict in the evidence. But here there was only one witness and, while his testimony is not too clear in all respects, it does not contain conflicts upon which to base this general presumption. Murphree v. Hanson et al., 197 Ala. 246, 72 So. 437; Bowling v. State, 204 Ala. 405, 85 So. 500; Marsh v. Elba Bank & Trust Co., 205 Ala. 425, 88 So. 423; Scott v. McGriff, 222 Ala. 344, 132 So. 177; Henderson v. Henderson, 228 Ala. 438, 153 So. 646; Wright v. Price, 226 Ala. 591, 147 So. 886; Barnes et al., v. Clark et al., 227 Ala. 651, 151 So. 586, 90 A.L.R. 637; Hamilton et al. v. James, 231 Ala. 668, 166 So. 425; Esco v. Davidson, 238 Ala. 653, 193 So. 308; Turner v. Turner, 251 Ala. 295, 37 So.2d 186.

Since no presumption is to be indulged in favor of the findings of the trial court, it is our duty on this appeal to determine whether the testimony of Mr. Latshaw is sufficient to overcome the presumption of correctness of the assessment of the Department of Revenue.

As before indicated, the only evidence in this record as to the transactions out of which the taxpayer received the sum of $7,009.32, on which the disputed tax was based, is the testimony of C. S. Latshaw, taxpayer's president.

Taxpayer is an Alabama corporation with its principal office and place of business in Mobile. During the period covered by the assessment, it was engaged in the business of operating an iron and steel foundry and machine shop, where it produced heavy castings, such as stern frames, anchor windlasses, etc., used in the construction of boats and ships.

The heavy castings could not be manufactured without the use of forms known to the business or trade as 'patterns.' The part which 'patterns' play in the manufacture of castings is described by Mr. Latshaw as follows: 'A pattern is a form that has to be manufactured before we can make a casting in the mold. Whatever shape we put in the sand that is the shape of the final product, and they have to be made of wood or plastic, whatever the case may be. * * * Well, in order to make a casting you first have to have a pattern, to get it in the mold, and whatever shape that is, of course, that is the shape of the [sic] casting comes out. * * *'

Taxpayer maintained a pattern shop or department for the manufacture of patterns. The patterns were made according to the customer's specifications and blueprints.

The $7,009.32 received by taxpayer during the period covered by the assessment and upon which the disputed tax was computed, was paid to it by out of state customers for the manufacture of patterns, which patterns were used by taxpayer in the production of castings for these customers. The castings produced from the patterns were shipped to the purchasers in other states. The patterns are still in the possession of taxpayer in Mobile County. It does not appear that the State sought to collect a sales tax based on the receipts from the castings shipped to the out of state buyers.

Mr. Latshaw's testimony is far from complete as to the transactions here involved. But we think it supports the inference that the general course of conduct of that part of taxpayer's business with which we are here concerned was as follows: A prospective purchaser of castings submitted specifications and blueprints as to patterns needed for the manufacture of the castings and made inquiry as to the cost of the pattern and the cost of the castings; taxpayer quoted prices on the two articles separately. Upon being given the order, taxpayer proceeded to manufacture or produce the pattern. By the use of the pattern, the casting was manufactured. After the casting was manufactured, it was shipped to the out of state buyer. When the casting was shipped to that customer, he was 'billed' separately for the pattern and the casting.

As to what happened to the pattern after the casting was shipped and both articles paid for by the purchaser, Mr. Latshaw testified as follows:

Direct

'Q. Now, I will ask you whether or not during the period involved in this sales tax assessment, you had made sales of castings to customers outside of the State of Alabama, under circumstances where those castings were shipped in interstate commerce to customers outside the State of Alabama, where the charges made for the...