State v. Union Tank Car Co.

• Decision Date: 22 June 1967
• Docket Number: 3 Div. 247
• Citation: 201 So.2d 402,281 Ala. 246
• Parties: STATE of Alabama v. UNION TANK CAR COMPANY.
• Court: Alabama Supreme Court

Page 402

201 So.2d 402

281 Ala. 246

STATE of Alabama v. UNION TANK CAR COMPANY.

3 Div. 247.

Supreme Court of Alabama.

June 22, 1967.

Rehearing Denied Aug. 17, 1967.

MacDonald Gallion, Atty. Gen., Willard Livingston and Wm. H. Burton, Asst. Attys. Gen., for appellant.

Bradley, Arant, Rose & White and John P. Adams, Birmingham, for appellee.

SIMPSON, Justice.

The facts in this case were stipulated and are as follows: Union Tank Car Company is a New Jersey corporation and is qualified to do business in Alabama. It manufactured in Indiana two railroad cars which are the subject of the use tax assessment involved in this case. It then leased these two railroad cars to United States Steel Corporation who used the two cars in the State of Alabama and elsewhere.

On January 22, 1965, a use tax assessment against Union Tank Car Company was made final in the amount of $630.82. The assessment made by the Department of Revenue was based upon the cost of materials used by Union Tank Car Company in manufacturing the two cars. Following the final assessment Union Tank Car Company appealed to the Circuit Court of Montgomery County under the provisions of Title 51, § 140, Code of Alabama. That court entered a final decree in favor of appellee and the State has appealed to this court.

The Circuit Court found that appellee was exempt from the payment of the use tax under the provisions of Title 51, § 789(q), which is as follows:

'789. Exemptions--The storage, use or other consumption in this state of the following tangible personal property is hereby specifically exempted from the tax imposed by this article * * *.

'(q) The storage, use, or consumption of railroad cars, and vessels and barges of more than 50 tons burden when purchased from the manufacturers or builders thereof.'

The single issue which we must decide initially is whether the foregoing sections exempt the appellee from the payment of use tax under the facts of this case. The Circuit Court so found.

The State's contention is that the exemption is unavailable to appellee because the two cars were not 'purchased from the manufacturer or builder thereof' within the language of the exemption section. The appellee's position is that it is precisely within the category of persons exempted from the imposition of use tax by the State and that the kind of property here involved is expressly exampted regardless of the fact that there has been no 'purchase from a manufacturer'. The appellee itself is the manufacturer.

The State contends that the word 'purchased' must be given its literal meaning; that exemption sections of taxing statutes are to be strictly construed; and that in the absence of a purchase from a manufacturer or builder, the taxpayer cannot claim the benefit of the exemption.

We think that the State's argument puts an undue emphasis on the word 'purchased' and ignores the obvious intention of the legislature in granting the exemption in the first place. Our responsibility is to give effect to the legislative intention where it is manifested. Bell v. Pritchard, 273 Ala. 289, 139 So.2d 596. When approached in this fashion, it seems clear to us that the legislature intended by § 789(q) to exempt railroad cars from the payment of use taxes when there have been no dealings with respect thereto except Direct dealings between manufacturers of railroad cars and the taxpayer. The exemption is aimed at a specific class of persons and a specific category of personal property. The State would have us ignore these provisions and look only to the transaction. We think to do so would be to adopt a mechanistic approach not warranted by the legislation itself.

The State relies upon our decision in Paramount-Richards Theatres v. State, 256 Ala. 515, 55 So.2d 812 (second appeal) where we held that Title 51, § 788 authorized a tax only where there had been a sale and that the section did not authorize the State to impose a tax on bona fide rentals. There we were construing the following language:

' § 788. Poperty taxed; persons liable.--An excise tax is hereby imposed on the storage, use or other consumption in this state of tangible personal property * * * purchased at retail * * *.'

In construing this language we held that the statute was intended to prevent evasions of the act where there is an actual sale of tangible personal property, and that the definition...