Samper v. Indiana Department of State Revenue

*53DISSENTING OPINION

Emmert, J.

We should be very careful that we do not stretch the tax laws by implication to tax gross income at a higher rate than the law prescribes, since it is perfectly ethical and proper for any taxpayer to avoid higher tax rates if he can conduct his business so a lower rate applies. The evasion of taxes justly due under a statute is a wrong done the government, but it should be noted, and always remembered, that it is just as immoral and evil for the sovereign, acting through its tax agents, to extract money not due in the guise of taxes from one of its citizens, as it would be for the taxpayer by fraud and deceit to seek to evade taxes he justly owes to his sovereign. See Bullen v. Wisconsin (1916), 240 U. S. 625, 630, 631, 36 S. Ct. 473, 60 L. Ed. 830, 835; Superior Oil Co. v. Mississippi ex rel. Knox (1930), 280 U. S. 390, 50 S. Ct. 169, 74 L. Ed. 504.1

“We said recently with reference to another section of the Gross Income Tax Act of 1933 that ‘in case of doubt such statutes are to be construed more strongly against the state and in favor of the citizen.’ Department of Treasury v. Muessel (1941), 218 Ind. 250, 32 N. E. (2d) 596.” Oster v. Department of Treasury (1941), 219 Ind. 313, 317, 37 N. E. 2d 528.

The tax rate under the Gross Income Tax statutes depends upon the transaction by which the gross in*54come is received by the taxpayer. “In Storen v. J. D. Adams Mfg. Co. (1937), 212 Ind. 343, 348, 7 N. E. (2d) 941 (rev’d on other grounds, 304 U. S. 307, 58 S. Ct. 913, 82 L. Ed. 1365), it was said that ‘the rate does not depend upon the business in which the taxpayer is primarily engaged, but upon the activity from which each item of his gross income is received.’ ” Oster v. Department of Treasury (1941), 219 Ind. 313, 318, 37 N. E. 2d 528, supra. See also Freeman v. Hewit (1946), 329 U. S. 249, 67 S. Ct. 274, 91 L. Ed. 265. If an item of this transaction here under inquiry is a sale at retail, I cannot escape the conclusion that the appellant is entitled to one-half (I/2) of one (1) per cent rate as prescribed by §64-2603 (c), Burns’ 1951 Replacement, which provides:

“(c) With respect to that part of the gross income of every person who is a retail merchant as defined in this act which is received from selling at retail, the tax shall be equal to one-half of one per cent [%%] of such part of the gross income.”

Clause (k) of §64-2601, Burns’ 1951 Replacement, provides:

“ (k) The term ‘retail merchant’ means and includes only a transaction by a ‘retail merchant’ by-which the ownership of tangible personal property is transferred, conditionally or otherwise, for a consideration, when such transfer is made in the ordinary course of the transferer’s regularly conducted business and at a fixed and established place of .business, and is acquired by the transferee for any other purpose than those designated by subsection (a) of sec. -3 [§64-2603] of this act.”

There is nothing in this definition in the Gross Income Tax Act which -is in conflict with the Uniform Sales Act. Section 58-101, Burns’ 195Í Replacement, even *55though the tax act does not call the “consideration” for the sale the “price.”2

Section 64-2604, Burns’ 1951 Replacement, evidences a clear legislative intent that the taxpayer shall have the benefit of any lower rate by classifying the items on which the lower rate applies. This section states:

“Any person receiving gross income taxable at different rates under the provisions of this act shall be subject to taxation upon his entire gross income at the highest rate applicable to any part of such gross income unless he shall segregate the parts of his gross income taxable at different rates upon his records and in the returns which he files pursuant to the provisions of this act. Such segregation shall be subject to the review of the department as hereinafter provided.”

The last sentence providing for review does not mean that the Gross Income Tax collectors have any right to change the law as enacted by the statutes, but only that the taxpayer’s classification is subject to correction if erroneous in fact under the law.

Appellant’s brief is deficient in its statement of so much of the evidence “as is necessary to present accurately and concisely a full understanding of the questions presented.” However, the appellees do not seek an affirmance of the judgment on this ground, but have set forth in their answer brief recital of the evidence concerning the nature of the transactions. Briefly stated, the question presented is, may a taxpayer, who does electrical repair work at a regularly established place of business, make his contracts with his customers so that he sells them at retail the parts neces*56sary to operate a radio and be taxed at one-half of one per cent [%%], which is the retail rate?

The question is one of great importance to hundreds of taxpayers who are now segregating the gross income received from the transfer of title to thousands of mechanical parts used in the repair of various items of machinery, accessories and mechanical devices. The custom and usage in billing the customer by separately itemizing parts as sales at retail from the labor charges is so general this court can properly take judicial notice thereof. 9 Wigmore, Evidence (3rd Ed.), §2580.

The record in this case discloses that the appellant separately itemized charges for parts from the labor involved in testing to determine the defective part and replacing the defective parts with new parts. The customers must be presumed to have contracted with the appellant according to his customary manner of doing business, and this court has no right to restrict his liberty of contract by saying he cannot do business that way. In Brunson v. Cromwell (1918), 134 Ark. 605, 204 S. W. 303, the operator of a threshing machine customarily took as toll one-tenth of the grain threshed by the farmers. In the years 1915 and 1916 under a special contract he charged the appellant ten cents per bushel. In 1917 there was no special contract, and the Supreme Court of Arkansas held the appellant, in the absence of a special contract, was bound by the customary toll charge. As stated in Steidtmann v. Joseph Lay Co. (1908), 234 Ill. 84, 88, 89, 84 N. E. 640, “A person entering into a contract in the ordinary course of business is presumed to have done so in reference to any existing general usage or custom relating to such business. (Collins Ice Cream Co. v. Stephens, 189 Ill. 200; Chisholm v. Beaman Machine *57Co., 160 id. 101; Leavitt v. Kennicott, supra.) And this is so whether he knew of the custom or not. (Samuels v. Oliver, 130 Ill. 73; Taylor v. Bailey, 169 id. 181; Lyon v. Culbertson, 83 id. 33; Doane v. Dunham, 79 id. 131; Bailey v. Bensley, 87 id. 556.) ” See also, 3 Williston, Contracts (Rev. Ed.) §661, p. 1902.

It does not require any expert on radios to know that radio tubes, coils, condensers and resistors could not themselves be economically or satisfactorily repaired by a radio repairman. Each of such new parts when required for a radio would fit any other radio of the same make and model just as well as the one being repaired. The only labor involved, after ascertaining the defective part, would be in inserting the new tube in its socket, or unsoldering a connection to the defective coil, condenser or resistor and resoldering the connection to the new part. The situation is entirely different than that involved for instance in the repair of a motor or generator which needs rewinding. The motor or generator is the same, and the defective part is the same with the exception of being rewound. Clearly the work involved in the repair of radios is totally unlike that involved in professional work such as done by a lawyer in drafting a complicated trust deed on paper worth but a few cents.3

*58In this appeal, the customers who came to appellant’s radio shop received a transfer of title to goods which went into their radios to make them operate satisfactorily. They were separately billed for these at retail prices as was appellant’s custom and usage of doing business. No labor was expended on any new part to make it usable nor was any old part repaired so it could be used again. The retail price for the parts was clearly stated on the receipt and guarantee given the customer. Title to the parts passed to the buyer for the named consideration, which is selling at retail under the clear terms of §64-2601 (k), Burns’ 1951 Eeplacement. We are not at liberty to say the appellant could not make his contracts in this manner to qualify as “selling at retail.” The exhibit set out in appellees’ answer brief shows the price for parts on a radio job as $8.00, and labor $2.00. The situation presented here is entirely different from the dry cleaning business, the enameling business, the bookbinding business, the optometry profession, or the repair of fur coats. There is nothing in the Gross Income Tax Act that' prevents any person from having in one contract provision for the sale of goods, wares and merchandise and another separate provision for labor with reference thereto. The consideration for the transfer of title to the goods was separately stated. This is all that is required to make the transfer of title to the goods a sale under the facts in this record. The appellant should have been allowed the tax rate of one-half of one per cent on the radio parts used *59to put the radios in operating condition. We are not giving the ■ appellant any remedy by “due course • of law” for “injury done to him in his.. . . property”4 when we, by judicial construction, nullify §64-2601 (k), Burns’ 1951 Replacement, and suggest his remedy is with the General Assembly. We take the statutes as we find them, and any taxpayer should have the right to rely on them as written, and make his contracts with his customers in any manner not forbidden by statute or public policy.

Note.—Reported in 106 N. E. 2d 797.

“We do not speak of evasion, because, when the law draws a line, a case is on one side of it or the other, and if on the safe side is none the worse legally that a party has availed himself to the full of what the law permits. When an act is condemned as an evasion, what is meant is that it is on the wrong side of the line indicated by the policy if not by the mere letter of the law.” Bullen v. Wisconsin (1916), 240 U. S. 625, 630, 631, 36 S. Ct. 473, 60 L. Ed. 830, 835.

“A sale of goods is an agreement whereby the seller transfers the property in goods to the buyer for a consideration called the price.” Section 58-101(2), Burns’ 1951 Replacement.

The distinction between professional services and mechanical labors involved in this appeal was well noted by the Supreme Court of Louisiana in State v. Cohn (1936), 184 La. 54, 58, 165 So. 449, in its definition of a profession, as follows: ‘“Very generally the term is employed as referring to a calling in which one professes to have acquired some special knowledge, used by way of instructing, guiding, or advising others or of serving them in some art; and employment, especially an employment requiring a learned education; an occupation that properly involves a liberal education or its equivalent and mental, rather than manual, labor, especially one of the three learned profes*58sions; any calling or occupation involving special mental and other attainments or special discipline, as editing, acting, engineering, authorship. The word implies professed attainments in special knowledge as distinguished from mere skill; intellectual skill as distinguished from that used in an occupation for the production or sale of commodities; . . ”

Section 12, Article 1, Indiana Constitution.