Undercofler v. v. F. W. Post 4625

Felton, Chief Judge,

concurring specially. The affidavits supporting the plaintiff in error’s motions for summary judgments show that one of the assessed items in one (VFW) case 'and the sole item in the other (American Legion) case was receipts from the operation of coin-operated gaming devices known as “slot machines,” or “one-armed bandits.”

Code Ann. § 92-3403a C(1) lists a number of specific transactions which the terms “retail sale” or a “sale at retail” include, but to which they are not limited, for the purpose of the Act. The plaintiff in error contends that the operation of these “slot machines” is a transaction which constitutes a “retail sale” or a “sale at retail,” hence making the receipts therefrom taxable, within the provision of subsection (c) of the above section; to wit: “Sales of tickets, fees or charges made for admission to or voluntary contributions made to places of amusement, sports, or entertainment, including billiard and pool rooms, bowling alleys, amusement devices, musical devices, theatres, opera houses, moving picture shows, vaudeville, amusement parks, athletic contests, including wrestling matches, prize fights, boxing and wrestling exhibitions, football and baseball games, skating rinks, race tracks, public bathing places, public dance halls or any other place at which any exhibition, display, amusement or entertainment is offered to the public or place or places where an admission fee is charged, together with charges made for the operation of coin-operated musical devices and other such coin-operated amusement devices and charges made for participation in games and amusement activities.” (Emphasis supplied.)

Although the above section is written with language which might appear to be sufficiently broad and general to include, by the application of the ejusdem generis rule, the operation of “slot machines,” there are other considerations involved besides the words in which the statute is couched. “General terms and expressions in the constitution, or in the statute providing for the collection of taxes, are never allowed their full literal import if the effect of such construction is to require that to be *720done which the law does not authorize, or to violate a fundamental principle upon which the government is founded and operated.” Penick v. Foster, 129 Ga. 217 (6) (58 SE 773, 12 LRA(NS) 1159, 12 AC 346). “It is a familiar rule of construction, where a statute is susceptible of two interpretations, that it should be construed in harmony with the general policy of the law, rather than against it.” Singleton v. Close, 130 Ga. 716, 720 (61 SE 722). In all interpretations, the courts must look diligently for the intention of the legislature. Code Ann. § 102-102 (9) and cases annotated thereunder. “While . . . statutes in pari materia may not be resorted to where the language of the statute under consideration is clear, it is equally as well settled that, where the terms of the statute to be construed are ambiguous or its significance is of a doubtful character, it becomes necessary to give proper consideration to other related statutes in order to ascertain the legislative intent in reference to the whole system of laws of which the doubtful statute is a part.” Ryan v. Commissioners of Chatham County, 203 Ga. 730, 732 (48 SE2d 86). The mere keeping of a slot machine constitutes a violation of our criminal law. Code § 26-6502; Miller v. State, 94 Ga. App. 259, 262 (2) (94 SE2d 120), and citations.

Keeping the foregoing principles of statutory construction in mind, what was the legislative intent regarding the taxability of the proceeds from illegal activities, specifically “slot machines,” under the State’s Sales and Use Tax Act? Although the statute provides that the enumerated transactions are not inclusive of all those encompassed by the Act, an examination of the whole list reveals that all of the specified transactions are of a legal or lawful nature. Applying the restrictive rule of ejusdem generis, therefore, the general words, “other such coin-operated amusement devices, etc.,” are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words, i.e., those of a legal or lawful nature. Aside from this technical, though valid, verbal analysis method of determining the legislative intent, however, it can be shown that the construction urged by the plaintiff in error is inconsistent with public policy and our whole system of law. *721As has already been stated, the maintaining of “slot machines” is a criminal offense in this State. The Georgia Supreme Court has held that where a particular activity (in that particular case a “bucket shop,” or gaming-house) has been prohibited by a criminal statute, yet if the legislature subsequently imposes a license tax upon that activity, those who engage in it after paying the required tax are exempt from prosecution and punishment for a penal offense. Miller & Co. v. Shropshire, 124 Ga. 829, 831 (53 SE 335, 4 AC 574). We recognize the distinction between a license tax, which is a prerequisite for carrying on a business, and a tax purely for revenue purposes. While it is true that sales tax enactments are considered primarily revenue measures, 47 Am. Jur. 216, Sales and Use Taxes, § 14, this court has held that they are also in the nature of license and occupation or excise taxes. Williams v. General Finance Corp., 98 Ga. App. 31, 34 (1a) (104 SE2d 649). The term “license tax” is sufficiently broad to include both a charge imposed under the police power for the privilege of obtaining a license to conduct a particular business, and a tax imposed upon a business for the sole purpose of raising revenue, every “license tax” being imposed for one purpose or the other, or both. City of Waycross v. Bell, 169 Ga. 57 (149 SE 641). The term “license tax” may be defined as a sum exacted for the privilege of carrying on a particular occupation. City of Waycross v. Bell, p. 62, supra. Thus, the Sales and Use Tax Act, though primarily a revenue measure, was a license tax measure in the sense that it recognized the legality of the class of transactions, some of which were specifically named, and thereby sanctioned their continued operation. Under the authority of the Miller case, supra, the inclusion as a taxable transaction of the illegal activity of maintaining “slot machines” would impliedly repeal the statute making the activity a criminal offense. Such an intention can not, under the circumstances, be imputed to the General Assembly. Repeals by implication are not favored by the law. Central of Ga. R. Co. v. Leonard, 49 Ga. App. 689, 698 (176 SE 137), and cit. Such a construction would cast the legislature in the indefensible role in which, on the one hand, it declares an activity to be illegal, hence against the public *722policy of the State and not to be condoned, while, on the other hand, it takes cognizance of the illegal activity and attempts to exact revenue for the privilege of carrying on that activity with impunity in the face of an existing and valid, yet unenforced, statute.

It is contended that the taxability of profits from illegal activities under our Sales and Use Tax is supported by the policy of the Federal Government, upheld by numerous court decisions, of taxing, under the income tax statutes, gains or profits from such illegal activities as traffic in illicit liquor, race track bookmaking, card playing, unlawful insurance policies, making of illegal prize fight pictures, lotteries, graft, extortion, fraud, embezzlement, prostitution and the misapplication by an attorney of his client’s money. See Mertens, Law of Federal Income Taxation, §§ 4.11, 6A13, and cases cited therein. This policy is neither applicable nor binding in the case of a sales and use tax, such as is now under consideration, because of (1) the difference in the constitutional and statutory authorities for the two forms of taxes, and (2) the distinction between the natures of the two taxes. The 16th Amendment to the United States Constitution provides: “The Congress shall have power to lay and collect taxes on income, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” (Emphasis supplied.) Justice Holmes, in U.S. v. Sullivan, 274 U.S. 259 (47 SC 607, 71 LE 1037), a case frequently cited in subsequent similar cases, pointed out that the Internal Revenue Act, § 213(a), which implemented the 16th Amendment, defines gross income as “gains, profits, and income derived from . . . the transaction of any business carried on for gain or profit, or gains or profit and income derived from any source whatever.” It was noted in Rutkin v. U.S., 343 U.S. 130 (72 SC 571, 96 LE 833), that § 11 B of the Income Tax Act of 1913 had specified “lawful” business, but that in 1916 this was amended by omitting the one word “lawful,” with the obvious intent thereafter to tax unlawful as well as lawful income, i.e., “from whatever source derived,” as provided by the 16th Amendment. The Supreme Court has upheld the power of Congress to exercise its taxing *723power to restrict or suppress an illegal activity, with the revenue purpose of the tax being secondary. United States v. Sanchez, 340 U.S. 42 (71 SC 108, 95 LE 47). In that case, however, the taxes were allowed under the Marihuana Tax Act, 26 USCA § 2590 (a) (2), the purpose of which, in addition to the raising of revenue, was to “render extremely difficult the acquisition of marihuana by persons who desire it for illicit uses.” S. Rep. No. 900, 75th Cong. 1st Sess. p. 3. To the same effect, see HR Rep. No. 792, 75th Cong. 1st Sess. p. 2. Of course, the Federal Government is one of limited powers—limited to only those powers given it by the Federal Constitution, whereas the State Governments have the sovereignty (or whatever is left of it) to exercise such powers as are not granted to the Federal Government. These powers include the power of taxation and since the Federal Government has not preempted the taxing of illegal activities, there is no reason why the States should be unable to do so. Art. VII, Sec. I, Par. I of the Georgia Constitution of 1945 provides that the right of taxation is a sovereign right belonging to the people, and that the General Assembly shall not have the authority to irrevocably limit this right. Although we are holding that the construction in pari materia of the statute making slot machines illegal and the statute levying a sales and use tax on a certain class of transactions results in a limitation of the incidence of the taxing, this does not mean that this is an irrevocable limitation, or that the General Assembly could not extend the taxing power to illegal activities. In other words, we are not ruling on the constitutionality of the tax statute nor denying that the legislature could tax illegal transactions if it saw fit, but are merely holding that the legislature had no such intention in its passage of this Act.

The other difference between the income tax and the sales and use tax lies in the nature of the two taxes. The incidence of the income tax is solely upon income already realized, hence it is retroactive in its operation. The income tax law does not necessarily approve or condone the activity which has produced the gain or profit, but says, in effect, that merely because the business is unlawful is no reason to exempt it from carrying its share of the burden by paying the taxes that if lawful it would *724have to pay, as was expressed by Mr. Justice Holmes in U.S. v. Sullivan, 274 U.S. 259, supra. The incidence of the sales and use tax, on the other hand, is upon a more limited and delineated class of transactions, and is more prospective in its operation. In other words, rather than providing merely for taxation of transactions which may have been “one shot operations” and may be terminated at the time they are reported, the sales and use tax contemplates taxation of a “going concern”—a continuing operation which has been defined as specifically as is possible in a statute without enumerating every conceivable transaction covered. To construe this Act so as to include illegal activities would give the State a financial interest in perpetuating a criminal activity by taking the relatively small (3%) proportion of the taxpayer’s illegally obtained profits in exchange for not only permitting the continued operation of the illicit activity but also encouraging it by allowing the taxpayer to retain the lion’s share (97%) of the proceeds. It seems apparent that such a policy would quickly undermine the effectiveness of and respect for our criminal statutes. The fact that the operation of bingo and other gambling devices has not been allowed by the legislature in this State, even for the benefit of churches and other charitable organizations, is a good indication that it is against our public policy. It is to be deplored that such laws are not as well enforced as criminal statutes ought to be due to such a lack of public support that the very tenure of the jobs of the enforcing officers is oftentimes jeopardized by their attempts at enforcement. Nevertheless, we do not think that the General Assembly was so inconsistent as to define the public policy then proceed to fill the public coffers with the illicit proceeds of the activity declared to be contrary to public policy. It follows that the Revenue Commissioner stepped beyond his authority in assessing this tax as much as he would have if he assessed a sales tax on a real estate sale.

If the Sales and Use Tax Act or any other law required the agents of the Revenue Department to confiscate gambling machines immediately upon discovery, so as to show an intent not to authorize a collection of taxes on future income from gambling machines, we would have some basis for a contrary ruling in *725this case. But there is no such requirement for confiscation, and the State is now collecting sales tax from the machines operated by the taxpayers in this case as is admitted by all parties.

It follows from the above that the court did not err in granting the summary judgments in favor of defendant in error American Legion Post 69, the assessment against which was based solely on the proceeds from “slot machines,” and in favor of defendant in error Veterans of Foreign Wars Post 4625, the non-itemized assessment against which was comprised partially of proceeds from “slot machines,” a non-taxable transaction, and partially of proceeds from the sale of foods, a taxable transaction, in which the assessment showed one lump sum and did not separate the amount of the legal assessment from the illegal.

It is possible that my views should be classified as a dissent in view of the lack of jurisdiction on the part of the Commissioner but the result is the same.

Ebeirhardt, Judge.

We are in full accord with Headnote 1 and Division 1 of the opinion, which is determinative of the issues before us. Since the assessments in question were invalid for the reason stated, the matter of the jurisdiction of the Revenue Commissioner to make the original assessments, which have been canceled or abated, is not before us. What is said, therefore, in Headnote 2 and Division 2 of the opinion, as well as what is said in the special concurring opinion of Chief Judge Felton is obiter.

I am authorized to say that Presiding Judge Bell, and Judges Jordan, Hall and Russell concur in this statement.