Union Portland Cement Co. v. State Tax Commission

Decision Date12 June 1946
Docket Number6884
Citation110 Utah 135,170 P.2d 164
CourtUtah Supreme Court
PartiesUNION PORTLAND CEMENT CO. v. STATE TAX COMMISSION

Certiorari Proceeding By The Union Portland Cement Company Against The State Tax Commission of Utah To Review The Action of The Tax Commission In Making A Deficiency Use Tax Assessment Against Plaintiff

For opinion on rehearing see 110 Utah 152, 176 P. 2d 879.

Order of Tax Commission affirmed.

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

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

Wolfe Justice. McDonough, Pratt, and Wade, JJ., concur. Larson Chief Justice (concurring).

OPINION

Wolfe Justice.

Certiorari to review the action of the Tax Commission in making a deficiency use tax assessment against plaintiff for its use of coal, iron grinding balls, firebrick and various other items in its business.

Plaintiff is a corporation engaged in the manufacture of cement at Devil's Slide, Utah. On August 18, 1945, after due notice and hearing, the Tax Commission found that sales of all the items involved were made outside of the state of Utah and that the use of all the items was subject to the use tax. It thereupon ordered the plaintiff to pay a deficiency use tax for the period of March 1, 1941 to February 28, 1945 in the sum of $ 7,262.46, including interest at 6% per annum as of June 2, 1945.

Plaintiff objects to the assessment on its use of coal, iron grinding balls and firebrick. To the assessment of the use of the other items it does not object.

We will first discuss the objections to the tax on the use of the coal. It is agreed that the practices and conditions were substantially the same in the dealings with all the coal companies from which the coal involved was purchased. The coal purchases were made by plaintiff's manager telephoning to the Salt Lake agents of the coal companies, all of the mines of which were located outside of the State of Utah. The manager specified the sizes of coal and the date and time of shipment. It appeared that the agents of the coal companies accepted the orders and then forwarded directions to the mines for shipment.

Involved in the transactions were coal company "acceptance of order" forms which read in part as follows:

"This acceptance of order must be signed by seller to constitute a contract under conditions and terms shown above and on the reverse side. Sales agents have no authority to alter these conditions or bind the seller.

" All sales are f. o. b. cars at mine or other indicated shipping point, and buyer shall pay all freight charges.

"Seller shall not be liable for any delay, loss, damage or charges after delivery of coal to carrier. * * *" (Italics added.)

The Tax Commission found that the sales of coal were not made in the state of Utah and were therefore subject to the use tax rather than to the sales tax. Plaintiff contends the sales were made in Utah and admits that those made before March 18, 1943 are subject to the sales tax but as sales of coal for industrial purposes were exempted from the Sales Tax Act after March 18, 1943 (see Section 80-15-4, Laws of Utah 1943) that the sales after that date are not subject to the sales tax or the use tax. [1]

Were the sales of coal made in Utah?

"A sale of goods is an agreement whereby the seller transfers the property in goods to the buyer for a consideration called a price." Section 81-1-1(2), U. C. A. 1943.

The essence of a sale is the transfer of title to the goods from the seller to the buyer. Sec. 5 Mariash on Sales. When title passes is a question of intention of the parties. Section 81-2-2, 3, U. C. A. 1943; 1 Williston, Sales 526. To determine that intention when it is not expressly shown rules have been set up in Chapter 2 of Title 81 of our Code. The sections applicable to the problem in this case are as follows:

Sec. 81-2-1.

"Where there is a contract to sell unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained * * *."

Sec. 81-2-3.

"Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer:

* * * * * *

"Rule (4) (a) Where there is a contract to sell unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made.

"(b) Where in pursuance of a contract to sell the seller delivers the goods to the buyer, or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to or holding for the buyer, he is presumed to have unconditionally appropriated the goods to the contract, except in the cases provided for in the next ruleand in section 81-2-4 [reservation of right of possession or property when goods are shipped]. * * *

"Rule (5) If a contract to sell requires the seller to deliver the goods to the buyer, or at a particular place, or to pay the freight or cost of transportation to the buyer, or to a particular place, the property does not pass until the goods have been delivered to the buyer or have reached the place agreed upon."

In the case at bar the parties to the sale of the coal did not expressly say when or where they intended title to the coal to be transferred. Applying the above rules we see that since the coal at the time the contract of sale was made was at the coal companies' mines and was not ascertained, no title could be transferred until the coal was ascertained. The coal was ascertained and unconditionally appropriated to the contract by the coal companies delivering it to the railroads at the mines. Plaintiff's consent to such appropriations was impliedly given by the "f.o.b." provisions of the sales contracts. Mariash in Section 155 of his work on Sales writes:

"The general rule, therefore, in 'f.o.b.' contracts is that property passes when the goods are free on board at the place named in the contract, and that place also is the place of delivery to the buyer."

In Standard Casing Co. v. California Casing Co., 233 N.Y. 413, 135 N.E. 834, the court said:

"The general rule is that, upon a sale 'f.o.b. the point of shipment,' title passes from the seller at the moment of delivery to the carrier, and the subject of the sale is thereafter at the buyer's risk. Williston Sales, § 280, p. 409; United States v. R. P. Andrews & Co., 207 U.S. 229, 28 S.Ct. 100, 52 L.Ed. 185 * * *. The operation of the rule is, of course, subordinate to intention."

The rule is stated in the annotation in 101 A. L. R. 293 as follows:

"Where the contract provides for a sale f. o. b. at the point of shipment, the title is generally held to pass, in the absence of a contrary intention of the parties, at the time of the delivery of the goods for shipment at the point designated." See also 46 Am. Jur. 608.

The fact that the coal companies' acceptances of the orders provided that the "seller should not be liable for any delay, loss, damage or charges after delivery of coal to carrier" is another indication that title passed when the goods were delivered to the carrier at the mines, for risk of loss is generally on the title holder. Section 81-2-6, U. C. A. 1943; Williston on Sales, Vol. 1, page 692-694.

We hold that the Tax Commission did not err in finding the title to the coal involved in this case passed to the plaintiff when the coal was delivered f. o. b. to the carriers at the companies' mines. See Middleton v. Evans et al., 86 Utah 396, 45 P. 2d 570.

The situs of a sale is where the act is performed or the event occurs which operates to vest title in the buyer. 46 Am. Jur. 582; Annotation 44 L. R. A., N. S., 450; Wind v. Iler, 93 Iowa 316, 61 N.W. 1001, 27 L. R. A. 219; Brown v. Wieland, 116 Iowa 711, 89 N.W. 17, 61 L. R. A. 417; Moline Jewelry Co. v. Dinnan, 81 Conn. 111, 70 A. 634, 17 L. R. A., N. S., 1119.

The Tax Commission did not err in finding the sales of coal in this case did not take place in Utah.

Plaintiff contends that the application of the use tax law as made by the Tax Commission in reference to the coal is discriminatory against coal produced out of Utah and is, therefore, contrary to Art. 1, Sec. 8, Constitution of the United States. The applicable part of which section is as follows:

"The Congress shall have Power * * * to regulate Commerce with foreign Nations, and among the several States and with the Indian Tribes."

In plaintiff's own words the contention is:

"The practical effect of the decision [of the Tax Commission] is to impose a 2% tax on coal consumed in Utah in industry but mined in Wyoming, while at the same time coal mined in Utah and consumed in Utah industry bears no sales or use tax burden. Plaintiff asserts that the Tax Commission erred in holding the coal sales were subject to the use tax and not the sales tax and in holding that the use tax did not exempt industrial coal because the Utah leg. is without power to tax Wyoming coal and exempt Utah coal, and because as thus construed the law imposes a discriminatory burden on interstate commerce contrary to the mandate of the Federal Constitution." (Plaintiff's Brief, pp. 4, 5.)

It is apparent that plaintiff's contention of discrimination is based entirely on the assumption that

"coal mined in Utah and consumed in Utah industry bears no sales or use tax burden."

Said assumption is erroneous.

The Sales Tax Act was...

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