William L. Bonnell Co. v. Coweta County

• Decision Date: 24 October 2001
• Docket Number: No. A02A0060.,A02A0060.
• Parties: WILLIAM L. BONNELL COMPANY v. COWETA COUNTY BOARD OF TAX ASSESSORS.
• Court: Georgia Court of Appeals

556 S.E.2d 159

252 Ga. App. 151

WILLIAM L. BONNELL COMPANY v. COWETA COUNTY BOARD OF TAX ASSESSORS.

No. A02A0060.

Court of Appeals of Georgia.

October 24, 2001.

Alston & Bird, Timothy J. Peaden, Mary T. Benton, Atlanta, for appellant.

Glover & Davis, Jerry A. Conner, Asa M. Powell, Jr., Newnan, for appellee. ELDRIDGE, Judge.

The Coweta County Board of Tax Assessors granted freeport ad valorem tax exemption for 1993, 1994, and 1995 to William L. Bonnell Company, Inc., a manufacturer of aluminum extrusion. The Board subsequently reassessed the value of inventory and finished products held for sale returned in the Application for Inventory/Freeport Exemption of Bonnell by changing the method of accounting for inventory valuation from "last-in, first out" (LIFO) used by Bonnell to "first-in, first-out" (FIFO) when the application failed to disclose the accounting method used. The use of such latter assumption forced up artificially the value of the raw materials, inventory, and partially finished goods above the freeport application. The Board refused to allow Bonnell to amend the freeport application in proportion to the resulting increase in value of the inventory. Bonnell appealed the reassessment to the Superior Court of Coweta County. On cross-motions for summary judgment based upon a joint stipulation of facts, the issues were submitted to the trial court, which denied Bonnell's motion and granted the Board's. We reverse, because the freeport exemption requires no particular accounting method to be utilized as to partly finished goods, finished goods, and raw material, but does mandate that manufactured finished goods stored in Georgia for shipment outside the state by someone other than a Georgia manufacturer use FIFO. See OCGA § 48-5-48.2(b)(3).

1. (a) A freeport exemption for raw materials, partially finished goods, and inventory of finished goods held by the original manufacturer or producer does not mandate any particular accounting method to be used for valuation. OCGA § 48-5-48.2(b)(1), (2). So long as the method employed by the taxpayer is consistent with its other accounting method and fairly and accurately reflects values, the taxpayer is free to select either the LIFO or FIFO assumption or any other method of inventory evaluation. However, as to finished goods stored in Georgia for shipment out of state to someone other than the Georgia manufacturer, the Act mandates that the exemption "shall be determined based on application of a first-in, first-out method of accounting for the inventory." OCGA § 48-5-48.2(b)(3).

The statute is plain and unambiguous that inventories of raw materials, finished goods, and partially finished goods require no particular method of inventory accounting. OCGA § 48-5-48.2(b)(1), (2). Words used in a statute should be given their ordinary and common meaning where the statutory language is plain and unambiguous, as here. Ray M. Wright, Inc. v. Jones, 239 Ga.App. 521, 523, 521 S.E.2d 456 (1999). All words of a statute should be given effect, and a statute should not be construed so as to render any language meaningless or mere surplusage. Cobb County Bd. of Tax Assessors v. Morrison, 249 Ga.App. 691, 693, 548 S.E.2d 624 (2001); Whirl v. Safeco Ins. Co., 241 Ga. App. 654, 655, 527 S.E.2d 262 (1999). Where in one part of the statute no accounting method is specified, but in a subsequent section an accounting method is specified, this indicates the intent of the General Assembly to allow the taxpayer to choose any generally accepted accounting method where not specified, because the General Assembly could have mandated that FIFO was to be used with all types of inventory as indicated by the specification in the later section. See generally Ray M. Wright, Inc. v. Jones, supra at 522-523, 521 S.E.2d 456. Flexibility in the taxpayer's accounting methods, except as to finished goods held for shipment outside the state, was the intent of the General Assembly as to the accounting method for inventory evaluation. "Revenue statutes are to be construed strictly so as to resolve doubt in favor of the taxpayer, and their meaning is not to be extended by implication." (Citations and punctuation omitted.) Fayette County Bd. of Tax Assessors v. Ga. Utilities Co., 186 Ga.App. 723, 724(1), 368 S.E.2d 326 (1988). Accord Cobb County Bd. of Tax Assessors v. Morrison, supra at 694, 548 S.E.2d 624. "Neither the superior court nor this court is authorized to construe a revenue statute so as to confer an authority upon the Board by implication." Fayette County Bd. of Tax Assessors v. Ga. Utilities Co., supra at 726(1), 368 S.E.2d 326. Accord Cobb County Bd. of Tax Assessors v. Morrison, supra at 693, 548 S.E.2d 624. Thus, the Board lacked the authority to require that a particular accounting method for inventory evaluation be used by the taxpayer on the personal property return or the application for freeport exemption through office procedure. Office procedure for the county board of tax assessors, where there exists underlying statutory authority to act, can define the statutory meaning of terms like "filed" when such term is contained in the statute without definition, because the Board is granted the general authority to implement the Act within certain statutory parameters. DeKalb County Bd. of Tax Assessors v. Lanier Worldwide, 208 Ga.App. 435, 436-437(1), 430 S.E.2d 595 (1993). However, when the statute contains no provision for waiver of freeport exemptions to applications filed beyond a certain date, the Board lacked statutory authority to create a waiver through office procedure. See TEC America v. DeKalb County Bd. of Tax Assessors, 170 Ga. App. 533, 536-538(2), 317 S.E.2d 637 (1984). Thus, the Board of through its office procedures lacked statutory authority to mandate that FIFO be utilized in an application for freeport exemption which would cause a waiver of a timely filed application for freeport exemption with a schedule of all inventory. Id. at 536-538(2), 317 S.E.2d 637.

Fair market value of inventory is a question of fact and not a mere accounting assumption made by the assessors in lieu of actually making a factual determination of the value of each item of inventory; cost of the inventory based upon a FIFO assumption may be a short way to determine value but may not accurately reflect value, because of inflation, deflation, damage, deterioration, style change, or obsolescence. See generally J.C. Penney Co. v. Richmond County Bd. of Tax Assessors, 233 Ga.App. 399, 504 S.E.2d 201 (1998).

While we agree that property must be assessed at fair market value, OCGA § 48-5-6, "cost" is not a concept foreign to such valuation. What the taxpayer was willing to pay for the personalty, its cost to him, is one of the factors from which fair market value may be determined, if not the primary factor, because such figure is fixed, while other factors may deviate upward or downward from such figure based upon the fair market.... For ad valorem tax purposes, fair market value is not the retail value to the taxpayer, but the current wholesale value adjusted for the fair market; thus, the taxpayer's cost may be adjusted upward, downward, or remain the same to reflect the "wholesale market" as it determines the fair market value of the tangible personalty in the taxpayer's possession at that economic moment in time.

Eckerd Corp. v. Coweta County Bd. of Tax Assessors, 228 Ga.App. 94, 103-104(3), 491 S.E.2d 173 (1997). See also J.C. Penney Co. v. Richmond County Bd. of Tax Assessors, supra at 401, 504 S.E.2d 201.

(b) LIFO makes an accounting assumption for income purposes where it is applied to items of inventory that, as an item is sold from inventory, the purchaser buys the newest item, i.e., the last-in item of inventory; thus, the sale becomes the first-out. Where prices increase through inflation or for other reasons, the newest and most expensive items with the higher cost basis move into and out of inventory first.

Under any method of inventory, "costing" the closing inventory is a necessary step in the calculation of taxable income. FIFO and LIFO are alternative accounting methods for arriving at this cost. LIFO assumes that the last articles purchased during the year were the first ones sold, so that articles left in the inventory at the end of the year were the first ones purchased. FIFO (first-in, first-out) assumes the converse, that the earliest article purchased was the first one sold, so that articles left in the inventory at the end of the year were the last ones purchased. Obviously neither FIFO nor LIFO corresponds with actual fact, although the FIFO assumption seems more logical in the normal course of business operations. In a period of stable prices the application of either theory renders the same result. But during an inflationary period, LIFO is distinctly advantageous to the taxpayer, for, in effect, he is not required to include as profit increases in value of inventory. This illustrates the real purpose of the methods—to reflect accurately what normally is considered as profit during inflationary and deflationary

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