Tidwell v. Servomation-Willoughby Co.

• Decision Date: 24 July 1972
• Docket Number: SERVOMATION-WILLOUGHBY
• Parties: George M. TIDWELL, Commissioner of Revenue of the State of Tennessee, Appellant, v.COMPANY, Inc., et al., Appellees.
• Court: Tennessee Supreme Court

Page 98

483 S.W.2d 98

George M. TIDWELL, Commissioner of Revenue of the State of Tennessee, Appellant, v. SERVOMATION-WILLOUGHBY COMPANY, Inc., et al., Appellees.

Supreme Court of Tennessee.

July 24, 1972.

David M. Pack, Atty. Gen. of Tenn., Milton P. Rice, Deputy Atty. Gen., Nashville, for appellant.

P. V. Jackson, III, Nashville, for appellees.

OPINION

CHATTIN, Justice.

Appellees instituted this suit seeking to recover certain penalties on gross receipts taxes which penalties were paid under protest.

The facts are undisputed.

Appellees are a chain of corporations engaged in the vending machine business. They have elected to pay taxes on the gross receipts of their business in lieu of privilege and sales taxes.

On August 4, 1970, appellees paid appellant a sum equal to one-fourth of their gross receipts privilege tax for the fiscal year beginning July 1, 1970, and ending July 1, 1971. They paid interest of six per cent per annum for the four day delinquency and also a penalty of ten per cent on the amount of one quarter of the annual tax.

Thereafter, appellant advised appellees because of their failure to remit the first quarterly installment of their 1970 gross receipts privilege tax on August 1, 1970, they had forfeited their option to pay the tax on a quarterly basis and were required to pay the entire amount of the 1970--71 tax, plus a penalty of ten per cent and interest of six per cent per annum for the four days of delinquency.

Appellees excepted and refused to comply. However, on December 15, 1970, appellees paid franchise and excise taxes for the fiscal year ending September 1, 1970. The appellees requested a credit for such franchise and excise tax payments against the annual gross receipts privilege tax demanded by appellant, prior to the computation of any penalties thereon. Appellant declined to grant such a credit.

On June 24, 1971, appellees paid appellant under protest the sum of $6,320.65. Thereafter, this suit was filed.

Appellant rested his defense on General Revenue Law Rule and Regulation No. 9, which was promulgated by the Commissioner on May 20, 1968, under authority of T.C.A. Section 67--4302, which specifically authorizes the Commissioner of Revenue to formalize rules and regulations for the enforcement of T.C.A. Chapters 40--43, inclusive, of Title 67. It is therein provided:

'Rules and regulations not inconsistent with said chapters when promulgated by the commissioner, and approved by the attorney-general, shall have the force and effect of law.'

General Revenue Law Regulation No. 9 reads as follows:

'Any person desiring to exercise the option of paying his tax on a quarterly installment basis under provisions of Section 67--4318, Tennessee Code Annotated, shall make timely payment of the first installment on or before the first day of August and failing to make such timely payment, together with any unpaid gross receipts privilege tax due for a prior period, shall not have the option of paying his tax on a quarterly installment basis, but shall be required to pay the entire amount of the annual tax, plus a penalty of ten per cent (10%) of the annual tax, together with interest at the rate of six per cent (6%) per annum on the tax and penalty.'

The Chancellor found the aforesaid rule and regulation was inconsistent with T.C.A. Section 67--4318. He, therefore, found appellees had not forfeited their right to pay the tax on a quarterly basis and gave judgment against appellant for the sum paid under protest. He did not reach the question of credit for the franchise and excise tax payments.

Appellant perfected an appeal to this Court and insists the Chancellor erred in holding a taxpayer may avail himself of the privilege of paying the gross receipts privilege tax in quarterly installments, as provided by T.C.A. § 67--4318, after being in default on August 1 of the taxable year.

A determination of the question presented depends on a proper construction of T.C.A. § 67--4318, which reads as follows:

'Any person failing to file report and pay the tax found to be due in accordance with the provisions of §§ 67--4315--67--4323 on or before August 1 of any year shall, as a penalty for such failure, pay an additional amount of ten per cent (10%), together with interest at the rate of six per cent (6%) per annum on the total amount of the tax and penalty incurred.

Provided, that any person subject to the gross receipts tax imposed by chapters 40 to 43, inclusive, of this title shall have the option of paying his tax on a quarterly instalment basis by paying one-fourth (1/4) of the tax due on the first day of August, and an additional one-fourth (1/4) of the tax that may be due on each of the first days of November, February and May; provided further, that any person so exercising this option shall be required to pay interest at the rate of six per cent (6%) per annum on any payment made after the first day of August under the foregoing provisions. Any person failing to pay the appropriate instalment of this tax when it shall become due, shall be required to pay as a penalty for such...