A. W. Cullum & Co. v. Calvert, 11716

• Decision Date: 21 January 1970
• Docket Number: No. 11716,11716
• Citation: 450 S.W.2d 419
• Parties: A. W. CULLUM & COMPANY, Inc., Appellant, v. Robert S. CALVERT, Comptroller of the State of Texas, Appellee.
• Court: Texas Court of Appeals

Page 419

450 S.W.2d 419

A. W. CULLUM & COMPANY, Inc., Appellant, v. Robert S. CALVERT, Comptroller of the State of Texas, Appellee.

No. 11716.

Court of Civil Appeals of Texas Austin.

Jan. 21, 1970.

Rehearing Denied Feb. 11, 1970.

Worsham, Forsythe, Sampels & Busbee, Dan Busbee, Jr., Dallas, for appellant.

Crawford C. Martin, Atty. Gen., Nola White, First Asst. Atty. Gen., Hawthorne Phillips, Exec. Asst. Atty. Gen., John R. Grace and Alfred Walker, Asst. Attys. Gen., Austin, for appellee.

O'QUINN, Justice.

This is a sales tax case involving sums aggregating $24,190.62 paid under protest by appellant to the Comptroller of Public Accounts based upon deficiency determinations covering tax periods (1) from September 30, 1963 through July 31, 1967, and (2) October 1, 1966 through July 31, 1967.

The parties stipulated and agreed on all facts, and the cause was tried before the court without a jury. The trial court denied appellant recovery and entered judgment for the State from which this appeal has been taken.

As it existed at the times involved in this case, the Texas Sales Tax Act required each retail merchant situated as appellant to remit to the Comptroller two percent of its receipts from the sale of all tangible personal property. Article 20.02, Title 122A, Taxation-General, V.C.T.S. The taxes were collected by the retailer from its customers in accordance with a 'bracket system' set out in Article 20.021 of the Act.

In calculating sales taxes appellant arrived at a total of its retail receipts, deducted from that total expenses incurred through distribution of trading stamps to its customers, and then remitted two percent of the balance to the Comptroller.

In making deficiency determinations the Comptroller ruled, and the trial court found, that appellant should have remitted two percent of the total receipts, without deducting expense of the trading stamps. The Act as involved in this case is as the law existed prior to the amendments of 1968.

We affirm the judgment of the trial court.

Appellant contends under five points that it was error (1) to determine that distribution of trading stamps does not constitute sale of intangible personal property which is nontaxable; (2) in the alternative, error to determine that under the Comptroller's ruling appellant may not deduct the cost of trading stamps as representing cash discounts; (3) in further alternative, error to find the Comptroller did not exceed his authority in defining 'cash discounts;' (4) in further alternative, error to hold that the ruling does not subject consumers to double taxation; and (5) in further alternative, error to find that the sales Tax Act does not allow cost of trading stamps to be deducted from gross sales as cash discounts.

The record shows that appellant entered into a licensing agreement with the trading stamp company by which the stamp company furnished trading stamps and books for a fee, measured by the amount of stamps ordered, and agreed to redeem the stamps when presented at a redemption store established by the stamp company. Under the arrangement, the retailer delivered trading stamps to its customers, in conjunction with the sale of merchandise, usually at a ratio of one stamp for each designated amount or unit of the purchase.

The retailer did not make a separate charge for the stamps, and the selling price of the merchandise was not reduced when the customer declined the stamps. The stamp company published a catalog showing the premium articles that could be acquired upon surrender of a stated number of stamps. The customer was able to obtain the article of choice listed in the catalog by delivering the required number of stamps to the redemption store.

By terms of the licensing agreement, title to the stamps remained in the stamp company, without regard to which party had physical possession of the stamps, and complete right to possession remained in the trading stamp company. The stamps and collectors' books were never sold to the collectors, nor to the merchants issuing the stamps, nor to any other persons. The stamp company retailed title and the right to possession of the stamps and the books at all times, subject only to the rights of the collectors of the stamps to redeem them for merchandise according to specified rules and regulations set out in the notices given to the collectors in the books and stated in the contract between the retailer and the stamp company.

The only right the customer had in the stamps distributed to him by the retailer was to paste the stamps in the books and present them to the stamp company for redemption. The customer was not permitted to transfer, dispose of, or use the stamps for any further purpose, without consent in writing of the trading stamp company.

In practice, stamps were offered to all customers, but some customers declined to take them. The price which formed the basis for distribution of the stamps, was the selling price of the merchandise sold by the retailer.

The retail merchant collected from the customers the full amount of the Texas sales taxes to be paid by the purchasers, based on the sales price of the merchandise, regardless of whether the purchaser declined or not to take the proffered stamps. No rebates of sales taxes were made by the retailer to any of the purchasers.

Trading stamps were delivered to appellant by the stamp company as a part of a total program or plan purchased from the stamp company. For the consideration paid to the stamp company, appellant also received the collectors' books, in which stamps were required to be affixed in order to be redeemable, as well as catalogs showing articles to be acquired upon surrender of stated numbers of books filled with stamps. The catalogs and empty books were distributed to appellant's customers at its stores without charge. In order to be completed, a book had to have 1200 stamps affixed on the pages in accordance with instructions found in the book. The minimum number of books for use in redemption was one-fourth of one book. It would appear from the record that to ascertain how many stamps have been, or would be, redeemed under this system presents insurmountable difficulties.

It is settled law that appellant had the burden of establishing its right to receive a refund of taxes paid under protest, as well as the amount of the refund to which it is entitled. Calvert v. Union Producing Company, 154 Tex. 479, 280 S.W.2d 241 (1955). The amount of the protested tax does not appear to be in controversy. Only appellant's right to a refund is in issue.

At the time the taxes in question accrued, the Sales Tax Act provided that

'There is hereby imposed a limited sales tax at the rate of two per cent (2%) On the receipts from the sale at retail of all tangible personal property within this State.' Article 20.02 (Emphasis added)

The statute without ambiguity levies the tax on all the receipts from sales by the retailer of tangible personal property. The Comptroller contends, and we think properly, that the full amount of the receipts is taxable. Article 20.021(F) provides that '* * * it shall be presumed that all gross receipts are subject to the tax until the contrary is established.'

The Tax Act defines 'receipts' as meaning '* * * the Total amount of the sale * * * of the retail sales of retailers, valued in money, whether received in money or otherwise, Without any deduction on account of * * * cost of materials used, labor or service costs, interest paid, losses or Any other...