Undercofler v. Capital Auto. Co., 41174

• Citation: 111 Ga.App. 709,143 S.E.2d 206
• Decision Date: 20 May 1965
• Docket Number: No. 3,No. 41174,41174,3
• Parties: Hiram K. UNDERCOFLER, Commissioner, v. CAPITAL AUTOMOBILE COMPANY
• Court: Georgia Court of Appeals

Page 206

143 S.E.2d 206

111 Ga.App. 709

Hiram K. UNDERCOFLER, Commissioner, v. CAPITAL AUTOMOBILE COMPANY.

No. 41174.

Court of Appeals of Georgia, Division No. 3.

May 20, 1965.

Syllabus by the Court

1. (a) The federal manufacturer's excise tax imposed by 26 U.S.C. (I.R.C.1954) § 4061 is an element of the cost of property sold and is therefore included in 'gross sales' and 'sale price' as these terms are defined in the Georgia Retailers' and Consumers' Sales and Use Tax Act (Code Ann. § 92-3403a (D) and (E)).

(b) Code Ann. § 92-3441a, which provides, 'Federal excise taxes shall be excluded by the Commissioner in collecting the tax imposed on the sale price of any item or commodity or value admissions or services,' is construed in harmony with other provisions of the Act so that 'federal excise taxes' as used in this section refers only to those federal excise taxes which are not included in 'sales price' and 'gross sales.'

(c) Under Code Ann. § 92-3402a (a) a retailer is liable for a sales tax of three percent of gross sales, or the amount of taxes collected by him, whichever is greater and which includes tax upon sales prices including the federal manufacturers excise tax as an element of cost of the property sold.

2. The motion to dismiss the bill of exceptions is denied.

The State Revenue Commissioner made a deficiency assessment against Capital Automobile Company for the collection of taxes found by the Commissioner to be due under the Retailers' and Consumers' Sales and Use Tax Act. Taxpayer filed an appeal from the assessment to Fulton Superior Court. The trial judge decided questions of both law and fact upon a statement of evidentiary facts agreed upon by the parties. The Commissioner excepts to the court's judgment rendered in favor of the taxpayer.

Eugene Cook, Atty. Gen., William L. Harper, John A. Blackmon, Asst. Attys. Gen., Melvin Thompson, Jr., Atlanta, for plaintiff in error.

Westmoreland, Hall & Penecost, John L. Westmoreland, Jr., Atlanta, for defendant in error.

BELL, Presiding Judge.

1. Taxpayer is engaged as a dealer in the business of selling automobiles at retail. In computing the Georgia sales tax upon its sales of automobiles for the taxable period in question, taxpayer deducted from gross sales the federal manufacturer's excise tax imposed upon automobiles by 26 U.S.C. (I.R.C.1954) § 4061. Also, it is apparent from the record that the amount of taxes collected by taxpayer from its purchasers was based upon exclusion of this excise tax from sales price.

The ultimate question for determination is whether Code Ann. § 92-3441a creates an exclusion of the manufacturer's excise tax from 'gross sales' as defined by Code Ann. § 92-3403a (D).

The pertinent statutory provisions are as follows: Code Ann. § 92-3402a (a) (Ga.L.1960, pp. 153, 154). 'Every purchaser of tangible personal property at retail in this State shall be liable for a tax thereon at the rate of three per cent. of the sales price thereof. Said tax shall be paid by the purchaser to the retailer making such sale, as hereinafter provided, and said retailer shall remit same to the State Revenue Commissioner, as hereinafter provided, and when received by the State Revenue Commissioner it shall be a credit against the tax imposed hereinafter on said retailer. Every person making a sale or sales of tangible personal property at retail in this State shall be a retailer and a dealer as defined in this Chapter and shall be liable for a tax thereon at the rate of three per cent. of such gross sale or gross sales, or the amount of taxes collected by him from his purchaser or purchasers, as hereinabove provided, whichever is greater: Provided, however, that no retail sale shall be taxable to the retailer or dealer which is not taxable hereunder to the purchaser at retail.'

Code Ann. § 92-3403a (D)(1) (Ga.L.1951, pp. 360, 363). "Gross sales' mean the sum total of all retail sales of tangible personal property or services as defined herein, without any deduction whatsoever of any kind or character, except as provided in this Chapter.'

Code Ann. § 92-3403a (D)(3) (Ga.L.1951, pp. 360, 366). "Gross sales' shall not include the Federal retailers excise tax if this excise tax is billed to the customer separately from the selling price of the product.'

Code Ann. § 92-3403a (E) (Ga.L.1951, pp. 360, 367). "Sales price' means the total amount for which tangible personal property or services are sold, including any services that are a part of the sale, valued in money, whether paid in money or otherwise, and includes any amount for which credit is given to the purchaser by the seller, without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever * * *.'

Code Ann. § 92-3441a (Ga.L.1951, pp. 360, 385). 'Federal excise taxes shall be excluded by the Commissioner in collecting the tax imposed on the sale price of any item or commodity or value admissions or services.'

Federal excise taxes may be classed in two general categories: Some Internal Revenue Code provisions for federal excise taxes, such as the retailer's excise taxes imposed under 26 U.S.C. (I.R.C.1954) Ch. 31 and excise taxes upon facilities and services imposed under 26 U.S.C. (I.R.C.1954) Ch. 33, create tax liability only as of the time of a retail sale or other dealerconsumer transaction. Other provisions for federal excise taxes generally create tax liability prior to the point of retail sale or consumer transaction: See 26 U.S.C. (I.R.C.1954) Ch. 32 (manufacturers excise taxes), § 4451 (the excise tax upon playing cards), Ch. 37 (excise taxes upon the manufacture or processing of sugar, coconut and palm oil), Ch. 39 (regulatory taxes upon narcotic drugs and other commodities), Subtitle E (alcohol and tobacco taxes and taxes upon firearms).

Whether the Sales Tax Act's exclusion of federal excise taxes excludes both these classes of federal excise taxes will be considered in light of the relationship of dealer liability and purchaser liability. Some of the Act's provisions pertain only to dealer liability, while certain others pertain only to purchaser liability. The dealer is not liable for the tax upon a sale not taxable to the purchaser. Code Ann. § 92-3402a (a). (Note that following the decisions in Williams v. Bear's Den Inc., 214 Ga. 240, 104 S.E.2d 230 and Oxford v. J. D. Jewell, Inc., 215 Ga. 616, 112 S.E.2d 601, which construed the Act as one imposing the tax primarily and essentially upon the dealer, Code Ann. § 92-3402a (a) was so amended, Ga.L.1960, pp. 153, 154, as to make the dealer's liability consistent with that of the purchaser.) Likewise, it is obvious that the legislature intended that the purchaser would not be liable for the tax upon a sale not taxable to the dealer, for otherwise, the Act would lead to an absurd result. The language of different provisions relating to purchaser liability and dealer liability, insofar as they may be ambiguous as to the inclusion or exclusion of federal excise taxes, will be reconciled.

Under Code Ann. § 92-3402a (a) the purchaser of tangible personal property at retail is liable for a tax of three percent of the sales price. The sales price is the total amount for which the property is sold, without any deduction 'on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever.' Code Ann. § 92-3403a (E). The cited Code section is one relating to the purchaser's liability. The manufacturer's excise tax upon automobiles (26 U.S.C. (I.R.C.1954) § 4061) is a tax liability resting directly upon the manufacturer (26 U.S.C. (I.R.C.1954) § 4601), and amounts to an expense of his incidental to the sale or lease (26 U.S.C. (I.R.C.1954) § 4217) or the manufacturer's own use (26 U.S.C. (I.R.C.1954) § 4218) of the manufactured article; it is not a tax liability either of the intermediate dealer or of the ultimate purchaser. See Martin's Auto Trimming, Inc. v. Riddell, 283 F.2d 503 (9th Cir.). To the dealer it is an element of 'the cost of the property sold' within the meaning of the unambiguous language of Code Ann. § 92-3403a (E), and hence, to the purchaser, a part of the sales price, just as much so as the manufacturer's cost of raw materials and labor as elements figuring in the 'sales price' as defined by this Code section. See Consolidated Distributors Inc. v. City of Atlanta, 193 Ga. 853, 856(2), 20 S.E.2d 421. The manufacturer's excise tax, but for separate billing to avoid payment of the Georgia sales tax pro tanto, has at the time of retail no separate identity as a tax. While this excise tax is in practical effect 'passed on' to the purchaser, first by an increase in cost of the property to the dealer, then by an increase in the purchase price, yet this circumstance does not shift legal liability for payment of the federal tax and does not change the essential character of the tax, which is part and parcel of the sales price and not an extraneous addition to it. Thus Code Ann. § 92-3403a (E) (sales price) indicates that there is no exclusion of the manufacturer's excise tax from the sales price upon which the purchaser must pay sales tax to the dealer. The same reasoning is applicable to all these federal excise taxes liability for which occurs prior to the point of retail sale or other consumer transaction. It is clear, also, that under this section the purchaser is not liable for sales tax upon a sales price including those federal excise taxes for which no liability accrues until a retail sale or consumer transaction occurs where the federal tax is not included as part of the sales price agreed upon but is billed to the purchaser separately.

This is consistent with Code Ann. § 92-3403a(D) defining 'gross sales,' in terms of which Code Ann. § 92-3402a(a) imposes upon the dealer liability for payment of the tax to the Commissio...