WATSON INDUSTRIES, Inc.
v.
SHAW, Commissioner of Revenue.
No. 91.
Supreme Court of North Carolina.
March 5, 1952.*508 Bunn & Bunn, Rocky Mount, Gardner, Connor & Lee, Wilson, and John G. Dawson, Kinston, for plaintiff.
Harry McMullan, Atty. Gen., Harry W. McGalliard and I. Beverly Lake, Asst. Attys. Gen., for defendant.
BARNHILL, Justice.
The plaintiff properly sets forth in its complaint two separate and distinct causes of action: (1) for the recovery of the alleged excess amount paid on the parts purchased for the construction of the four radio towers, and (2) for the recovery of the taxes paid on the rentals for transcriptions. This serves to clarify and facilitate discussion of the questions of law raised by the appeals herein.
First Cause of Action.
Are the fabricated articles or parts purchased by plaintiff for use in the erection of four radio towers building material within the meaning of G.S. § 105-187? If so, plaintiff was liable for the excise tax assessed and collected by defendant.
The subtitle of that section of our sales and use tax act, General Statutes 105, Art. 5, is: "Tax on building materials."
The pertinent part thereof reads as follows: "There is hereby levied and there shall be collected from every * * * corporation, an excise tax of three per cent of the purchase price of all tangible personal property purchased or used * * * which shall enter into or become a part of any building or any other kind of structure in this state, including all materials, supplies, fixtures and equipment of every kind and description which shall be annexed thereto or in any manner become a part thereof * * *." The tax collectible on any one article is limited to $15.
None of the parts purchased and upon which a tax was levied come within the exceptive provision contained in G.S. § 105-187, and, so far as the record discloses, no single part cost in excess of $500. Likewise, there is no suggestion that the plaintiff purchased four radio towers erected and standing in Iowa which were disassembled merely for the purpose of shipment. While the parts were fabricated for use in the erection of radio towers, they were first actually assembled and joined together in the form of towers after they reached Wilson and were delivered to plaintiff by the carrier. So then, if the fabricated parts constituted building material *509 for use in building or erecting a "structure" as that term is used in G.S. § 105-187, plaintiff was liable for the tax assessed and collected and was not entitled to recover any part thereof.
A "structure" is "something constructed or built." Webster's New Int. Dic., 2nd ed.; Jefferson Davis County v. Riley, 158 Miss. 473, 130 So. 283; Brown v. City of Decatur, 188 Ill.App. 147, 151; that which is built or constructed; an edifice or a building of any kind; in the widest sense any product or piece of work artificially built up or composed of parts and joined together in some definite manner. Favro v. State, 39 Tex. Crim. 452, 46 S.W. 932, 73 Am. St. Rep. 950; Paye v. City of Grosse Pointe, 279 Mich. 254, 271 N.W. 826.
"Building" and "structure" are synonymous. They agree in meaning but differ slightly in application. "Structure" retains more frequently than the other the sense of something constructed, often in a particular way. Webster's Dic. of Synonyms.
That a radio tower comes within the accepted definition of the term "structure" would seem to be beyond question. In applying G.S. § 105-187, we must accord the ordinary words used therein their natural, approved, and recognized meaning. Victory Cab Co. v. City of Charlotte, 234 N.C. 572, 68 S.E.2d 433. This being true, we are constrained to conclude that the fabricated parts purchased by plaintiff for the erection of radio towers constituted building material within the meaning of that statute. That the parts, singly or in combinations less than are required for the erection of a tower, were practically worthless is not material. The purchase price is the yardstick by which the tax due is to be measured.
The contention that the tax imposed constitutes a burden on interstate commerce is without merit. At the time the tax was assessable, the property had reached the end of its interstate transportation and had come to rest in this State. It then formed a part of the common mass of property within this State. It was purchased for use as building material and its purchase for such use within this State was taxable under the provisions of the Statute. G.S. § 105-187; Johnston v. Gill, Com'r of Revenue, 224 N.C. 638, 32 S.E.2d 30; Powell v. Maxwell, Com'r of Revenue, 210 N.C. 211, 186 S.E. 326; Henneford v. Silas Mason Co., 300 U.S. 577, 57 S. Ct. 524, 81 L. Ed. 814; Monamotor Oil Co. v. Johnson, 292 U.S. 86, 54 S. Ct. 575, 78 L. Ed. 1141; McLeod v. J. E. Dilworth Co., 322 U.S. 327, 64 S. Ct. 1023, 88 L. Ed. 1304. See also Helson & Randolph v. Kentucky, 279 U.S. 245, 49 S. Ct. 279, 73 L. Ed. 683.
It follows, therefore, that the court below erred in rendering judgment in favor of plaintiff on its first cause of action and the judgment in that respect must be reversed.
Second Cause of Action.
G.S. § 105-220 reads in part as follows:
"An excise tax is hereby levied and imposed on the storage, use, or consumption in this state of tangible personal property purchased from a retailer within or without this state * * * for storage use or consumption in this state at the rate of three per cent of the sales price of such property, regardless of whether said retailer is or is not engaged in business in this state.
* * * * * *
"Every person storing, using or otherwise consuming in this state tangible personal property purchased or received from a retailer * * * shall be liable for the tax imposed by this article * * *".
The statute, in G.S. § 105-219, defines the material terms used in the foregoing section.
"(a) `Storage' means and includes any keeping or retention of possession * * * for any purpose except sale in the regular course of business of tangible personal property purchased from a retailer.
"(b) `Use' means and includes the exercise of any right or power or dominion whatsoever over tangible personal property by a purchaser thereof and includes * * any * * * exhaustion or consumption of tangible personal property by the owner or purchaser thereof * * *.
*510 "(c) The word `sale' or `selling' shall mean any transfer of title or possession, or both, exchange, or barter of tangible personal property, conditional or otherwise * * * for a consideration paid or to be paid * * * and shall include any of said transactions whereby title or ownership is * * * to pass * * * and shall further mean and include any bailment, loan, lease, rental or license to use or consume tangible personal property for a consideration paid * * * in which possession of said property passes to the bailee, borrower, lessee, or licensee * * *.
"(d) `Purchase' means the buying of, giving an order for * * * tangible personal property as a result of which there occurs a sale or delivery of tangible personal property by a retailer to a person for the purpose of storage, use, or consumption in this state * * *.
"(g) `Retailer' means and includes every person engaged in the business of making sales of tangible personal property * * for storage, use or consumption in this state, and every manufacturer, producer, or contractor engaged in business in this state and selling * * * tangible personal property for use in this state * * *.
"(i) `Tangible personal property' means personal property which may be seen, weighed, measured, felt, touched, or is in any other manner perceptible to the senses * * *".
To these definitions contained in the statute we may add that an "excise tax" is a tax levied upon the sale or consumption of personal property. Callaghan, Cyc. Law Dic., 2d ed.; Webster's New Int. Dic., 2d ed. A use tax is a tax on the enjoyment of that which was purchased. McLeod v. J. E. Dilworth Co., supra.
Thus it appears no excise tax is assessable under the terms of G.S. § 105-220 unless there has been (1) a purchase of tangible personal property, (2) from a retailer (3) for storage, use or consumption within this State; and (4) title to or possession of such property passes from the "retailer" to the "purchaser." Johnston v. Gill, Com'r of Revenue, supra.
The mere statement of the essentials of a taxable transaction under this section would seem to make it apparent that the contracts between plaintiff and lessors of transcriptions for rebroadcasting do not come within the terms of the statute.
The lessors are not retailers. They are merely distributors of transcriptions for rebroadcasting. Nor is the plaintiff the purchaser of tangible personal property. It merely purchases the right to rebroadcast the program, speech, or discussion recorded on a transcription tape or record. In order that it may make use of its purchase, it is accorded temporary custody of the recordings necessary to that end. Neither title to nor possession of tangible personal property passes to it.
"Custody" and "possession" are not convertible terms. Boatright v. State, 121 Tex. Cr.R. 578, 51 S.W.2d 311.
By possession is meant that by which one can exercise his power over property at his pleasure to the exclusion of all others. Gilkerson-Sloss Commission Co. v. London, 53 Ark. 88, 13 S.W. 513, 7 L.R.A. 403. "Possession" means simply the owning or having a thing in one's possession and implies the present right to deal with property at pleasure and exclude others from meddling with it. State v. Danser, 105 W. Va. 495, 144 S.E. 295. Personal property is in the "possession" of a person when it is in his custody and control and subject to his disposition. State v. Jones, 213 N.C. 640, 197 S.E. 152.
But defendant leans heavily upon that part of the definition of "sale" contained in G.S. § 105-219(c) which reads as follows: "and shall further mean and include any bailment, loan, lease, rental or license to use or consume tangible personal property for a consideration paid * * * in which possession of said property passes to the bailee, borrower, lessee, or licensee". This provision, however, may not be lifted out of its context so as to universalize its meaning. A word or phrase or clause or sentence may vary greatly in color and meaning according to the circumstances of its use. Towne v. Eisner, 245 U.S. 418, 38 S. Ct. 158, 62 L. Ed. 372. It is *511 axiomatic, therefore, that a provision in a statute must be construed as a part of the composite whole and must be accorded only that meaning which other modifying provisions and the clear intent and purpose of the act will permit. Its meaning must sound a harmoniousnot a discordantnote in the general tenor of the law.
The purpose of this extension of the ordinary meaning of the word "sale" is apparent. It is intended to plug a possible loophole in the statute by preventing a retailer from evading the provisions of the act by camouflaging a sale under the label of bailment, loan, lease, or like term when it is intended that in fact both the use and the possession shall pass to the bailee, borrower, lessee, or licensee. It is not sufficient to embrace the transactions here in question.
Our sales tax statute, G.S. Ch. 105, Art. 5, levies a tax upon the sale of tangible personal property in this State by a "retail" merchant as a privilege tax for engaging or continuing in the business of a retail merchant. The compensating use tax, G.S. Ch. 105, Art. 8, here under consideration, levies a tax upon the storage, use, or consumption within this State of tangible personal property which has been purchased by a local resident from a retailer. Its purpose is to remove, insofar as possible, the discrimination against local merchants resulting from the imposition of a sales tax, and to equalize the burden of the tax on property sold locally and that purchased without the State. Johnston v. Gill, Com'r of Revenue, supra.
The intent runs throughout both statutes, which are merely separate divisions of the same revenue law, that the tax shall be assessed upon the basis of the consideration paid in transactions between retailers and consumers in which dominion over, possession of, or title to tangible personal property is acquired by the "purchaser." The only difference is that in the first the tax is upon the sale, and in the second it is upon the enjoyment of the thing purchased.
The legislative intent is the essence of the law and the guiding star in the interpretation thereof. 50 A.J. 200; Mullen v. Town of Louisburg, 225 N.C. 53, 33 S.E.2d 484; Midkiff v. North Carolina Grannite Corp., N.C., 69 S.E.2d 166 and cases cited.
"Few words are so plain that the context or the occasion is without capacity to enlarge or narrow their extension." Crawford, Stat.Constr. 276, sec. 174; Mullen v. Town of Louisburg, supra. Such is the case here. The words "bailment", "loan", "lease", "rental", and "license", as used in the definition of "sale", must be so construed as to harmonize with the other provisions of the statute and conform to the clear intent of the Legislature.
While it is true one of the most significant aids to construction in determining the meaning of a revenue law is the interpretation given such act by the administrative agency charged with its enforcement, the rule has no application here. This for the reason the rule is invoked only when ambiguity exists. Under no circumstances will the courts follow an administrative interpretation in direct conflict with the clear intent and purpose of the act under consideration. Crawford, Stat. Constr. 397 (see cases cited in note); Sutherland, Stat.Constr., 3rd ed. 310; Gill v. Board of Commissioners, 160 N.C. 176, 76 S.E. 203, 43 L.R.A.,N.S., 293; Charlotte Coca-Cola Bottling Co. v. Shaw, Com'r of Revenue, 232 N.C. 307, 59 S.E.2d 819.
"It is only in cases of doubt or ambiguity that the courts may allow themselves to be guided or influenced by an executive construction of a statute. If the words of the law are clear and precise, and the true meaning evident on the face of the enactment, there is no room for construction." Black, Interpretation of Laws, 2nd ed. 305, 50 A.J. 204. And this is true no matter how long the administrative construction has been followed. Louisville & N. R. Co. v. United States, 282 U.S. 740, 51 S. Ct. 297, 75 L. Ed. 672.
Tax statutes are to be strictly construed against the State and in favor of the taxpayer. State v. Campbell, 223 N.C. 828, 28 S.E.2d 499; Sabine v. Gill, Com'r of Revenue, 229 N.C. 599, 51 S.E.2d 1; Henderson v. Gill, Com'r of Revenue, 229 N.C. *512 313, 49 S.E.2d 754; 3 Sutherland, Stat. Constr., 3rd ed., 293.
"In the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the government, and in favor of the citizen." Gould v. Gould, 245 U.S. 151, 38 S. Ct. 53, 62 L. Ed. 211.
The language used in G.S. § 105-220 and related sections of our sales and use tax act, when so construed, compels the conclusion that the court below erred in sustaining the tax levied against the total cost to plaintiff of the right to broadcast transcriptions furnished it under contract as set forth in its second cause of action.
We have examined the decisions cited by defendant to which we have made no specific reference. None of them are sufficiently pertinent to the question here presented to require discussion.
The judgment entered in the court below on each cause of action must be
Reversed.