Colonial Pipeline Co. v. Undercofler

Bell, Presiding Judge.

Code Ann. § 92-3402a (b) provides that upon the first instance of use within this state of tangible *60personal property purchased at retail outside this state, the owner or user of the property shall be liable for a tax of three percent of cost price or fair market value of the property, whichever is the lesser. Code Ann. § 92-3405a provides that the owner or user shall pay the tax imposed by Code Ann. § 92-3402a (b) the same as if the property had been sold at retail in this state. The effect of Code Ann. § 92-3405a is to require as far as practicable that the application of the tax upon use (Code Ann. § 92-3402a (b)) of tangible personal property purchased outside the state shall be consistent with the application of the tax upon sales (Code Ann. § 92-3402a (a)) of tangible personal property at retail inside the state.

It follows that the term “cost price,” as used in Code Ann. § 92-3402a (b) and as defined in Code Ann. § 92-3403a (F) for purposes of the use tax, may be taken as synonymous with the term “sales price,” as defined in Code Ann. § 92-3403a (E) insofar as “sales price” relates to the sale of tangible personal property rather than to the sale of services. “ ‘Sales price’ means the total amount for which tangible personal property [is sold] . . . including any services that are a part of the sale . . . without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever. . .” Code Ann. § 92-3403a (E). Thus, where the instate or out-of-state vendor furnishes services incidental to the sale of tangible personal property, such as delivery to the purchaser, and no additional charge is made for the services so as to constitute a separate sale of services, the services are included in the “sales price,” or “cost price,” of the property for the purpose of computing the applicable sales or use tax.

The purpose of Code Ann. § 92-3403a (C) (2) (j), which provides that the term “sale at retail” shall not include “charges made for the transportation of tangible personal property,” is merely to exclude the sale of such services from the application of the sales tax. The use tax imposed by Code Ann. § 92-3402a (b) does not apply to sales of services, irrespective of Code Ann. § 92-3403a (C) (2) (j) and similar exclusions from the sales tax. Thus, Code Ann. § 92-3403a (C) (2) (j) is not relevant to this case.

*61Where the vendor of tangible personal property purchased at retail outside this state makes an additional charge for the delivery of the property to Georgia and the vendor and taxpayer contract with reference to this additional charge, this constitutes a separate sale of services. The use tax, since it does not in any event apply to sales of services, is inapplicable. Under these circumstances the services are rendered in connection with the sale of tangible personal property, but the services are not “a part of the sale” so as to be included in “sales price,” or “cost price,” for the purpose of computing the use tax.

To the extent that the steel companies assumed the expense of transportation of the property without charging taxpayer an additional amount for delivery, the service of delivery was merely a part of the sale of the property and an element of cost price. In other words, to determine “cost price,” taxpayer could not deduct from the net price the cost of services unless there was an additional charge made for the services and the steel companies and taxpayer contracted with specific reference thereto.

However, if the steel companies and taxpayer contracted with the understanding that a specific amount of the net price was an additional charge to defray the expense of delivery, the agreement as to delivery of the property would in substance constitute a separate sale of services, and taxpayer would be entitled to deduct this amount from the net price in order to arrive at the “cost price” of the property for use tax purposes.

The “cost price” of the property involved in this case must be determined in the context of the transactions between the steel companies and taxpayer and specific terms of their agreements at the time of the purchases. The stipulations in the record in this case furnish little information as to the terms of these agreements.

Paragraphs 7, 8 and 9 of the stipulations show that $10,-308,968.41 was the mill value, or “undelivered” purchase price, of the property involved in this case. In order to arrive at a “delivered price,” the steel companies added $395,039.98 to the mill value. This surcharge obviously was added to defray the *62cost of transportation and other services involved in delivering the property from the mills to construction sites in Georgia.

However, while the stipulations show that the steel companies used these figures to arrive at the “delivered price” of the property, the stipulations fail to show whether or not the purchase contracts were made with specific reference to separate figures for “mill value” and the additional amount charged. Apparently the stipulations as to these figures are merely information of an agreement between taxpayer and the Commissioner with regard to the steel companies’ unilateral bookkeeping, and do not indicate specific terms of the purchase contracts between the steel companies and taxpayer. The stipulations show that the parties contracted with reference to a “delivered price” only.

Under these circumstances the taxpayer has failed to adduce evidence sufficient to rebut the prima facie correctness of the Commissioner’s assessment. Code Ann. § 92-3432a.

Judgment affirmed.

Jordan, J., concurs. Eberhardt, J., concurs specially.