Zoller Brewing Co. v. State Tax Commission

• Decision Date: 29 September 1942
• Docket Number: 45933.
• Citation: 5 N.W.2d 643,232 Iowa 1104
• Parties: ZOLLER BREWING CO. v. STATE TAX COMMISSION.
• Court: Iowa Supreme Court

5 N.W.2d 643

232 Iowa 1104

ZOLLER BREWING CO. v. STATE TAX COMMISSION.

No. 45933.

Supreme Court of Iowa

September 29, 1942

Edward A. Doerr, of Davenport, for appellant.

John M. Rankin, Atty. Gen., and John E. Mulroney, Asst. Atty Gen., for appellee.

WENNERSTRUM, Chief Justice.

Plaintiff has appealed from an assessment of a use tax, levied by the state tax commission of the State of Iowa against plaintiff company, which levy was confirmed and approved on appeal to the district court. The controversy involves the use tax levied on account of bottles, cartons, kegs and a mechanical case-packer used in the sale and distribution of beer produced by the company.

By virtue of a claim of exemption, as made by the plaintiff, and the further contention on the part of the state tax commission that the property is not exempt from the tax, it is necessary for us to set forth the particular statutes in question and then make application of them to the facts presented to us on this appeal.

The sections of the 1939 Code that must receive consideration in this controversy are as follows:

"6943.102 Definitions. * * *: 1. 'Use' means and includes the exercise by any person of any right or power over tangible personal property incident to the ownership of that property except that it shall not include processing, or the sale of that property in the regular course of business. Property used in 'processing' within the meaning of this subsection shall mean and include (a) any tangible personal property including containers which it is intended shall, by means of fabrication, compounding, manufacturing, or germination, become an integral part of other tangible personal property intended to be sold ultimately at retail (b) * * *, (c) industrial materials and equipment, which are not readily obtainable in Iowa, and which are directly used in the actual fabricating, compounding, manufacturing or servicing of tangible personal property intended to be sold ultimately at retail."

"6943.105 Evidence of use. For the purpose of the proper administration of this chapter and to prevent evasion of the tax, evidence that tangible personal property was sold by any person for delivery in this state shall be prima facie evidence that such tangible personal property was sold for use in this state."

The manner in which the plaintiff carries on its business and sells its product, as disclosed by the record, may be briefly summarized as follows: It establishes or quotes prices for beer based on the quantity sold, the competitive necessity to effect a sale, and the grade of the product. In making a sale of its product the plaintiff makes a separate charge to the customers for bottles, cartons and kegs. If a particular customer returns the containers furnished him, the account is credited on the basis of a certain amount for each container returned. However a customer does not have to return any containers unless he desires credit or cash for them. The record shows that a customer might return more containers than he received from the plaintiff. Upon the return of any bottles, cartons and kegs, he receives either cash or credit, as he desires, according to a uniform scale. The plaintiff in making its sales to its customers does not retain title to any of the containers delivered. When a customer returns any type of container whether originally furnished by the plaintiff company or from any other source, credit is given to the customer on the basis of a smaller credit per unit than originally charged for the various containers.

In construing the "use tax" we are restricted to the statutory definition set forth in our own statute. However, it is well to give consideration to general comments made concerning "use tax" that have heretofore received the attention of the Supreme Court of the United States.

In the case of Henneford v. Silas Mason Co., Inc., 300 U.S. 577, 57 S.Ct. 524, 526, 81 L.Ed. 814, Mr. Justice Cardozo, speaking for that court, commented on the general purposes and intentions in the imposition of a "use tax" as follows:

"The plan embodied in these provisions is neither hidden nor uncertain. A use tax is never payable where the user has acquired property by retail purchase in the state of Washington, except in the rare instances in which retail purchases in Washington are not subjected to a sales tax. On the other hand, a use tax is always payable where the user has acquired property by retail purchase in or from another state, unless he has paid a sales or use tax elsewhere before bringing it to Washington. The tax presupposes everywhere a retail purchase by the user before the time of use. If he has manufactured the chattel for himself, or has received it from the manufacturer as a legacy or gift, he is exempt from the use tax, whether title was acquired in Washington or elsewhere. The practical effect of a system thus conditioned is readily perceived. One of its effects must be that retail sellers in Washington will be...