U.S. Gypsum Co. v. Green

• Decision Date: 01 April 1959
• Citation: U.S. Gypsum Co. v. Green, 110 So.2d 409 (Fla. 1959)
• Parties: UNITED STATES GYPSUM COMPANY, a Corporation, Relator, v. Ray E. GREEN, as Comptroller of the State of Florida, Respondent.
• Court: Florida Supreme Court

Page 409

110 So.2d 409

UNITED STATES GYPSUM COMPANY, a Corporation, Relator, v.Ray E. GREEN, as Comptroller of the State of Florida, Respondent.

Supreme Court of Florida.

April 1, 1959.

Knight Kincaid, Young & Harris, Jacksonville, for relator.

Richard W. Ervin, Atty. Gen., and John J. Blair, Asst. Atty. Gen., and Lewis H. Tribble, Tallahassee, for respondent.

O'CONNELL, Justice.

Relator, the United States Gypsum Company, filed with this Court its original petition in mandaus praying that the respondent, Ray E. Green, as Comptroller of the State of Florida, be directed to refund the relator certain taxes, penalties and interest thereon previously assessed against and paid by relator.This Court issued its alternative writ of mandamus so directing the respondent.Respondent moved to quash the writ.Oral argument on that motion has been heard.No return to the writ has been filed.The pertinent facts have been stipulated to by the parties.

In August, 1956the respondent assessed the relator with an additional liability for Florida use tax for a period beginning May 1, 1954 and ending April 30, 1956.Relator did not contest a portion of the liability and paid such, with penalty and interest, to the respondent.Relator protested the remainder of the tax and, after rehearing, its objections were overruled, except that the penalty was reduced from 25% to 10% of the assessed and contested use tax.

Relator then paid the contested tax, penalty and interest involuntarily in order to avoid further penalties and interest.It filed in proper form and time its claim for refund, which claim was denied.

The contested use tax which relator was required to pay amounted to $26,540.11, the 10% penalty was $2,654.01 and the interest was $1,558.15.The total amount contested and paid was $30,752.27.Of the total $26,540.11 use tax, $347.58 was on 'advertising', $25,407.58 on 'machinery and equipment' and $784.95 on 'freight'.We shall consider each of these three categories separately.

Items included in the 'advertising' taxed consisted of miniature samples of the relator's products and printed materials which were distributed free to wholesale and retail dealers.The printed materials consisted of brochures advertising relator's products and manuals containing technical information regarding its products.The total tax on advertising of $347.58 was broken down as being $86.90, $130.34 and $130.34 on the miniature samples, advertising brochures and technical manuals, respectively.

Relator asserts that the $86.90 tax on the miniature samples must have been based upon Rule 77(1) of the Comptroller's Rules and Regulations which provides:

'Donations of tangible personal property made by any dealer in the course of his business to any person or organization shall be taxed as if the full retail charge had been made for each item donated.For example, if prizes are announced as having been given by a named merchant, the merchant receives payment for the donated merchandise in the form of advertising and good will, and the tax applies.'

By the terms of the statute which was in effect during the period the tax was assessed, Sec. 212.02(2), F.S.A. a 'sale' means a transfer 'for a consideration.'Consequently, relator's argument is simply that respondent's Rule 77 directly contravenes such statute and hence is an unwarranted extension of the tax.

Despite the obvious appeal and ligic of relator's assertion we nevertheless must find to the contrary.It is our observation that Rule 77 is directly in keeping with the obvious legislative intent evidenced by the sales and use tax law as a whole.

It is clear that the relator did not import the samples into this State for resale.Rather the relator was the ultimate user thereof.

Certainly if the samples had been produced in Florida and purchased by the relator, it would have been required to pay a sales tax thereon, because the transaction would have constituted a 'retail sale' or 'sale at retail' under the provisions of Sec. 212.02(3)(a)andSec. 212.02(3), (b), F.S.A. then existing.

Further, Sec. 212.06(4) provides that the importation of such property into this State for use, or consumption, or distribution, not for resale, 'shall each be equivalent to a sale at retail' and taxed accordingly.

The primary function of the use tax is to complement the sales tax so as to make uniform the taxation of property subject to the tax, whether produced, purchased and used in this State or produced and purchased in another state or country, but used in this State.

This is clear in Rule 91(4) which in part provides:

'* * * The two taxes, Sales and Use, stand as complements to each other and taken together provide a uniform tax upon either the sale at retail or the use of all tangible personal property irrespective of where it may have been purchased.'

Since the samples were purchased in another state the sales tax would not apply, but since they were used, consumed or stored for use, not for resale, by the relator within this State they were subject to the use tax.

We must therefore conclude that as applied to this caseRule 77 is valid and that under the statute the imposition of the tax in the amount of $86.90 was proper and the respondent properly refused to refund the same.

The other two items labelled and taxed by respondent as 'advertising' were advertising brochures, taxed in amount of $130.34, and technical manuals, taxed in amount of $130.34.

In support of its contention that these items are not taxable the relator makes the same argument as on the samples.In addition he argues that Rule 29(2) and (3), complied by the respondent, specifically exempt the advertising brochures and technical manuals since they were distributed free.

Rule 29(2) and (3) read as follows:

'(2) Sales of package inserts, individual folding boxes and set-up boxes, and the printing thereon to manufacturers, or producers, to accompany their own manufactured products and to pass to the ultimate consumers upon final sales of the manufactured product contained or described therein, shall be deemed made for the purpose of resale.

'(3) Sales of direction sheets, instruction books, or manuals to a manufacturer, producer, wholesale or retail merchants, to be supplied with his product at no separate charge, are not taxable.If a separate charge is made for such sheets, books, manufla or pamphlets, the manufacturer, etc., shall collect the tax from his purchaser.Sales of advertising material such as brochures, pamphlets and price lists are taxable to the purchaser.'(Emphasis added.)

The technical manuals are clearly not taxable under the first sentence of Rule 29(3), and it was improper ti impose a tax on them.

However, the only reference in the Rule to advertising material is found in the last sentence of Rule 29(3).This sentence adds nothing to the statute itself for the sale of such advertising material is a sale of tangible personal property and therefore covered under the statute, and in every instance the tax is to be paid by the ultimate purchaser and collected by the seller.The reason for the presence of the last sentence is not clear.Since this sentence provides that the tax is to be paid on advertising material sold by the manufacturer it might be inferred that such material distributed free would not be taxable.

While doubtful language in taxing statutes should be resolved in favor of the taxpayer, the reverse is applicable in the construction of exceptions and exemptions from taxation.

The relator has not made it to clearly appear that the advertising brochures were exempted from the tax, and the doubtful language in the rule must be construed in favor of the respondent.

We therefore conclude that the tax levied on the advertising brochures was proper, but that the technical manuals were not taxable and the respondent should be required to refund the sums collected thereon.

The second category of use tax complained of by the relator was the tax of $25,407.58 on machinery and equipment.In relator's plant at Jacksonville, Florida were 32 separate machines and prior to the subject tax period relator had paid to the respondent in excess of $300.00 as use taxes on each of the 32 machines.The items of machinery and equipment subjected to the $25,407.58 tax were all additional or replacement parts for the 32 machines.These items were purchased by relator out of the State and no one invoice therefor equalled or exceeded $10,000.00.

Sec. 212.08(2) Fla.Stats.1953 and 1955, F.S.A. in effect during the subject period, created a limited exemption 'from so much of the tax imposed by this chapter, as shall exceed three hundred dollars' on the sale, use, storage or other consumption in the State of 'machines and equipment and parts therefor' used in 'compounding, processing, producing or manufacturing of tangible personal property for sale.'Respondent's Rule 88 concerns this section of the statute.

As we understand it relator's basic contention is that once a user of machinery, employed in 'compounding, processing, producing or manufacturing of tangible personal property for sale' had paid a tax of $300.00 on such machinery and parts therefor, all further purchases of additional or replacement parts for use on said machines were exempt from taxation under the terms of the statute, Sec. 212.08(2) F.S.1953, 1955, F.S.A., regardless of when purchased or the amount of the parts purchased at any given time.Having previously paid $300 tax on each machine it says the additional parts purchased are not taxable.

In Sec. 212.08(2), supra, the legislature authorized:

'The comptroller * * * to promulgate rules and regulations not inconsistent with this section further defining 'machines and equipment and parts therefor' for the purpose of enforcement of uniformity in tax collections hereunder.'

In Sec. 212.18(2) F.S.1953 and 1955, F.S.A., the Comptroller was given general authority to make and...