Union Portland Cement Co. v. State Tax Commission

• Decision Date: 06 February 1947
• Docket Number: 6884
• Citation: 110 Utah 152,176 P.2d 879
• Court: Utah Supreme Court
• Parties: UNION PORTLAND CEMENT CO. v. STATE TAX COMMISSION

176 P.2d 879

110 Utah 152

UNION PORTLAND CEMENT CO. v. STATE TAX COMMISSION

No. 6884

Supreme Court of Utah

February 6, 1947

Judd Ray, Quinney & Nebeker, of Salt Lake City, for plaintiff.

Wayne Christofferson and Clarence C. Neslen, both of Salt Lake City, for defendant.

Critchlow & Critchlow, Dey, Hoppaugh, Mark & Johnson, George Jay Gibson, Ingebretsen, Ray, Rawlins & Christensen, H. B Thompson, A. U. Miner, M. J. Bronson, Albert R. Bowen William M. McCrea, S. N. Cornwall, Irvin L. Stephenson, Bryan P. Leverich, Clair M. Senior, Beverly S. Clendenin, and Calvin Behle, all of Salt Lake City, amici curiae.

WOLFE Justice. McDONOUGH, C. J., and PRATT, WADE and LATIMER, JJ., concur.

OPINION

On rehearing. Former opinion modified. For former opinion see 110 Utah 135, 170 P.2d 164.

On Rehearing

WOLFE Justice.

We granted a rehearing in this case to reconsider the relationship between the Sales and Use Tax Acts, Utah Code 1943, 80-15-1 et seq., 80-16-1 et seq., and the effect on the use tax of exemptions contained in the Sales Tax Act.

In our original opinion in this case, which is reported at 110 Utah 135, 170 P.2d 164, we held that the Use Tax Act is separate and distinct from the Sales Tax Act and that Use Tax Act is broad enough to cover all tangible personal property which is used, stored or consumed in this state unless such property is expressly excepted by exemptions contained in the Use Tax Act itself. We noted that one of the exemptions to the use tax was "property, the gross receipts from the sale of which are required to be included in the measure of the" sales tax. We held that the amendment to the Sales Tax Act which exempted the sale of coal for industrial use from the sales tax had the effect of making such coal subject to the use tax because the gross receipts from the sale of such coal were then not required to be included in the measure of the sales tax, the Use Tax Act by its terms having a plenary application to all property used, stored or consumed in this state unless exempted by provisions in the Use Tax Act itself.

The holding, in effect, is that specific exemptions in the sales tax remove those items from the sales tax but make them subject to the use tax. As the sales and use taxes are each 2% of the purchase price our holding makes specific exemptions to the sales tax of practically no effect unless the identical exemptions are also in the Use Tax Act. At thee original hearing we did not have before us matters which on the rehearing are presented by stipulations. These matters bear on the intention of the legislature and serve to widen our consideration beyond the logical effect of the wording of the two acts.

In this opinion and for the purposes of this opinion only we use the terms "industrial coal" and "coal for industrial use" as meaning 'coal other than sold or furnished for domestic or commercial consumption."

The sales tax was adopted in 1933. During the first three years of the administration of Sales Tax Act, the Tax Commission discovered certain substantive faults in the act. The Commission in its Third Biennial Report (1935-1936) to the governor and the legislature reported as follows:

"There are certain objections and problems that have been raised in The administration of this tax, namely:

* * * *

"2. The tax cannot be imposed on transactions involving interstate commerce.

* * * *

"The second item, that of interstate commerce, is the more serious as it applies to revenue, administration and the effect upon the Utah merchant. States are prohibited by the Federal Constitution from regulating commerce between states, and as a result, a sales tax cannot be imposed on sales made in interstate commerce. Such sales may be classified in two groups; sales of goods coming into the state, and sales of goods going outside the State. It is this first group which results in competition with, and discrimination against, the Utah merchant and causes the greatest administrative difficulties and probably affects the revenue more than the second group. Other states having sales tax laws have enacted as a supplement to their sales tax, a law known as a 'Use Tax' which has the effect of imposing a tax on goods coming into the state for use and upon which the state sales tax has not been paid. Such a law would tax not only this group of interstate commerce transactions, but would also apply to goods which the user had gone into another state to purchase. As the sales tax in the State of Idaho is no longer in effect, we no doubt will have the situation of Utah residents living close to the Idaho State line going into Idaho where no sales tax is charted, to make purchases rather than trading with the Utah merchants. The adoption of a 'Use Tax' would impose a tax on the purchase price of such goods when they were brought into this State for use or consumption * * * If this state is to continue the sales tax as a part of its revenue system, the adoption of a 'Use Tax' statute should be seriously considered. * * * " (Pp. 53, 54, Third Biennial Report of the Tax Commission of Utah.)

As a result of the Tax Commission's recommendation, the legislature in 1937 enacted the Use Tax Act. The Use Tax Act was not, in form, an amendment to the Sales Tax Act but was set up as a separate Chapter (16 of Title 80).

The Use Tax Act contained certain specific exemptions thereto. Section 80-16-4. However, not included in those exemptions was property purchased from religious, charitable and eleemosynary institutions though the sale of such property was expressly exempt from the sales tax.

The same legislature which enacted the use tax also amended the Sales Tax Act to exempt therefrom newspapers and newspaper subscriptions. Such property is not included within the exemptions in the Use Tax Act.

Since 1937 other amendments to the Sales Tax Act have exempted sales to charitable and religious institutions and various other sales. But the Use Tax Act has not been expressly amended to exempt the use of such property from its operation nor do the express exemptions theretofore existing exempt the use of such property.

The Tax Commission noted the uncertainty that existed because the Use Tax Act was not correspondingly amended each time the Sales Tax Act was changed. The commission administered the two laws as though they were one and when the sale of certain property was exempted from the sales tax it considered the use of that property was also exempted from the use tax. The Commission reported its construction of the two acts to the legislature. In its Fourth Biennial Report (1937-1939) it said:

"The use tax should also be changed so as to correlate with the sales tax, and the same specific exemptions allowed in the

...