United Canners, Inc. v. King

• Citation: 696 S.W.2d 525
• Court: Tennessee Supreme Court
• Decision Date: 08 July 1985
• Parties: UNITED CANNERS, INC., Appellee, v. John K. KING, Commissioner of Revenue, Appellant.

Page 525

696 S.W.2d 525

UNITED CANNERS, INC., Appellee, v. John K. KING, Commissioner of Revenue, Appellant.

Supreme Court of Tennessee, at Knoxville.

July 8, 1985.

Rehearing Denied Sept. 16, 1985.

C. Blair Scoville, Asst. Atty. Gen., W.J. Michael Cody, Atty. Gen. and Reporter, of counsel, Nashville, for appellant.

John B. Phillips, Jr., Stophel, Caldwell & Heggie, P.C., of counsel, Chattanooga, for appellee.

OPINION

FONES, Justice.

This state revenue case involves the application of the exemption in T.C.A. § 67-4-309(b) extended to a transferee of the ownership of a business, the former owner of which has paid the privilege tax on bottlers imposed by T.C.A. § 67-4-402 for the full tax year in which the transfer was made.

Plaintiff, United Canners, Inc., initiated this action seeking a refund of the tax that was assessed by the commissioner and paid under protest. The chancellor found that United Canners was a transferee under the statute and entitled to recover the tax penalty and interest of $75,936.14. We are of the opinion that plaintiff did not acquire ownership of the bottling business in question and does not qualify for the exemption.

Coca-Cola Bottling Company United, Inc., an Alabama corporation qualified to do business in Tennessee, is a franchisee of Coca-Cola U.S.A., and as such authorized to operate Coca-Cola Bottling Companies in Augusta, Georgia, Birmingham, Alabama, Spartanburg, South Carolina and Chattanooga, Tennessee. Its bottling plant in Chattanooga is located at 4000 Amnicola Highway.

On February 13, 1976, officials of the Alabama corporation organized and incorporated United Canners, Inc., as a Tennessee corporation and a wholly owned subsidiary of the Alabama corporation. On that same date, February 13, 1976, the parent corporation transferred to the subsidiary what was, in effect, the right to market the canning operation at the Chattanooga facility as distinguished from the bottling operation conducted there, which continued to be operated by the Alabama corporation.

The evidence in the case consisted of two stipulations and the testimony of Albert N. Mullis, Jr., General Manager of the Chattanooga facility. The stipulated facts that describe the transfer and its consequences are as follows:

8. United Canners has conducted and is conducting the same canning operations formerly performed by Coca-Cola Bottling and is using the same plant, equipment, and personnel as Coca-Cola Bottling used when it was conducting the canning operation.

9. United Canners has no employees. All personnel engaged in United Canners' canning operations are employed and paid by Coca-Cola Bottling.

10. United Canners owns no physical, tangible assets. All physical, tangible assets utilized in United Canners' canning operations are owned by Coca-Cola Bottling. United Canners makes no lease payments for any physical assets. No transfer of physical, tangible assets was ever made by Coca-Cola Bottling to United Canners.

11. United Canners only asset is accounts receivable from its customers.

12. On February 13, 1976, United Canners took over the canning operation from Coca-Cola Bottling at the facility located at 4000 Amnicola Highway, Chattanooga, Tennessee. At the same time, United Canners took over all purchase orders, contracts, agreements and understandings between Coca-Cola and its canning customers and, since February 13, 1976, has performed the canning services to those customers pursuant to the purchase orders, contracts, agreements and understandings.

13. United Canners has received and is currently receiving its supplies from the same supplier which previously supplied Coca-Cola Bottling with respect to the canning operation at the facility located at 4000 Amnicola Highway, Chattanooga, Tennessee. Since February 13, 1976, Coca-Cola Bottling has continued to conduct the bottling operation at the facility located at 4000 Amnicola Highway, Chattanooga, Tennessee.

The privilege tax at issue is imposed upon bottlers and manufacturers of soft drinks, "which are closed and sealed in glass, paper, metal, plastic or any type of container or bottle," measured by gross receipts. T.C.A. § 67-4-402.

Thus, the tax at issue is applicable equally to both the bottling and the canning operation conducted by the two corporations at the Chattanooga facility.

The exemption sub-section, § 67-4-309(b), reads as follows:

(b) Whenever the ownership of a business subject to the gross receipts tax, the owner of which has paid the tax on an annual basis in accordance...