Calvert v. Canteen Company

SMITH, Justice.

I respectfully dissent. The Court has failed to follow the basic rules governing the construction of statutes in holding that the retailer is liable for the tax. The Court bases such holding on its construction of Article 20.05(B) only, rather than giving effect to all of the language of the statute. The Court has, in effect, stricken from the Act the clear and precise language of Article 20.02(A) which provides that the tax is to be paid by and collected from the consumer, and that there “shall be” no tax and no tax “shall be collected” on retail sales of property costing one cent (1‡) to twenty-four (24‡).

The construction adopted by the Court fails to take into consideration the fact that Article 20.02(A) deals with imposition of the tax, levying of the tax, rate of the tax, collection of the tax, and subject matter of the tax, while Article 20.05(B) relates merely to the tax return and payment to the State of the tax required by Article 20.02(A). However, whether the two Articles deal with the same subject matter or not, Article 20.02(A) should be recognized as the controlling statute on the imposition, rate, levy, collection and subject matter of the sales tax. Admitting for the sake of argument that the general provisions of Article 20.05(B) are in conflict with the special provisions of Article 20.02 (A) dealing with the same subject, then the former would be controlled or limited by the latter.

It is my position, however, that the two statutes under consideration do not relate to the same subject matter. Thus construed, there is no conflict or inconsistency between the two Articles. They merely supplement one another and necessarily must be read together. Article 20.05(B), under the heading “Return and Payments,” uses the general language of “two per cent (2%) of all receipts from the total sales of such” property. On the other hand, Article 20.02(A) under the heading “Method of Collection and Rate of Tax,” uses the specific language as to rate of tax and collection of tax that “there shall be” “no tax and no tax” “shall be collected” on sales of one cent (1^) to twenty-four (24‡), and further that “[t]he tax hereby imposed shall be collected * * * from the consumer” Emphasis added.

The construction urged by the Comptroller, if adopted, necessarily causes a conflict in the statute. Such construction renders the statute inconsistent and ambiguous. The Court, in following the contention of the Comptroller, ignores the cardinal rule that a proper construction of a tax statute requires that any ambiguity, inconsistency or conflict in the statute must be strictly construed against the Comptroller and resolved in favor of the involved taxpayer. Texas Unemployment Compensation Commission v. Bass, 137 Tex. 1, 151 S.W.2d 567 (1941).

The question before this court does not involve an exemption from taxation. If it *560did, then the rules of liberal construction in favor of the taxing authority and strict construction against the one claiming the exemption would be applicable.

In the present case, the question is whether or not Canteen Company et al. come within the statutory provisions imposing the tax. In the Bass case [Carpenter v. Bass], supra, where the same question was involved, the Court of Civil Appeals, 142 S.W.2d 406, said:

“In such case, contrary to the rule relating to exemptions the applicable rule of construction is that the statute should be construed strictly against the taxing authority, and liberally in favor of one sought to1 be held liable for the tax. (Citing authorities)
“Under the operation of that rule if there be any ambiguity in the meaning of the word ‘controls’ as used in said (taxing statute) it is to be construed most strictly against the tax liability asserted, and, therefore, of course, most liberally in favor of non liability.”

The Sales Tax Act was passed originally by the 57th Legislature. That same Legislature, at its Third Called Session, passed a resolution requesting the Comptroller to rescind his order requiring all retailers collecting the tax to remit the tax to the Comptroller on the basis of two per cent (2%) of their total gross receipts from all sales of taxable tangible personal property. The resolution stated that as a matter of public policy it was the specific intent of the Legislature in enacting the:

“Limited Sales, Excise and Use Tar to exclude from the computation oi gross receipts from the sales of taxable personal property, those gross receipts, derived from the sale of any taxable item or article of tangible personal property having a value of twenty-four cents (24(⅜) or less; and * * * that the Comptroller of Public Accounts be requested to rescind his present interpretation of the * * * (Act) * * * which is in conflict with this declaration of public policy and that a new interpretation in accord with this declaration be issued. * * ⅜»

The courts are not necessarily compelled to accept such declarations of intentions, however, interpretations and constructions-placed on statutes by the same Legislature that passed the original statute are entitled to be given some weight by the courts. See First National Bank of Port Arthur v. City of Port Arthur, Tex.Civ.App. 35 S.W.2d 258 (1931).

The specific language of the Texas Sales Tax Act imposed a tax upon the incident or the transaction of a sale at retail of tangible personal property, and clearly provided that the tax imposed shall be collected by the retailer from the consumer. Therefore, it is not surprising that the Legislature advised the Comptroller through the above resolution that he was-in error in attempting to require the seller (retailer) to pay a sales.tax on his total gross sales in spite of the fact that the Texas Sales Tax Act clearly, precisely and unmistakably does not levy a tax on retail sales of one cent (1^) to twenty-four cents (24$S).

The law of averages theory adopted by the Court simply cannot be used to change the clear language of the statute. The-bracket-system formula can only be invoked to balance the impact of a tax that has been imposed. The case of Winslow-Spacarb, Inc. v. Evatt, 144 Ohio St. 471, 59 N.E.2d 924 (1955), had under consideration a taxing statute very similar tO' the Texas statute under consideration. In-that case, the Supreme Court of Ohio said r

“If Section 5546-12a were to be applied to such a vendor who collects no tax from the consumer, the vendor would be paying three per cent (3%) on his gross retail sales entirely out of his own pocket, while other vendors in' the same vicinity selling similar or *561other commodities, some of their sales being taxable and others not, would have the privilege and advantage of deducting ‘the amount of tax paid to the state by means of cancelling prepaid tax receipts,’ for which expenditure they have been reimbursed by the consumer, thus placing them in a more favored position and in some instances, at least, causing them to pay little or nothing. The result would be unfair discrimination among vendors, in violation of the equal protection clauses of Section 2, Article I of the Constitution of Ohio and the 14th Amendment to the Constitution of the United States.”

I can see no material distinction between the Ohio statute and the Texas statute. The Ohio statute, Gen.C. § 5546-2, provides that no tax should be collected on retail sales “[i]f the price is less than nine cents (90)” and the Texas statute provides that “there shall be” no tax and that no tax “shall be collected” on retail sales of twenty-four cents (24⅜⅝) and less.

Our court has failed to distinguish the nature or incidence of the Texas tax, which is a transaction tax upon the event of a retail sale, from a privilege, license or gross receipts tax levied upon the privilege of making retail sales. The Court’s failure to make the distinction is demonstrated in its reliance upon cases from other jurisdictions which are not in point. The case of Smoky Mountain Canteen Co. v. Kizer, 193 Tenn. 598, 247 S.W.2d 69, involved a statute which required a tax for the exercise of the privilege of engaging in the business of selling tangible personal property at retail in the state. The Act further provided that the tax was to be computed on gross sales for the purpose of remitting the amount of tax due to the state, and was to include each and every retail sale. In construing the statute, the Supreme Court of Tennessee said:

“The Tennessee Sales Tax is a levy upon the vendor. It is a tax upon the privilege of selling at retail, leasing or renting tangible personal property. The doing of any of these acts is declared to be a taxable privilege and the Sales Tax Act levies a tax thereon, the measure of which is on the gross proceeds derived by the retailer from’ the sale at retail, * * (Emphasis added)

Other cases upon which the Court relies are Piedmont Canteen Service, Inc. v. Johnson, 256 N.C. 155, 123 S.E.2d 582, and Stevens Enterprises, Inc. v. State Commission of Revenue and Taxation, 179 Kan. 696, 298 P.2d 326. The North Carolina and the Kansas statutes, like the Tennessee-statute, are each different from the Texas statute. These statutes clearly place the tax on the seller or retailer, whereas the Texas statute does not in any manner impose a tax upon the retailer. The Kansas statute, G.S.1951 Supp. 79-3603, for example, provides “ * * * for the privilege of engaging in the business of selling tangible personal property at retail in this state [Kansas].”

These cases have, no doubt, led this court to conclude that “[respondents are required to absorb the tax only because they have elected to sell items at a retail price less than the price provided for collectibility from the consumer.” This holding is entirely out of harmony with the Texas statute. The Texas statute contains no language which can be said to have reference to a “taxable privilege.” The statement of our court is in harmony with the theory that the retailer, in electing to sell items at a retail price less than the price provided for collectibility from the consumer, is exercising a privilege for which a tax is due by the retailer.

This court should also compare the bracket systems of the three states with that of Texas. The Tennessee “bracket system” is an administrative device adopted by the Tax Commissioner to permit the retailer “in so far as practicable” to pass the.tax on to the consumer, while the *562“bracket system” in the Texas statute is an integral part of the statute itself and by specific statutory language is the actual “Method of Collection and Rate of Tax” for each sale within the bracket. The Tennessee bracket is an administrative limited method of passing the retailer’s tax on to the consumer, while the Texas bracket is the statutory rate of the consumer's tax on each retail sale.

The North Carolina bracket system is an administrative device “for convenience of the retailer in collecting the tax.” The retailer has the burden of paying the privilege tax, however, with permission to pass on to the purchaser only a part of his tax liability, while the Texas bracket system is an integral part of the statute and is the actual statutory “Method of Collection and Rate of Tax” upon the consumer. The same is true as to the Kansas statute.

The case of White v. Washington, 49 Wash.2d 716, 306 P.2d 230, cited by the Court, is not in point. The Washington statute, RCW 82.08.060, is entirely different from the Texas statute. The Washington statute levied a statutory three per cent (3%) tax against the retailer, and then merely authorized the State Tax Commission to promulgate an administrative schedule or a bracket system “of the tax required to be collected by the seller from the buyer,” and the statute further specifies that the administrative methods adopted by the Commission were “to eliminate collections of fractions of one cent (⅛) and so as to provide that the aggregate collections of all taxes by the seller shall, insofar as practicable, equal the amount of the tax imposed by this chapter,” and further provided that “such schedules may provide that no tax need be collected from the buyer upon sales below a stated sum * * Thus, the bracket system under the Washington statute is clearly an administrative device adopted by the Tax Commission to permit the retailer to collect from the purchaser, as nearly as possible, the amount of tax levied against the retailer.

In view of the distinct difference between the tax statutes of other jurisdictions, except Ohio, and the Texas statutes, the cases construing the foreign statutes can be of little or no help to the Court in solving the question before this court. The well-established rules of statutory construction adopted by the courts of this state call for the conclusion that the tax, under Article 20.02(A), is imposed upon the consumer, not upon the retailer. A proper determination of whether the Texas statute levies a collectable tax against the retailer on sales between one cent (1‡) and twenty-four (24¾⅜) depends upon a proper interpretation of the specific language of the statute itself. In arriving at a proper interpretation of the statute, the specific language of Article 20.02(A) must be considered and not ignored.

The judgment of the Court of Civil Appeals should be affirmed.

GREENHILL, J., joins in this dissent.