Utah Concrete Products Corporation v. State Tax Commission

• Decision Date: 25 April 1942
• Docket Number: 6398
• Citation: 125 P.2d 408,101 Utah 513
• Court: Utah Supreme Court
• Parties: UTAH CONCRETE PRODUCTS CORPORATION v. STATE TAX COMMISSION

125 P.2d 408

101 Utah 513

UTAH CONCRETE PRODUCTS CORPORATION v. STATE TAX COMMISSION

No. 6398

Supreme Court of Utah

April 25, 1942

Original proceeding in the Supreme Court by the Utah Concrete Products Corporation, and the Utah Concrete Pipe Company against the State Tax Commission of Utah to review a decision of the State Tax Commission holding the plaintiffs liable for additional sums levied under the Emergency Revenue Act (Sales Tax Act) and the Use Tax Act.

Decision affirmed in part and reversed in part.

Conway Ashton and Ball & Musser, all of Salt Lake City, for plaintiffs.

Alvin I. Smith, Grant A. Brown, David T. Lewis, Garfield O Anderson, and Wayne Christoffersen, all of Salt Lake City, for defendant.

WOLFE Justice. McDONOUGH and PRATT, JJ., MOFFAT, Chief Justice, LARSON, Justice, concurring.

OPINION

WOLFE, Justice.

Review of a decision of the State Tax Commission holding plaintiffs liable for additional sums levied under the Emergency Revenue Act (Sales Tax Act) and the Use Tax Act.

Plaintiff, the Utah Concrete Products Corporation, and the plaintiff, the Utah Concrete Pipe Company, a copartnership, were, during the years 1937, 1938, and 1939, engaged in the manufacture of concrete pipe, cinder blocks and related concrete products. They were primarily engaged in selling these products to public highway and building contractors; a relatively small amount being sold directly for private use.

In 1940, the State Tax Commission notified the plaintiffs of an additional sales tax assessment for the years 1937, 1938, and 1939. Plaintiffs duly petitioned for a redetermination on the grounds that deductions were allowable on sales to contractors. On March 12, 1941, a joint hearing was held and subsequently the State Tax Commission rendered its decision denying said petition and finding the Utah Concrete Products Corporation and the Utah Concrete Pipe Company liable in the sum of $ 692.81 and $ 1,052.56 respectively. The plaintiffs have conceded and paid the sums of $ 13.92 and $ 10.59 respectively. The remainder, being paid as required by law, is claimed to be an invalid tax assessment. Of such sums, ninety-eight per cent of the amount represents sales tax claimed on sales to contractors for use in public highway construction. The sum of $ 12.50 is claimed due from sales to contractors for use in private construction and $ 17 arises from the use by the plaintiff Utah Concrete Pipe Company of cinder blocks made by it at Provo, Utah, and used in the construction of its own office building in Salt Lake City, Utah.

Three questions are presented in the instant case for determination by this court:

First, are sales of products made by a manufacturer of building materials to contractors for use upon a private construction contract taxable under the Emergency Revenue Act of 1933 (Sales Tax Act) and its subsequent amendments?

Second, are sales of products made by a manufacturer of building materials to contractors for use upon a public construction contract taxable under the same act as amended?

Third, are building materials used by the manufacturer thereof for its own use subject to taxation under the Use Tax Act of 1937?

Taking the first two questions involving the Emergency Revenue Act (Sales Tax Act), first, we find its declared purpose to be

"a tax upon every retail sale of tangible personal property made within the state of Utah equivalent to two (2) per cent of the purchase price paid or charged * * *." The Emergency Revenue Act of 1933, Section 4, Chapter 63, Laws of Utah, 1933, as Amended by Section 1, Chapter 20, Laws of Utah, Second Special Session, 1933.

It is the plaintiffs' position that a sale by them as manufacturers to contractors for use in private and public construction is not a "retail sale" within the contemplation of the act. The defendant Tax Commission contends that by the provisions of the act it is "apparent that the sales tax applies to the sale to the ultimate 'user or consumer.'"

Under paragraph (e), Section 2, Chapter 20, Laws of Utah, Second Special Session, 1933, as amended by Laws 1939 c. 103, amending the original act of 1933, it states the term "retailer" to mean

"a person doing a regularly organized retail business in tangible personal property, known to the public as such and selling to the user or consumer and not for resale, and includes commission merchants and all persons regularly engaged in the business of selling to users or consumers within the state of Utah * * *. The term 'retail sale' means every sale within the state of Utah by a retailer or wholesaler to a user or consumer, except such sales as are defined as wholesale sales or otherwise exempted by the terms of this act * * *." (Italics added.)

"Wholesale" is defined under the Emergency Revenue Act of 1933, as amended by paragraph (d), Section 2, Chapter 103, Laws of Utah, 1939, as meaning

"a sale of tangible personal property by wholesalers to retail merchants, jobbers, dealers or other wholesalers or retailers to users or consumers not for resale, except as otherwise hereinafter specified." (Italics added.)

From the context of our statute "used" and "consumed" may be said to express the same meaning--to make use of, to employ, and does not necessarily mean the immediate destruction or extermination or change in form of the article or commodity.

The paramount question then turns upon the proposition of whether the contractors to whom the plaintiffs sold their products were "users" or "consumers" within the meaning of the act or whether they were mere dealers in the products reselling to the third parties.

For purposes of discussion, we shall treat plaintiffs' sale to private and public highway contractors at one and the same time. These sales are made under similar contracts. One to contractors for the construction of privately owned projects; the other to contractors for public projects. Each contract is for a lump sum. No separate charges are made for labor or materials as far as the owner of the project is concerned.

The plaintiffs place much reliance on the case of Western Leather & Finding Co. v. State Tax Commission, 87 Utah 227, 48 P.2d 526. The writer has had doubts as to the correctness of the ruling in that case wherein it was held by this court that shoe repairmen were not subject to the sales tax on the theory that they did not consume the shoe leather applied by them to shoes. It was held as a purchase of the leather by the shoe repairmen from the manufacturer for the sole purpose of reselling as leather soles and heels. The leather remained as tangible personal property; whereas, in the instant case, contractors purchase the pipes, culverts and cinder blocks for the purpose of using and consuming them by incorporating them as one of many units which go to make up buildings, structures, or roads, as the case might be, and not for reselling them as such in their original form, but for the purpose of changing their very nature from personal to real property. In short, labor and many other materials enter along with the plaintiffs' products to make up the particular structure, and they are all used or consumed in the process of producing a new entity. The case of the Western Leather & Finding Co. v. State Tax Commission, supra, may be distinguished along these lines.

In the case of the City of St. Louis v. Smith, 342 Mo. 317, 114 S.W.2d 1017, 1019, under a retail sales statute similar in intent and wording to ours, building, paving and sewer contractors were held liable for the tax as "consumers," and it was the dealer's duty to collect the tax at time of sale. The court stated that in its "Judgment the contractors in this case did not buy the materials in question for the purpose of reselling such materials to the city. They were under contract to deliver to the city a finished product. It was the inseparable comingling of labor and material that produced the finished product." Again in the case of Atlas Supply Co. v. Maxwell, 212 N.C. 624, 194 S.E. 117, 118, the court on holding plumbing and heating contractors subject to sales tax law, stated that "they purchase the materials and supplies, not for resale as tangible personal property, but for use in producing the turnkey job. There is no resale of the materials and supplies, as such, either actual or intended, within the meaning of the act." See views expressed to the same effect in Lone Star Cement Co. v. State Tax Commission, 234 Ala. 465, 175 So. 399; Albuquerque Lumber Co. v. Bureau of Revenue, 42 N.M. 58, 75 P.2d 334; State v. J. Watts Kearny & Sons, 181 La. 554, 160 So. 77; Herlihy Mid-Continent Co. v. Nudelman, 367 Ill. 600, 12 N.E.2d 638, 115 A. L. R. 491.

Cases expressing a contrary opinion: Bradley Supply Co. v. Ames, 359 Ill. 162, 194 N.E. 272, and Blome Co. v. Ames, 365 Ill. 456, 6 N.E.2d 841, Ill. A. L. R. 940, which were later distinguished and overruled respectively in Herlihy Mid-Continent Co. v. Nudelman, supra; Moore v. Pleasant Hasler Construction Co., 50 Ariz. 317, 72 P.2d 573, reversed on rehearing in Moore v. Pleasant Hasler Construction Co., 51 Ariz. 40, 76 P.2d 225; Wiseman v. Gillioz, 192 Ark. 950, 96 S.W.2d 459.

Having decided that contractors are consumers within the meaning of our act because they are the last persons in the chain to deal with such products before incorporation into a separate entity and before such products lost their identity as such, the question arises, are sales to state highway contractors (involving 98% of the sales in the instant case) exempt under Section 6, Chapter 63, Emergency Revenue Act of 1933, as amended by Laws of Utah, 1933, Second Special Session, Chapter 20, Section 1, which, among others, exempts sales to the state of Utah from taxation.

P...