Wiseman v. Gillioz

• Decision Date: 06 July 1936
• Docket Number: No. 4-4403.,4-4403.
• Citation: 96 S.W.2d 459
• Parties: WISEMAN, Com'r of Revenues, v. GILLIOZ et al.
• Court: Arkansas Supreme Court

96 S.W.2d 459

WISEMAN, Com'r of Revenues, v. GILLIOZ et al.

No. 4-4403.

Supreme Court of Arkansas.

July 6, 1936.

Rehearing Denied September 28, 1936.

Appeal from Pulaski Chancery Court; Frank H. Dodge, Chancellor.

Action by M. E. Gillioz and others against Earl R. Wiseman, Commissioner of Revenues. Decree for plaintiffs, and defendant appeals.

Reversed and remanded, with directions.

Carl E. Bailey, Atty. Gen., and Thomas Fitzhugh, Asst. Atty. Gen., for appellant.

Hill, Fitzhugh & Brizzolara, Miles, Armstrong & Young, Fadjo Cravens, and Harry P. Daily, all of Fort Smith, for appellees.

MEHAFFY, Justice.

This action was begun by appellees, and appellees state that the following is a brief statement of the facts:

"The City of Fort Smith has for years been in possession of and operating a municipal water plant and system consisting of a pump station on the Poteau river; storage basins located on high tracts of land in the City, into which the Poteau river water was pumped; and a complete distribution system. It became necessary for the City to abandon the pump station on the Poteau river, due solely to the poor quality of the Poteau river water. The storage basins and distribution system were adequate. In order to secure a new and adequate supply of water, the City acquired, and became the owner of, a perpetual right-of-way approximately twenty miles long, and some 1,227 acres of land in fee, and then entered into the three construction contracts for the improvement of its real estate.

"The complaint alleges that the improvements in the aggregate really constitute one project and consisted generally of the following: the building of clay-earth dam on the City's land with concrete wing wall and cut-off walls and a natural rock and concrete spillway. The dam and spillway were built for the purpose of impounding a large lake on the City's property. Included in the improvement was the clearing and grubbing of the lake site. Other improvements included in the contracts and project were the building of a concrete intake tower in the lake above the dam, the building of concrete settling basins, stone and concrete filtration house, and clear water well on the City's land some distance below the dam, and the connection of the concrete intake tower, by means of a 27 inch pipe line, with said settling basins, filtration house, and clear water well, and the connection of all of these, by means of a 27 inch steel pipe line and cast iron pipe line, with the present storage basins and distribution system of the City of Fort Smith. The complaint alleges, and the demurrer admits, that all of said improvements were made on and under the City's land and constitute permanent structures thereon and thereto, and were made pursuant to the three construction contracts involved in this case."

The complaint then alleges the separate contracts and what each one was to furnish, or, rather, what each contractor undertook to do under his contract, and then alleges:

"That much of the material used for the construction of this project was earth, clay, and stone taken by the contractors from the City's land. There was no separate price to be paid by the City for any material used by the contractors. The complaint alleges, and the demurrer admits, that the contractors entered into construction contracts for definite sums, by which they were to furnish the materials and labor and construct the improvements to the City's land. The complaint further alleges that the appellant herein, as Commissioner of Revenues of the State of Arkansas, is demanding that the cost of materials to the contractors be treated as `gross proceeds' of sale of materials by the contractors to the City under the construction contracts for lump sum contract prices set forth in the complaint, and is demanding that the contractors pay a retail sales tax of two per cent thereon to the State, and that they collect same from the City as consumer.

"The complaint alleges, and the demurrer admits, that the construction contracts were all entered into before the effective date of the Sales Tax Act [Acts 1935, p. 591]."

The appellant demurred, the court overruled the demurrer, and entered a decree permanently enjoining the Commissioner of Revenues from enforcing the provisions of the Sales Tax Act, from which comes this appeal.

There are but two questions for our consideration: First, was there a sale of tangible personal property, taxable under the Sales Tax Law? Second, if there was such a sale, would the collection of the tax on contracts made prior to the effective date of the law be unconstitutional as impairing the obligation of the contracts (article 2, § 17)?

The appellee is correct in stating that without regard to the precise nature of the property sold, it is certain that under the express terms of the act the transaction must be a sale or no tax is imposed. They call attention to the case of Wiseman v. Phillips, 191 Ark. 63, 84 S.W. (2d) 91, and state that it is there expressly held that section 4 of the act levies the tax. Section 4 reads as follows:

"Beginning May 1, 1935, there is hereby levied upon and shall be collected from all retail sales, as herein defined, a tax of two (2%) per centum of the gross proceeds derived from said sales.

"The tax imposed by this section shall apply to

"(A) All sales at retail of tangible personal property.

"(B) All retail sales at or by restaurants, cafes, cafeterias, hotels, dining cars, auctioneers, photostat and blue-print sales, funeral directors, and all other establishments of whatever nature or character selling for a consideration any property, thing, commodity, and/or substance.

"(C) All sales of admission or admittance to athletic contests, theaters, both motion picture and stage performances, circuses, carnivals, dance halls and other places of amusement.

"(D) All retail sales of electric power and light, natural gas, water, telephone use and messages and telegrams.

"(E) Where there are adjoining cities or incorporated towns which are separated by a state line, the taxes and licenses to be paid by dealers in and on sales and services in such adjoining city or incorporated towns on the Arkansas side of the state line shall be at the same rate as provided by law in such adjoining state, if any, not to exceed the rate provided in this act."

It will be observed that paragraph (b) of section 3 defines the term "sale at retail" to mean any transaction, transfer, exchange, or barter by which is transferred for a consideration the ownership of any personal property, thing, commodity or substance, or the furnishing or selling for a consideration any of the substances or things hereinafter designated and defined, when such transfer, exchange, or barter is made in the ordinary course of the transferor's business, and is made to the transferee for consumption or use, or for any other purpose than for resale.

Appellees cite and rely on State v. J. Watts Kearny & Sons, 181 La. 554, 160 So. 77, 78, as showing that the contractors are not dealers. The question in that case was whether they were wholesale or retail dealers. The state was collecting a retail tax. It contended that it was entitled to collect both a wholesale and retail tax. The court in that case said, in speaking of the contractor: "He is not a `dealer,' or one who habitually and constantly, as a business, deals in and sells any given commodity. He does not sell lime and cement and nails and lumber."

The court, in the above case, stated also that "sales to contractors are sales to consumers, and for this very reason, the Legislature did not include contractors and subcontractors in the term `dealers for resale,' as used in section 7 of Act No. 205 of 1924, but has placed them in an entirely different classification in section 24 of that act."

Section 24 of the act provides: "That every individual, firm, company or corporation carrying on the profession or business of contractor, shall pay a license based upon the gross annual receipts of said business, which licenses shall be fixed and graded," etc.

The Chief Justice O'Niell wrote a dissenting opinion in the case above in which he said: "The main question in these cases is whether the business of selling building materials, in very large quantities, to contractors and subcontractors, and to municipalities and municipal boards and commissions, should be classed as a wholesale business or as a retail business, in determining the rate of the license tax to be levied upon the business."

We have no such question here. The appellees contend that they did not make a sale, and that therefore they are not liable to pay any tax. In the case above referred to, on rehearing, not only the Chief Justice dissented, but two other Justices. The above case is construing the Louisiana statute, and that statute is different from ours. However, as we have already said, the contractors in that case did...