Williams Rentals, Inc. v. Tidwell

• Decision Date: 07 October 1974
• Citation: 516 S.W.2d 614
• Parties: WILLIAMS RENTALS, INC., Appellant, v. George M. TIDWELL, Commissioner, Department of Revenue of the State of Tennessee, Appellee.
• Court: Tennessee Supreme Court

Page 614

516 S.W.2d 614

WILLIAMS RENTALS, INC., Appellant, v. George M. TIDWELL, Commissioner, Department of Revenue of the State of Tennessee, Appellee.

Supreme Court of Tennessee.

Oct. 7, 1974.

Cochran, Carey, Fleischer & Mullikin, Memphis, for appellant.

Milton P. Rice, Atty. Gen., John B. Hagler, Jr., Asst. Atty. Gen., Nashville, for appellee.

OPINION

PER CURIAM.

Williams Rentals, Inc., filed a complaint in the Chancery Court of Davidson County seeking the return of sales taxes paid to the State of Tennessee under protest. On considering a motion for summary judgment, the chancellor dismissed the complaint. Williams Rentals, Inc., appealed, insisting the chancellor erred 'in holding that the State of Tennessee is not interfering with interstate commerce by assessing a tax on transactions where appellant leased equipment to contractors in Memphis, Tennessee, with the clear understanding that said equipment was immediately to be transported to the States of Arkansas and Mississippi to be used at job sites in those two states.'

Chancellor Frank Drowota, III, now Judge of the Court of Appeals, filed a comprehensive memorandum opinion in which he discussed fully and decided correctly the question before us on appeal. We adopt the opinion of the chancellor set out below as the opinion of this Court.

'Williams, a Tennessee corporation, operates a rental business in Shelby County, Tennessee, through which it rents construction machines and equipment to contractors in Tennessee and the surrounding states. This action was instituted to recover the sales tax paid under protest by Williams. The tax in question was assessed on transactions in which Williams leased construction equipment to contractors for use solely outside the State of Tennessee. However, delivery of the equipment was within the State of Tennessee.

'Williams argues that taxing such transactions results in double taxation and is a burden upon the interstate commerce between the parties, and places Williams at a competitive disadvantage with out-of-state rental companies who do not have to pay but one tax. Thus, Williams contends, the tax is in violation of Article I, Section 8, and Article I, Section 10 of the United States Constitution and contrary to the statutory exemption granted interstate commerce under Section 67--3007, Tennessee Code Annotated.

'Section 67--3007 provides as follows:

"Interstate commerce exempt.--It is not the intention of this chapter to levy a tax upon articles of tangible personal property imported into this state or produced or manufactured in this state for export; nor is it the intention of this chapter to levy a tax on bona fide interstate commerce. It is, however, the intention of this chapter to levy a tax on the sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in this state of tangible personal property after it has come to rest in this state and has become a part of the mass of property in this state.'

The Tennessee Supreme Court, discussing Section 67--3007 in Texas Eastern Transmission Corp. v. Benson, Tenn., 480 S.W.2d 905 (1972), stated:

"While this provision is a recognition by the legislature that our constitutional limitations upon the power of a state to levy a tax on goods moving in interstate commerce, it is presumably intended to extend the taxing power of the State of Tennessee to the fullest extent allowed under the commerce clause.' 480 S.W.2d at 907.

Thus, this State's highest court has declared that where a tax does not constitute a violation of the commerce clause, no exemption is available under Section 67--3007.

'The question to be resolved is whether the tax in question is a violation of the commerce clause. For reasons hereinafter stated this Court is of the opinion that the imposition of the tax does not violate the commerce clause.

'Unquestionably, the sale or lease of goods within a state may form part of a transaction in interstate commerce and hence be entitled to enjoy a corresponding immunity. Eastern Air Transport v. South Carolina Tax Comm., 285 U.S. 145 (147) (52 S.Ct. 340, 76 L.Ed. 673) (1932). But, it is only when such a tax operates to regulate commerce between the states or discriminate against interstate commerce in favor of intrastate commerce to an extent which infringes the authority conferred upon Congress, that the tax can be said to exceed constitutional limitations. McGoldrick v. Berwind-White Coal Mining Co., 309 U.S. 33 (60 S.Ct. 388, 84 L.Ed. 565) (1940).

'The decisions dealing with the commerce clause limitations on states' taxing powers appear to be predicated on a practical judgment as to the likelihood of the tax being used to place interstate commerce at a competitive disadvantage. But this is not to say that the commerce clause is intended to relieve those engaged in interstate commerce of their just share to the state tax burden. When individuals avail themselves of the laws and privileges of a state, the state may exact a tax from those individuals. And, merely because the incidental or consequential effect of the tax is an increase in the cost of doing business, this in and of itself does not constitute a burden on interstate commerce, Id. As stated by the Supreme Court in McGoldrick:

"In...