Shelby County v. King

BROCK, Justice,

concurring.

I concur in the result reached in the opinion prepared by Mr. Special Justice Dyer but prefer to state my reasons separately.

This is an action to recover use taxes paid under protest by the plaintiff, Shelby County, Tennessee. Shelby County entered into separate contractual agreements with several contractors for the performance of services in the construction of the Shelby County Criminal Justice Complex. In each of these contracts, Shelby County agreed to indemnify the contractors for any taxes they might owe on account of the Tennessee sales and use tax provisions, T.C.A. § 67-3001 et seq., arising out of sales made *497to Shelby County relating to the construction of the complex. Eventually the Department of Revenue assessed a total of $45,560.94 in sales and use taxes against the contractors for varying periods of time between 1976 and 1979. The contractors did not pay this assessment and are not parties to this suit; but, Shelby County did pay the assessment, under protest, and instituted this action to recover the same.

The trial court dismissed Shelby County’s complaint on two grounds: (1) the plaintiff did not have standing to contest the assessment or seek recovery of the taxes paid under protest and (2) the complaint failed to state a cause of action upon which relief could be granted. In my opinion, the trial judge was correct on both counts and I would affirm his judgment.

I

Since the taxes here sought to be recovered were not assessed or levied against the plaintiff, Shelby County, it is without standing to contest the assessment or to recover the taxes. Shelby County paid the taxes, not because the assessment was against it, but because it had agreed to indemnify the contractors from the taxes. This being the case, under our decisions, Shelby County has no standing to maintain this action. In Brodbine v. Torrence, Tenn., 545 S.W.2d 743 (1977), the Court held that the plaintiffs, a class of retailers of liquor for on the premises consumption, could not challenge a tax levied against wholesalers for sales of liquor to the plaintiff class of retailers. We held that, although the plaintiffs bore the economic burden of the tax, they failed to state a cause of action since the statute on its face did not purport to levy a tax on retailers. In that case we said:

“Of course, plaintiff cannot have ‘refunded’ to him taxes he has not paid. And, to be considered the ‘taxpayer’ it is not enough to show that in the course of business the economic burden of the tax was passed on to him by the true taxpayer; he must show that the taxing statute, in terms, imposes the tax upon him and creates obligations owing by him to the taxing authority (citations omitted).” 545 S.W.2d at 744.

In W. L. Hailey Company, Inc. v. King (unreported, 1965), we considered a case quite similar to the case at bar. In Hailey the Metropolitan Government of Nashville and Davidson County contracted with the plaintiff for the laying of sewer and water pipe. The plaintiff contractor sued to recover sales and use taxes paid under protest, and, in the alternative, to recover the same from Metro as required by the contract between Metro and the plaintiff contractor. Metro challenged the constitutionality of the taxing statute, T.C.A. § 67-3004. This Court held, however, that “this statute does not purport to levy a tax on defendant [Metro]. Such being the case, defendant has no standing to raise this question. The only liability of defendant, if any, is under contracts entered into with complainant [contractor].”

II

I am also of the opinion that the complaint fails to state a cause of action. The plaintiff’s theory is that because the use taxes assessed under T.C.A., § 67 — 3004(b), were based upon sales made to the County of Shelby, they should be held to be exempt under the provisions of T.C.A., § 67-3012, which provided, prior to 1979, that “all sales made to the State of Tennessee or any county or municipality within the state” were exempt.

In United States v. Boyd, 211 Tenn. 139, 363 S.W.2d 193 (1962), this Court held that T.C.A., § 67-3012, does not create an exemption from use taxes on contractors using materials that were sold directly from the supplier to the state; it merely exempted the transaction from sales tax. The plaintiff contends, however, that T.C.A., § 67-3012, was amended in 1978 to provide that the exemption also extended to use taxes as well as sales taxes in the circumstances existing in this case. A reading of the language of T.C.A. § 67-3012, as it appeared in the 1979 Code Supplement [see T.C.A. § 67 — 3012(1) (supplement 1980)] does *498appear to exempt property sold to the state, county or municipality from use taxes as well as sales taxes. This change, however, is apparently the result of an inadvertence of the Code Commission, since no public act in 1978 authorized such a change in the wording of T.C.A., § 67-3012. The Code Commission has the authority to “rearrange, regroup and renumber the titles, chapters, sections and parts of sections” of the Code, but it does not have the authority to change the “sense, meaning or effect” of any act. T.C.A., § 1-1-108. The result is that the apparent change in T.C.A., § 67-3012, purporting to extend the exemption to use taxes as well as the sales taxes is wholly ineffectual so that the pre-1979 interpretation of that Code Section as made by this Court in United States v. Boyd, supra, is still valid. Accordingly the use taxes here involved were not exempt because the personal property used by the contractor was sold directly to Shelby County.

For the above reasons, I concur in the result reached by the majority opinion and would affirm the judgment of the circuit judge.