Opinion
No. 2100
March 21, 1939
TAXATION — USE TAX — EXEMPTIONS — INTERSTATE COMMERCE — STATUTES — LICENSES — CONSTITUTIONAL LAW.
1. The use tax imposed under the Use Tax Act was intended to supplement or complement the sales tax (Laws 1937, c. 118). 2. The state use tax applies only to merchandise not already in the state, but brought into the state directly or on order (Laws 1937, c. 118). 3. The statute exempting from use tax machinery, etc., directly used in mining, when such machinery is not "promptly purchaseable" in Wyoming from regularly established Wyoming individuals, firms, or agencies, did not exempt from the tax, oil well supplies ordered by corporate retailer authorized to transact business in Wyoming, from its home office in another state and by that office from dealers and manufacturers in other states and sent to Wyoming purchasers (Laws 1937, c. 118, § 4). 4. Provision of Use Tax Act, if requiring retailers making sales of tangible property for storage, use, or other consumption in Wyoming to collect tax imposed, from the purchaser "at the time of making such sales," would be invalid as interfering with interstate commerce, since it would require collection of tax at time an order is taken or accepted in foreign jurisdiction and before property reaches the state (Laws 1937, c. 118, § 6; U.S.C.A. Const. art. 1, § 8, cl. 3). 5. The provision of the Use Tax Act requiring retailers making sales of tangible property for storage, use, or other consumption in Wyoming to collect tax from purchaser "at the time of making such sales," if invalid, would be stricken from act, in view of provision that unconstitutionality of any clause of the Act reasonably separable from remaining portions of the act should not affect the remaining portions (Laws 1937, c. 118, §§ 6, 29). 6. If corporate retailer was assessed too great a penalty and interest for failure to pay use tax, in view of Supreme Court's construction of the Use Tax Act, the retailer could, on application, have correction made in district court (Laws 1937, c. 118). 7. The Use Tax Act imposing excise tax on storage, use, or other consumption in the state of personalty purchased from retailers, is not unconstitutional on ground of arbitrary classification, because peddlers are not made liable for the tax (Laws 1937, c. 118, §§ 2(f), 3, 6; Const. art. 1, § 28). 8. Provision of Use Tax Act requiring retailers to collect the tax is valid, as against contention that tax is legally due from and in first instance imposed upon consumer and that retailers could not be made liable for its payment (Laws 1937, c. 118, §§ 3, 6, 7).
ERROR to the District Court, Laramie County; SAM M. THOMPSON, Judge.
Action by the People of the State of Wyoming against the Continental Supply Company, to recover use taxes allegedly due the State. To review an adverse judgment, the defendant brings error.
For the plaintiff in error, there was a brief by Hagens Wehrli of Casper, and oral argument by Mr. W.J. Wehrli.
The burden was on plaintiff to prove that the materials were promptly purchasable in Wyoming. Subsection K, Sec. 4, Ch. 118, Laws of 1937. Certain commodities are exempt under the law. Sec. 6, Ch. 118, Laws of 1937. Plaintiff did not negative the exception in its petition, but it was a material allegation, 49 C.J. 153. Chicago Ry. Co. v. Hamilton (Ind.) 85 N.E. 1044. United States v. Cook, 84 U.S. 168. Fed. Chem Co. v. Paddock (Ky.) 94 S.W.2d 645. Garvey v. Wesson (Mass.) 154 N.E. 516. Plaintiff was required to plead and prove that the merchandise was not exempt under the act. Rice Oil Co. v. Toole County (Mont.) 284 P. 145. United States v. Ry. Co., 234 U.S. 669. The act provides that certain commodities are exempt, if not stocked for sale, or promptly purchasable in Wyoming. Many authorities involve a definition of the word "purchase." Hamilton v. Gray (Vt.) 31 A. 315. Bank v. United States, 38 F.2d 923. Hunt v. Bassett (Mass.) 783. People v. Caskrill (Calif.) 216 P. 78. Griffith v. Trenton (N.J.) 69 A. 29. 51 C.J. 95. Hessell v. Johnson (Wisc.) 36 N.W. 417. City of Denver v. Moewes (Colo.) 60 P. 986. Authorities on this point may be multiplied but the foregoing represents the decided weight of authority. Imposition of the tax under Sec. 6 of the act is an unconstitutional burden upon interstate commerce. Henneford v. Co., 300 U.S. 77. Weeks v. United States, 245 U.S. 618, 62 L.Ed. 513. Sonneborn Bros. v. Koeling, 262 U.S. 506. 67 L.Ed. 1095. Dahl Implement Co. v. Campbell (N.D.) 178 N.W. 197. Purchase v. State (Nebr.) 191 N.W. 677. Abner Mfg. Co. v. McLaughlin (N.M.) 64 P.2d 387. City of Rushville v. Heyeman (Ind.) 114 N.E. 691. Krueger v. Acme Fruit Co. (C.C.A., 5th Cir.) 75 F.2d 67. Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 282, 66 L.Ed. 239. Federal Trade Commission v. Pacific States Paper Trade Association, 273 U.S. 52, 71 L.Ed. 534. Cooney v. Mountain States Telephone and Telegraph Company, 294 U.S. 384, 79 L.Ed. 934. Baldwin v. Seelig, 294 U.S. 511, 79 L.Ed. 1032. J.B. Simpson, Inc. v. O'Hara (Mich.) 268 N.W. 809. Montgomery Ward Co. v. Fry (Mich.) 269 N.W. 166. Property in interstate commerce can be taxed only after it comes to rest in the state where the tax is imposed. 12 C.J. 104. Henneford v. County, supra. Minnesota v. Blasius, 290 U.S. 1. Blexom v. Henneford (Wash.) 76 P.2d 586. Gredd Dyeing Co. v. Query, 286 U.S. 472. Clements v. Town of Casper, 4 Wyo. 494. State v. Willingham, 9 Wyo. 290. State v. Byles, 22 Wyo. 136. The rule in Felt and Tarrant Mfg. Co. v. Corbitt, 23 F. Supp. 186, sustaining the use tax law of California, conforms to the general rule above stated. Sec. 6 of the Use Tax law violates Article 1, Sec. 28 of the Wyoming constitution requiring all taxation to be equal and uniform. 61 C.J. 39. The act violates Article 3, Section 24 of the Wyoming constitution requiring the subject of a bill to be expressed in its title. The defect may be raised for the first time on appeal. Grover Irrigation Co. v. Ditch Co., 21 Wyo. 204. Delfelder v. Bank, 38 Wyo. 481. A tax cannot lawfully be collected from one person when it is legally due from another. National Ice Co. v. Express Co. (Calif.) 79 P.2d 380.
For the defendant in error there was a brief by Ray E. Lee, Attorney General; Thomas F. Shea, Deputy Attorney General; and Wm. C. Snow, Assistant Attorney General, all of Cheyenne, and an oral argument by Mr. Lee.
Appellant's contention that the burden was on plaintiff to plead and prove that the materials were promptly purchasable in Wyoming, is not a fair statement under any question involved in the case, when Sec. 4-K, Ch. 118, Laws 1937 is considered. Findings of the trial court will not be disturbed where supported by substantial evidence. Peterson v. Johnson, 46 Wyo. 475. Willis v. Willis, 48 Wyo. 403. Kaleb v. Woodman of America, 51 Wyo. 116. It is also contended that the imposition of the tax at the time of sale is a burden upon interstate commerce. It is made clear by Sec. 6 of the act that the tax is imposed on the storage, use, or other consumption of tangible personal property within the state of Wyoming. Sec. 3, Ch. 118, Laws 1937. Sec. 6 of the act simply provides the method of collecting the tax. The case of Monamotor Oil Co. v. Johnson, 292 U.S. 86 disposes of this question. We call attention to the following cases, which also support the imposition of the tax. Felt Tarrant Mfg. Co. v. Corbett et al., 23 F. Supp. 186; Southern Pac. Co. v. Corbett et al., 23 F. Supp. 193; and Pacific Tel. Tel. Co. v. Corbett et al., 23 F. Supp. 197. (All of these cases appear in the advance opinions, 23 Federal Supplement, No. 3, June 20th, 1938.) Henneford et al. v. Silas Mason Co., 300 U.S. 577, 57 S.Ct. 524, 526, 81 L.Ed. 814; James v. Dravo Contracting Co., 302 U.S. 134. Silas Mason Co. et al. v. Tax Commission of Washington et al., 302 U.S. 186, and Western Livestock v. Bureau of Revenue, 82 U.S.L. Ed. advance opinions No. 11, page 548. This is an excise tax. It is applied uniformly to all coming within the scope of its provisions. State v. Willingham, 9 Wyo. 290. Henneford v. Co., supra. The position taken by plaintiff that the property is not taxable because the statute is invalid, is inconsistent with its claim that the property is exempt. This is an excise tax and the constitutional rule requiring uniformity has no application to excise taxes. Matter of Kessler, 146 P. 113. Ann. Cas. 1917 A. 228. State of Maryland v. Shapiro, 101 A. 703. State v. Wilson, 168 P. 679. State Bd. of Tax Commissioners v. Jackson, 75 Law Ed. 1248. State ex rel. Porterie v. Hunt, 162 So. 777. State ex rel. Griffin v. Greene, 67 P.2d 995. Frazier v. State Tax Commission, 175 So. 402. The fourth point raised by Counsel attacks the sufficiency of the title of the act without citing authority. The tax is not upon the sale, but rather upon the storage, use or other consumption of tangible personal property and the tax is upon the purchaser and not upon the seller, although the seller under certain conditions is made responsible for its collection. We think the point is fully answered by the case of Monamotor Oil Co. v. Johnson, supra. The final point urged by appellant is that a tax cannot lawfully be collected from one person when it is legally due from another. Appellant here attempts to force a strained and unreasonable construction upon the statute which we believe is wholly without merit. Monamotor Oil Co. v. Johnson, supra. We desire to offer the following additional cases in support of our contention that the tax is not a burden upon interstate commerce. Edleman v. Transport Co., 289 U.S. 249. American Airways v. Wallace, 57 Fed. 2d 877. Great Atl. Tea Co. v. Grosgean, 301 U.S. 412. We also desire to call attention to the case of Investment Co. v. People (Colo.) 81 P.2d 764. The point there involved was whether the use tax should be applied to an elevator sold by the Otis Elevator Co. of St. Louis to the Investment Company and installed in the City of Denver. The Colorado Court held that the transaction was subject to the use tax law of Colorado.
This is an action to recover certain taxes alleged to be due the State of Wyoming under the provisions of the Use Tax Act of 1937, Chapter 118, Session Laws of Wyoming 1937.
The Continental Supply Company, defendant in the case below and plaintiff in error here, is a Delaware corporation engaged in the business of selling supplies to oil producers and operators and to persons engaged in drilling wells for the production of oil and gas. Its home office is in Dallas, Texas; it is authorized to transact business in Wyoming, and it maintains as its principal office or place in Wyoming a store at Casper. It has three different places of business in the State. On or about June 9, 1937, the Corporation made application to the State Board of Equalization of Wyoming for a Certificate of Registration pursuant to Section 5, Ch. 118, Session Laws of Wyoming 1937. On September 3, 1937, a "Certificate of Registration and Authority to Collect Use Tax" was issued, addressed to the corporation's Casper Office.
During the months of June, July and August, 1937, the Corporation made various sales of merchandise to purchasers in Wyoming. Some of this merchandise was, doubtless, supplied from stock in the corporation's hands in its Wyoming stores. Other items, apparently not carried in local stocks, were ordered by the Corporation from its home office in Dallas, and by that office from dealers or manufacturers in other states. In most instances, apparently, shipment was made directly from the foreign dealer or manufacturer to the Wyoming purchasers, and in such cases the merchandise was at no time, at least directly, in the actual possession of the Corporation's Wyoming retailers. The merchandise involved in this action reached the purchaser in this state in all cases. The time taken up in filling the various orders does not appear, but judging from the testimony of the witness Gross, they were all filled in the regular, ordinary course of trade.
The appellant, from its office at Dallas, made a report on July 20, 1937, of the merchandise sold for storage, use or other consumption during June. Similar returns were made the following months. The appellant, however, failed to pay any use tax, except in those instances in which it had collected it, stating that the purchasers refused to pay it, claiming that the property purchased was exempt from the use tax. This action was brought as the result of such non-payment. The appellant defended on the ground that it is not liable for the tax. The specific claims in that connection will be mentioned later. Trial was to the court without a jury. The court found in favor of the validity of the statute imposing the use tax, and rendered judgment against the appellant for the amount claimed by the plaintiff. An appeal has been taken from that judgment.
1. Section 4 of the Use Tax statute exempts certain merchandise from the tax, including merchandise which pays the sales tax under the laws of this state. Subdivision K of that section provides that there shall be exempt from the tax "machinery, equipment and industrial materials directly used * * * in mining * * * when such machinery, equipment and materials * * * are not generally stocked in Wyoming for sale or are not promptly purchaseable in Wyoming from or through a regularly established Wyoming individual, firm or agency registered as a retailer under this act." Counsel for plaintiff in error contend that the property in question here is property coming within the exception of the foregoing subdivision. We may concede, as claimed, that oil well supplies are used for "mining," and seemingly the property involved herein was not generally stocked in this state. No stress is laid on that point. So we must determine the point pressed herein, namely, whether or not the merchandise was "promptly purchaseable" from or through a retailer as contemplated in the subdivision. Counsel contend that it was not and that hence the exemption applies. They have given us many definitions of the term "purchaseable" and of the term "promptly." The gist of their argument is summed up in stating that "materials promptly purchaseable in Wyoming, in our opinion, are such as might be obtained by a purchaser in going to a store located in the state of Wyoming and paying or agreeing to pay, the purchase price and obtaining then and there the materials purchased," and that since the supplies involved in the case at bar were not so purchaseable, the exemption clearly applies. The ordinary definition of "promptly purchaseable" would, doubtless, lead to such result. But definitions are often deceptive. Sometimes language conceals, rather than explains. A moment's reflection will show that the argument of counsel for plaintiff in error cannot be valid. If a man can go into a store in this state, pay or agree to pay the purchase price, and then and there obtain the goods, as counsel say, then the purchaser must pay a sales tax. There is then no room for a use tax. The use tax was intended to supplement or complement the sales tax. That aim of the law is of primary importance in construing the language of the subdivision under consideration. The use tax necessarily applies only to merchandise not already in the state, but brought into it directly or on order. It necessarily, in so far as retailers in this state are concerned, applies only to situations such as, or similar to those which, are presented in the case before us. Hence the term "promptly purchaseable" must be construed in that light, and there can be no reason for exempting property from the tax when the order is filled in the ordinary course of trade of that character, as seems to have been true in this case. It may be, as argued by counsel, that under the construction given it, the subdivision will have little or a very restricted meaning. But that is what the legislature probably intended, in view of the fact, as already stated, that the use tax was meant to complement the sales tax.
2. The title of the Use Tax Act is "An Act imposing an excise tax upon the storage, use or consumption of tangible personal property." Section 3 of the Act provides that "an excise tax is hereby imposed on the storage, use, or other consumption in this state of tangible personal property." Section 7 of the Act provides that the retailers coming within the Act must on the 15th of each month make to the Board of Equalization a return of the sales made during the preceding month of the goods sold, the storage, use or consumption of which is subject to the tax imposed by this Act." Section 4b provides that the tax shall not apply to any "property, the storage, use or consumption of which this state is prohibited from taxing under the constitution or laws of the United States of America * * * or which is used or to be used in operating or maintaining interstate transportation" etc. These provisions clearly provide that the tax intended to be imposed was upon the storage, use or consumption of property in this state, and not upon property not yet within the State. But section 6 of the Act provides:
"Every retailer maintaining a place of business in this state, and making sales of tangible property for storage, use or other consumption in this state, not exempted under the provisions of section 4 hereof shall, at the time of making such sales collect the tax imposed by this Act from the purchaser." (Italics are ours.)
It is accordingly argued by counsel for plaintiff in error that under the clause above italicized the tax must be collected at the time the order is taken or is accepted in the foreign jurisdiction; that is to say, before any property of any kind has reached the state of Wyoming, so as to be subject to the use tax; that the clause, accordingly, interferes with interstate commerce and is void. Counsel for the State believe that the contention is met by the case of Monamotor Oil Co. v. Johnson, 292 U.S. 86, 78 L.Ed. 1141, 54 Sup. Ct. 575. In that case it appears that the Iowa legislature imposed a license fee on all motor vehicle fuel used or otherwise disposed of in the state. A report was required to be made of all such fuel imported into the state. Some of that was not actually used in the state and was reshipped, but a refund was made for all fuel so reshipped. The court held that under these facts there was no substantial interference with interstate commerce. The case hardly meets the situation in this case, and we are inclined to agree with the argument of counsel for plaintiff in error that if the italicized portion of section 6 is controlling, there would be interference with interstate commerce. Weeks v. United States, 245 U.S. 618, 62 L.Ed. 513. The law here in question was taken from California as in force prior to 1937. The legislature of that state in 1937 perceived that the clause above italicized might lead to difficulties and added the clause "or, if the storage, use or other consumption of the tangible personal property is not then taxable hereunder, at the time such storage, use or other consumption becomes taxable hereunder." In other words, the California Legislature in 1937 made it clear that no tax should be collectible until the property should actually be in the state for storage, use or other consumption. We think, however, that substantially the same result which was reached in California by the amendment of 1937 may be reached under our law by striking out and holding the italicized portion of section 6 invalid. This we are permitted to do under the provisions of section 29 of the Use Tax Act, which provides:
"If any section, subsection, clause, sentence or phrase of this Act which is reasonably separable from the remaining portions of this Act is for any reason held to be unconstitutional, such decision shall not affect the remaining portions of this Act. The Legislature hereby declares that it would have passed the remaining portions of this Act irrespective of the fact that any such section, subsection, clause, sentence or phrase of this Act be declared unconstitutional."
We think that the clause in section 6 of the Act above italicized is clearly separable, and is in fact unimportant. It will leave a workable law, requiring the return and payment mentioned in section 6 to be made after the property has actually reached this state and is here for storage, use or other consumption. The record does not disclose whether in any instance the appellant made a report of its sales, for the purpose of the use tax, before the property actually reached the state. Probably not, in view of the extensions granted it to make its returns. If that is not true, however, and too much penalty and interest has been assessed in view of our construction placed on the law, the plaintiff in error may, on application, have the correction made in the district court.
3. It is contended by counsel for plaintiff in error that the use tax is in violation of section 28 of article 1 of the State Constitution in that it discriminates between retailers who maintain a place of business in this state and other persons, e.g., peddlers; that it makes the former liable for the tax, but not the latter. It seems to be correct that such discrimination exists, although subdivision (f) of section 2 of the statute attempted to arrive at as great a uniformity as possible. It is readily seen, however, that it would be difficult to enforce the statute against peddlers and persons similarly situated. There is a difference in the very nature of things between persons maintaining a place of business in this state and persons who do not — for example, a peddler. Hence the classification cannot be held to be arbitrary.
4. It is further contended that the use tax is legally due from, and in the first instance imposed upon, the consumer, and that hence the vendor cannot be made liable for its payment, and that the state should have sued the purchasers. We are referred to National Ice Cold Storage Co. v. Pacific Fruit Express Co. (Cal.) 79 P.2d 380. That case involved the sales tax on ice purchased under a contract which had been entered into before the Sales Tax Act became a law. That statute made the retailer liable for the tax, granting him the right to collect it, in turn, from the purchaser. The court held, if we understand the decision correctly, that the statute could not have the effect of imposing the tax on the purchaser under such a contract. The decision can, perhaps, be better understood by also consulting People v. McDuffie (Cal.) 79 P.2d 386, in which the substance of the decision was that a "retailer making sales of tangible personalty under contract executed prior to effective date of statute imposing tax on privilege of selling tangible personalty, could not add the tax to the sale price and collect it from the buyer." We have no such situation as that before us.
Nor is it quite true, as contended, that the tax is primarily due from the consumer, instead of the retailer, except in the sense that the tax is a use tax. Section 3 of the statute provides that "every person storing, using or otherwise consuming in this state tangible personal property purchased from a retailer shall be liable for the tax imposed by this act." At the same time, by section 6 of the statute, the retailer is made equally liable; he is required to collect the tax, and it is provided that the "tax herein required to be collected by the retailer shall constitute a debt owed by the retailer to this state." Under the provisions of section 7 of the statute, the retailer must report and pay the tax. The question as to whether or not this duty may be imposed upon him has lately been decided in the affirmative by the Supreme Court of the United States in the case of Felt Tarrant Mfg. Co. v. Gallagher, 59 Sup. Ct. 376, affirming 23 F. Supp. 186. In that case the court had under consideration the California law, from which our law was taken. An examination of that case, and the cases cited, will show that it has long been the practice for states to make use of retailers or other agencies, for the purposes of enforcing taxes, and such practice has uniformly been upheld as valid. We do not think that we should rule to the contrary.
For the reasons above stated, the judgment of the district court must be affirmed, with the right granted to plaintiff in error as hereinabove set forth.
Affirmed.
RINER, Ch. J., and KIMBALL, J., concur.