State v. West Point Wholesale Grocery Co.

• Decision Date: 08 May 1969
• Docket Number: 3 Div. 329
• Citation: 284 Ala. 149,223 So.2d 269
• Parties: STATE of Alabama v. WEST POINT WHOLESALE GROCERY COMPANY.
• Court: Alabama Supreme Court

Page 269

223 So.2d 269

284 Ala. 149

STATE of Alabama v. WEST POINT WHOLESALE GROCERY COMPANY.

3 Div. 329.

Supreme Court of Alabama.

May 8, 1969.

MacDonald Gallion, Atty. Gen., Willard W. Livingston, and Herbert I. Burson, Jr., Asst. Attys. Gen., for appellant.

John W. Johnson, Jr., Lanett, for appellee.

HARWOOD, Justice.

The West Point Wholesale Grocery Company, hereinafter referred to as the company, is a Georgia Corporation with headquarters in West Point, Georgia. Its business is wholesaling groceries, hardware, paper products, and other items.

In April 1966, final assessments were entered against the company as a foreign corporation by the Alabama State Department of Revenue for a franchise tax of $281.78, permit tax (fee) of $100.00, and an admissions tax of $191.08, with interest of $18.15. These assessments were for the year 1964, and were made under the provisions of Sections 348, 339, and 345 respectively, of Title 15, Code of Alabama 1940.

The company paid the assessments under protest and within due time filed suit in the Circuit Court of Montgomery County, in Equity, for recovery of the assessment so paid. After hearing in the Circuit Court, the Chancellor entered a decree finding that the taxes and fees above mentioned were illegal and that the taxpayer was entitled to have the same refunded.

The state thereupon filed this appeal from such decree.

The facts adduced in the hearing before the Chancellor tend to show that the company's business is wholly located in West Point, Georgia. It has no place of business in Alabama.

The company employs six salesmen who solicit orders within a 75 mile radius of West Point, Georgia. Approximately two-thirds of the company's business results from Alabama orders.

When orders are obtained they are brought to the company's place of business by the salesmen, or mailed, and if approved, are then processed. No goods are delivered on consignment.

Deliveries are ordinarily made in company trucks, usually four days a week. If a purchaser's place of business is closed at time of an attempted delivery, the goods are returned to the company's place of business. All trucks return to the company's parking lot each night. Occasionally an order will be delivered by a salesman if his route takes him near the customer's place of business sooner than a delivery truck would arrive. Loss or spoilage of goods rests upon the company.

Racks for display of school supplies, and containers for soft goods such as boxes, are furnished by the company, but these racks or boxes have no value and are not reclaimed by the company unless the retailer requests that they be hauled away.

Payments for goods received by Alabama purchasers are made either to salesmen of the company after the goods have been delivered, or are mailed to the company in West Point by the purchaser.

It has long been settled that a foreign corporation which has no place of business or inventory in Alabama, and no contact with this state other than soliciting agents whose orders are transmitted to the foreign corporation's out of state headquarters for acceptance or rejection, and if the orders are accepted, goods are forwarded to the Alabama purchaser either by common carrier, or vehicles of the foreign corporation, such foreign corporation is engaged in interstate commerce. Loudonville Milling Co. v. Davis et al., 251 Ala. 459, 37 So.2d 659; Family Discount Stamp Company of Georgia, etc. v. State of Alabama, 274 Ala. 322, 148 So.2d 218; J. R. Watkins Co.v. Hamilton et al., 32 Ala.App. 361, 26 So.2d 207; West Point Wholesale Grocery Co. v. City of Opelika, 38 Ala.App. 444, 87 So.2d 661, cert. den. 264 Ala. 700, 87 So.2d 667, 354 U.S. 390, 77 S.Ct. 1096, 1 L.Ed.2d 1420.

The Alabama Franchise Tax on foreign corporations is not constitutionally applicable to foreign corporations doing an exclusively interstate business in Alabama. State v. Plantation Pipe Line Co., 265 Ala. 69, 89 So.2d 549; State v. Anglo-Chilean Nitrate Sales Corp., 225 Ala. 141, 142 So.2d 87, 288 U.S. 218, 53 S.Ct. 373, 77 L.Ed. 710.

By analogy this same principle, under the same conditions, would be applicable to the Alabama admission tax (see Roberts v. Yellow Manufacturing Acceptance Corp., 315 F.2d 161), and to the Alabama permit tax (fee).

In brief, however, the state contends that:

'The Appellee is doing local business separable from its interstate business. First, it solicits by agent in Alabama. Second, it sells and sends order to foreign jurisdiction for approval. Third, it delivers the merchandise that has been sold in company vehicles. Fourth, the agents on occasions collect for the current delivery. Fifth, the agents collect for prior deliveries. Sixth, the agents deliver on occasions. In effect, they engage in the business of collection for some time after the sale has been consummated by delivery.'

1. Solicitation of orders and subsequent delivery of the products ordered are not a sufficient nexus with Alabama to subject the company to the franchise, permit, and admission taxes. Family Discount Stamp Company of Georgia, etc. v. State of Alabama, 274 Ala. 322, 148 So.2d 218.

2. The evidence adduced shows that no sales are consummated in Alabama, but only upon acceptance of the order in Georgia. This indicates an interstate character of the transaction. J. R. Watkins Co. v. Hamilton, 32 Ala.App. 361, 26 So.2d 207.

3. The fact that the ordered merchandise is delivered in the company trucks does not affect the interstate nature of the business done by the company. State of Alabama v. Transcontinental Gas Pipe Line Corp., 271 Ala. 329, 123 So.2d 172.

4. and 5. Collection for goods delivered, whether current with delivery, or for prior deliveries, is essential to the existence of transactions in interstate commerce. Such activity does not change an interstate transaction into an intrastate transaction. Loudonville Milling Co. v. Davis et al., 251 Ala. 459, 37 So.2d 659. See also 15 Am.Jur., Commerce, Section 54, at page 700.

6. Delivery by agents of the company on occasions of goods sold under accepted orders does not destroy the operation of the Commerce Clause of the United States Constitution. Such activity is not hawking or peddling (selling and delivering within this state), which activity is not immune under the Commerce Clause from taxing provisions of this state....