dissenting. In Ferguson v. Cook, 215 Ark. 373, 220 S.W.2d 808 (1949), a dealer in cemetery monuments reported to the tax authority only 50% of the gross proceeds of each sale because he attributed the other 50% to labor expended in the erection of the monuments. The case was tried on stipulations, and there was no evidence as to what might actually have been attributable to labor expended in the erection of monuments or in the creation of the monuments, engraving, etc. In that circumstance, we held the entire amounts taxable. The result in the Ferguson case also seems contrary to a statement of general principle written by Justice Frank G. Smith in that opinion, a statement with which I totally agree, as follows:
This language appears to mean, and we so construe it, that where one sells an article in the preparation of which for sale he has expended labor, which adds to its value and was necessary to make it salable, he must pay the sales tax on the price received, without deduction for the value of the labor performed.
Ark. Code Ann. § 26-52-103(a)(2)(E) (Supp. 1995) provides that “ ‘sale’ shall not include the furnishing or rendering of services, except as otherwise provided in this section.” Section 26-52-103(a)(4), in pertinent part provides:
“Gross receipts” or “gross proceeds” means the total amount of consideration for the sale of tangible personal property and such services are herein specifically provided for, whether the consideration is in money or otherwise, without deduction on account of the cost of the properties sold, labor services performed, interest paid, losses or any expenses whatsoever.
The confusion caused by the outset provision that a “sale” does not include services followed by a definition of “gross proceeds” which includes “labor services performed” has resulted in uncertainty and in conflicting decisions. For example, Ragland v. Meadowbrook Country Club, 300 Ark. 164, 777 S.W.2d 852 (1989), we held that the sale of food and beverages did not include the 15% “gratuity” included in the price to the customer for service. We distinguished Belvedere Sand & Gravel Co. v. Heath, 259 Ark. 767, 536 S.W.2d 312 (1976), in which we held taxable the total amount charged to customers by a sand and gravel company for its products, including the labor supplied to the taxpayer company by a contractor for delivery to its customer. Our distinction between the cases seemed to be that the “gratuity” in the Ragland case was added to the cost of the food and beverages after the sale whereas the delivery cost of the sand or gravel in the Belvedere case was somehow more integral to the sale. That is a distinction without a difference.
We are on the wrong track, and we have been on it since the decision in the Ferguson case. It is obvious to me that the General Assembly intended that any service which goes into the creation of an item for sale and indeed adds to its value should be taxable. In view, however, of the general statutory definition of “sale,” which excludes services, services ancillary to a sale should not be included. Such an interpretation would be consistent with what Justice Smith said in the Ferguson case, albeit probably not consistent with the result reached there.
The unreasonableness of the interpretation given by the majority opinion, and its portent for continued uncertainty in this area, is underlined by the parties’ apparent agreement that we will allow a taxpayer to avoid the tax on such services if they are “separately stated” in the bill to the customer. The majority opinion states, “Since the non-taxable service was included as part of the total consideration received from the rental of the portable toilets, the charge for services constitutes part of the gross proceeds, and the entire proceeds are subject to taxation.” That suggests a merchant can avoid taxation on services if they are billed separately from the charge for the item sold, regardless whether the services helped create the value of the item or were ancillary to the sale. Surely that cannot be the intent of the General Assembly. If services ancillary to a sale are to be taxed, the General Assembly could clearly say so. In the absence of such statutory language we should not permit the gross receipts tax on sales to be applied to such services.
I respectfully dissent.
Corbin, J., joins in this dissent.