950 WISEMAN, Commit. OF REV. V. GILLIOZ [192 WISEMAN, COMMISSIONER OF REVENUES V. GILLIOZ . 4-4403 Opinion delivered July 6, 1936. 1. TAXATION.—Under the terms of Acts 1935, ,p. 591, there must • be a sale, or no tax is imposed. 2. TAXATION—CONTRACTOR — SALES TAX.—Where a contractor entered into a contract with' a city by which he was to furnish the necessary material and construct a water plant for a definite sum, • there was a sale to the city of the material used by the contractor on which a sales tax is 'imposed by Acts of 1935, P. 591. 3.: CONSTITUTIONAL LAWIly1 pAIRMENT OF OBLIGATION OF . CONTRACTS. —Increasfng taxation . ,or adding new taxes. 'does not impair obli: gation of contract eniere d' into With city to cenAruct waterworks • Plant; sO: the sales tax aCt (ACts''1935; p. 591) . 'was 'held valid as against 'contention' "ifiat,:, as to contracts in existence when the statute was 'enacted, it impaired the,obligation thereof, since State's power, , of taxation. is, part of the , contract. ApPeal from Pulaski ChanCery Court; Frank H. Dgdge, ChancellOr ;''reVersed.• Carl E.. Bailey, Attorney General, arid 'Thomas Fitz-: kugh, Assistant; .. for aPpellant. . • . . • Hill, Fitzhugh . .•& Brialara, Mites, Armstrong & Y oung, Fadjo Craven:9 and Harry P.. Daily; for apPellees. MEHAFF Y. : J . ThiS 'action was begun by appellees, and appellees , state that the' f011oWing is a brief statement of the fact§ : "The city of Fort Smith has for' years been , in pós-session of and operating a nMniCipai Water plarit arid system.consisting of a ptinip station On the Paean River ; storage basins located .on , high tracts of land in the City, into which . the Poteau River water was pumped; arid 'a complete distribution systeM. It became necessary for the city to abandon the puinp station on the POteau River, due solely to the poor quality. of the Poteau River water. The storage basins and distribution 'system were' adequate. In order to secure' a neW and adequate supply of water; the city aCquired, and became ,the owner of, a perpetual right-of-way approximately twenty miles long, and some' 1,227 acres Of land in fee, and then entered into the three construction contracts for the improvement of its real estate.
AK.] WISEMAN, COMMR.. OF REV. v: GILLIOZ 951 i The . complaint alleges that the improvements in the aggregate really constitute one projeot and consisted generally of the following: the building of clay-earth dam on the eity's land with concrete wing wall and cutoff walls and a natural rock and concrete• spillway: The dam and spillway were built for the purpose of impounding :a large lake on the city's property.. Included in the improvement was the clearing and grubbing . of the lake site. Other improvements included iu the contracts and project were the building of a ,concreteintake tower in the lake above the dam, the building of concrete settling basins, stone and concrete filtration house, and clear water well on the city's land some distance below the dam, and the ConnectiOn of the concrete intake tower, by means of a • 27-inch . pipe line, with said settling basins, filtration liense, and clear water well, and the, connection of all of these, by means of a 27-inch Steel pipe line and caSt,iron Pipe line, with the present §torage basins , and diStribUtion sYstem of the city of Fort Sinith. The complaint alleges, and the 'demurrer adinits,' that all 'of said imprOVernents were made on and under the City's' land' and constituth permanent strUctures • thereon and thereto, and were Made pursuant to the' three '6:instruction ContractS iii-volved in this 'case." •The . complaint then allekes the separate contraets and what each.one was tO furni§h, or rather, what each contrador Undertook to dO under hi§ contract, and.t , h . e n . alleges : "That much of the material, used for the construction of this . project was earth,.clay and stone taken by the contractors from the' city's land. There was nO separate price to . be paid ty the 'City for any material Used by the contractors. The ; complaint alleges, and the demurrer admits, that the contractors entered into construction contracts for definite Slun g, by which they were .to furnish the material§ and labor 'and construct the improvements to the city's land.' The complaint further alleges that the appellant herein, .as Commissioner of Reii-enue of the State of Arkansas, is demanding that the cost of materials to the contractors be treated as grOss proceeds' of sale of materials by the contractors to the city under the' cOnstruction contracts for lump sum con-
952 WISEMAN, Comma. OF REV. V. GILLIOZ. [192 tract prices set forth in the complaint, and is demanding that the contractors pay a retail sales tax of two-per cent. thereon to the State, and . that.they collect:same:from the eity.aS,consumet:. , . . • . . • • : • •• ••• • •• "The • 'C'omplaiht . alleges, • and • the. deniurrer •admits, 'that 'the constrUction contracts were . all • entered intO . before the effective date .of. the Sales Tax-Act." . • The "appellant "dethurred; 'the ethirt oVerrnled'..the demurrer,. and entered . a deeree Pernianently • enjoining the C011araiSsiOrier Of Revenues , from' enforcing "the ' Pre-•yisiOns . of • the Sales Tar Ac :• t, ' front : which • •COMeS • this appeal. • •, • • • • . Therel are but , two 4nestiOns fOr our consideration 'First;", waS there a • sale 'of tangible personal, Property, taXable under the • 'Sa . les Tai 'Law? :Second; if there was . "such" a sale, wOuld the colleetion of ' the tax on contiacts fl • , • •• • . -Made . prior ,to • the:effeetive date 'Of • the la* be unconsti-'tntfOnal •aS iniPairing the'. obli .. g ation of the centracts7' r o .: The aPpellee . is correct: in . stating that, without . regard.tO the . precise nature of, the property sold, , it . is certain, that under:the e7cpress . teyms of..the . act, the,trapsac-Oen Must he a sale or no. tax . is imposed. Tii r ey.call attention to the case of Wiseman v. Phillips, 191 Arli. 63, .8,4 S. -.W....(2d) 91, and state . that it is . there . e?c.pressly held • that §: 4. of the aet , leiTieS . the tax. Section 4 reads" . as. follows; . "Beginning:May,...1,. , 1935, there is hereby levied uPon and 'shall ' be collected from . all retail sales,.aS here- indefined, tax'of tWO. ,(2%). pei . centnm of the o-rdss pro- • • ceeds der 4. ived frOm . said sales. ". " • "The tax im . poSed by this; section shall a . ppl . y to , :. • ,̀ (a) All , sales .at .retail of . tangible personal property., . • . . • • • `.` (b) . All- retail :sales at or by restaurants, cafes, cafeterias, hotels; dining cars, auctioneers, photostat and • blue-print sales, funeral' directors,. 'and .all other, establishments of :whatever nature or character.selling for•a .cOnsideratien any• property, - thing, commodity, • : and/or substance.. .. ••• . • , • • . • "(c),All sales . of admission or-admittance to athletic contests, theaters, both motion: picture and stage per-
ARk.:] COlViMR. OF REV. : V. -G.ILLIO formances;.: eirCuseS,.! carniVals,..'d.ance halls' 'and 'other places of 'Amusement. ! " (d) All retAil sales ofeleetrie power andlight; nral. gas, 'water, telephone use and. ineSsAges -and tele:: grams. • • • - ' • • . ". (a) Where. there- Are -adjoinin o. cities . or incorporated:towns 'which are 'separate-May :State line; . the taxes and licenses- to be. paid . by dealers in , and 'sales and service dn such adjoining city :incorporated' towns on the : Arkansas: 'Side • Of the 'State line' shall be at the , Mine rate as 'provided' by ' , law in sueh . adjoining State, &any; not to eieeed the rata provided in . this act:" . • 'It will be . Observed that 'paragraph (b) : of de: fines the term "sale' at - retail" 'to . mean 'aiiy transactien transfer, exchange, Or barter by whieh is transferred' fOr a' eonsideratiOn theOWnership Of 'Any per •aohat propertY, thing, commodity or • sUbstance; Or the furnishing 'or Selling 'for' a censideratiOn any 'of the: Substances-Or- things hereinafter designated- and-defined, 'When Siich transfer, 'e)tchange or batter:is made* in' the ordinaryourSe of. the transferor's business, and is made to . the transferee for eonsumptien or use,. or fer any other pUrpoSe than for resale:' ' , . 'Appellees cite and rely on . State v. J. Watts' if tarn.ey &-Sous, 181*La:' -554; 160 Sb: shoWing that- the 'eon: traetot' 'are' not dealerS. The queStion' in . thg t ' Case iVas whether titey were wholesale or retail dealers:• The' 'State -was collecting a' retail . tax. 'It COntended 'that it' . Was 'entitled to - collect . both 'a' wholeSaie . and 'retail' tak. -The cOurt 'in . that . caSe 'Said 'in speaking . of "the contraCtor':' "He iS not 'a . dealer; :Or 'one, who liahitually*ot • constantly, as a business; deals in. .and'sells ' any . given 'corn-modity He does not- Sell'eeinent-:and nails and luMber." . • TU. cotirt, 'in the' abOVa' a,80,' 'stated also that' sales to contractors' aire"sales ! tO consiuners; ; and bi-' this very reason the-Legislature did net inClude 'contractors ,! nd *sub-eentractot iii the term •` dealers for' resale ' ns ed §. 7; act' No: 205' of • 1 . 92 . 4; but has placed' them 'in ,-an entirely 'different classification : sin • §* 24' of -that-act:" • Section 24 of 'the act proVides : " That -every' individ-nal' firm, Cornpany or corporation' , carryi-ng on-the . pro-
954 WISEMAN, cOMMR. OF REV. v. GILLIOZ. [192 fession or business of contractor, shall pay a license based upon the gross annual receipts of said business, .which licenses shall be fixed and graded, etc." The Chief Justice 0 'I\TIELL wrote a dissenting opinion in the case above in which he said : "The main question, in these cases , is • whether the business of selling building materials in; very large quantities to contractors and sub-contractors, and to municipalities and.municipal boards and commissions, should be classed as a wholesale business or as a retail:business in determining the rate of the license tax to be levied upon tfie business." We have no such, question here. The appellees contend that they did not. make a sale, ,and that,- therefore, they are not,liable to pay- any tax.. In. the case above referred to, on rehearing, not only the Chief. Justice , dissented, but two other judges. .The , abov , e case is construing the Louisiana .statute, and that statute is different from ours. However, as we have , already said,: the contractors in that case did l not.contendthey were , not liable 'for a tax, but that they should be , taxed as retailers and not as wholesalers., Appellees next refer to the case of Bradley &apply Co. v. Ames, 359 Ill. 162, 194 N. E. 272, a case relied on by appellants. This is an Illinois case, and the appellees argue that a contractor who builds 'and constructs houses and other improvements to real estate : is not a dealer or a merchant. That on the- contrary he is a builder. They say he does not sell the houses ; that he constructs or erects them, and that he most certainly does not sell the lime, cement, lumber and steel which he uses and consumes in fabricating the completed structure which he erects upon and under the owner's land. Of course, one would not say that the contractor sold the house, but unquestionably, he sells the material that goes into the house. If one should contract to, furnish the material and labor and build , a house 'for the owner, he would necessarily estimate or calculate the value of the material furnished and the owner would have to pay for it. The contractor would sell this to , the owner. The material would -belong to the contractor before the contract was made, -or he would purchase it from material
ARK.] WIS.EMAN., COMIVIR, OF REV. V. GILLIOZ. 955 furnishers: Our statute says that sale at retail means any transaction, transfer, eXchange or.barter by which is transferred for a consideration the oWnership af any personal property, thing, commedity or substance, or the furnishing or selling for a consideration any of the substances and things, etC. If the chntractor owned this Material and sold itto 'the City of Fort Smith, will it be contended that it was not transferred to the city of Fort Smith . for a consideration? And if it was so transferred, it is: subject to the sales tax under our statute. • It makes no difference that we would not' say of a 'builder that he sold the honse, or sold the -lumber, shin.- gles or nails, hut that is, in fact, what he doe§. It is just as nnich a sale of the material asit would be if the contractor would agree on thePrice of the material and labor. separately. • * It seems to'us that the only qUestion iS whether there was a transfer to ' the *City for a Consideration:- If so,' it comes within the terms of § 3 of the , sales tax law. If there' was a transfer of ownership, aS mentioned in'§ 3 of the act, there— was a sale to the city upen'which the tax must be paid, unless the; appellees were entitled to exemption. • ' "In all cases 'of doubt as to the legislative intentian, or as to' the inclusion Of partiCular property :within the terms of' the statute, the Presumption . is iri favor of the taxing power, and the burden is on the claimant to estah-lish clearly his right to exemption, 'bringing himself clearly. within the ternis of such conditions as the . statute may imPose., • "An intention on the part . of the Legislatureto grant an exemption from the taxing poWer of the' State Will 'never he implied from language-which will admit of any other reasonable construction. Such an intention Mast be expressed in clear and unmisiakable terms, or must appear by necessary implication from the language used, for it is a well-settled principle that, when a special privilege or exemption is claimed under a statute, charter, or act of incorporation, it is tO be construed strictly against the property owner and in favor of the public. This principle applies with peculiar force , to a claim of exemption
.956 WISEMAN, COMMR. OF REV. V. Giwoz. [192 from taxation. Exemptions are never presumed, the burden is on a claimant to establish clearly his right to exemption, and . an alleged grant of exemption wilt be strictly construed, and cannot be. made out . by inference or implication, but must be beyond reasonable doubt. . other words, since taxation, is the rule and exemption the exception, 'the intention to make an exemption ought to be expressed in clear and unambiguous terms ; it cannot be taken to have been intended when the language of the statute on which it dependsis doubtful or uncertain; and the burden of establishing is upon him who claims it." .Wiseman v.:Madison Cadillac:Co., 191 Ark. 1021,. 88 S. W. (2d), 1007., , . Appellees have•a good deal to say about a dealer, but as to whether. thi . s is a . sale . by. retail from the contractor to the city, must be determined by the sales tax law. That law provides.: "The term 'retailer' shall , mean. any person, persons,. partnership,..firm . or corporation, .engaging in sale at:retail." . , .• • , "Sale at retail'.' is defined in. the law, as any transaction, •transfer, or exchange by which is transferred for a consideration, the ownership . ,of .personal property, etc.. And it makes no difference what the seller or.buyer may be called, if it , comes 'within the 'terms of this .law.; . The city of Fort,Sini. th.unquestionably acquired.this property from the eontractor, and . acquired itfor the purpose of eon , sp.mption and use,• and not for resale. • It is. argued . by appellees that the contractor was not •selling any property. They refer to the Louisiana case as holding-that the contractor does not sell cement,:gravel or sand, and they, say, that, no, title to personal property ever passed to the city. The title to the:property was.in the contractor,'and the city of Fort Smith •acquired title to • that property. ,It acquired it for a consideration. Merely .because the price, of the property. and the price of labor ;was, estimated together, does not in any way affect the transaction . so as .to prevent its being . a .trans,- fer , of personal property..to -the city. ,, .• . . The case of ,Wiseman,. Commissioner, v., Arkansas Wholesale Grocers,Ass'n,, ante p. 313, 90 .S. . (2d) 987, involved the question of .sales tax on wrapping .paper,
ARK. .] WISEMAN, cOM .MR. OF REV. V. ,GILLIOZ 957 paper bags and twine- sold at. wholesale • to . merchants, and the merchants, used them in wrapping•up, tying, * and as containers, for articles • of , merchandise • purchased from-them. • 'This . court -said : • "In the instant case,: however, it• is conceded that- there. is no,;fixed price for the above-mentioned. articles. . These articles -are , not ,ohly used by the merchant -in the conduct-of ,his business, but they often carry:.advertisements," • . • We alSo said : "In conStruing statutes' it iS the'dtty of the . courtS to' give them. a reasonable; sensible: interpretation; and, where the ;language is clea.r.and'unambiguous, it is only- for the : court; to• 'obey and enforce the 'statutes. Boyer-Campbell CO. v: Fry; '271 Mich:* 282; 260 -N.-W. 165,-98 A. L. R. 827." • ; ••• . R•• I ApPellees. Contend' that the *sales tax ' act canno ., t o . p- erate retroactively' and imPoSe a tax . hpon d given , trahs-action , not taXable when it oCcUrred. , :It is' tine We said • Wiseoict4z , y:' Phillip's, 191 Ark. 63, 84 S. W. .(2d) 91, that the aet Wohld'become effectiVe 'wh.611, and if; ihe j'hd,i,,,'- raent of this court as there announced becomes fihal.. That -1•Vas: trhe in that case.' Until 'it , beCame final fib Penalties could attaeh, but-We' were -constrning § 9731 Of ,Cravif6rd & MoSes'' Digest;' which reads' aS folroWs.: by the decision of any circuit' .COurt;'' a ConarriCtiiin may, 'be . given to any penal . or other , Statut è,' ' eVei :Y . act done in good 'faith . in :ConfOrmity , With • Such o'OnStine-Han after the , 'Making of such decision; and '134‘nre the reVersal thereof bY . the'Supreme Court; '010 be s'O far valid 'that the partY doing sna 'act shall 'not be'llable H 'to ahy penalty or forfeitnre for' 'AA-1y shah . act' that Shall ; bacie been adjUdg •. ed , la . wful' suCh *d . ecision-Of' the 'Circuit co .• u rt." ; •. •.-; . It will be observed; that, the , act proyides,:: , "Every act done in, good faith in conformity with such •construction after the making of, , such decision, and , before :the reversal thereof ,by the Supreme 'Court, shall b , e; se. far valid that the, party. doing.such,,act . shall not he t9 any penalty -or forfeiture for any , such act that shall hav,e been -adjudged ;lawful , by such decision of: the *circuit court." ;
958 WISEMAN, COMMR. OF REV. V. GILLIOZ. [192 Of course the act was effective as to the parties of that suit when the decision became final, but the statute says "acts done in good faith" before the reversal by the Supreme Court. All the contracts of the appellees were made after the reversal. The case was reversed on June 3d, and the contracts of appellees were all made after June 3d. How can it be said that they were made in good faith, relying on the construction of the chancery court, after it had been reversed by the Supreme Court? What the parties did, according to their own statements, was to make contracts after the case had been reversed by this court. To be sure, it did not become final immediately, but it was notice to the appellees that the case was reversed, and it could, hardly be said that one could act in good faith, relying on the decision of the chancery court, after it has been reversed by this court. Besides that, there had been no delivery of the property, the titles to the materials had not passed, but.theY were delivered long after the decision of this Court became final. If appellees' contention is cOrrect, then the State would be powerless to impose a tax or to increase its taxes, although it might become necessary to do so, so as to affect contracts made before a law became effective. One might have a valid contract, might have a note, the payment of which was secured by mortgage on large property, and no matter how necessary it became for the State to increase its taxes in order to, meet its obligations, such increase would be void , as to these contracts, if the contention of appellees is correct. Increasing taxation or adding a new tax does not impair the obligation of a contract. It is true ihat the law, as it existed at the time the contract was made, is a part of' the contract, but so is the law with reference to the State's . power of taxation. If this were not true, all contracts with reference to real estate would become void as to the tax upon the creation of an improvement district, or the provision for a road tax, or any other tax. The State has the power to tax, and there is no contention made in this case that the tax is unreasonable, or that it is void for any reason, except that appellees say
ARK.] 959 that it cannot apply to them because their contract antedated the law. There is no allegation and no showing in the cora-plaint that the appellees acted in good faith in conformity with the construction of the chancery court. We think, therefore r that the demurrer should have been sustained, and the decree of the 'chancery court is reversed, and remanded, with directions . to sustain the demurrer. MCHANEY, BUTLER and BAKER, JJ., dissent.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.