Morrison-Knudsen
Co. v. State Tax Commission
242
Iowa 33, 41, 44 N.W.2d 449, 454, 41 A.L.R.2d 523
Jan
9, 1951
Opinion
No. 47677.
October 17, 1950. Rehearing Denied
January 9, 1951.
TAXATION: Use tax — statute
liberally construed in favor of
1 taxpayer — clear intent to tax must appear. Section 423.2, C., '46,
'50, imposing an excise tax on the use in Iowa of property purchased for use in
the state should be liberally construed in favor of the taxpayer. It must
appear from the language of the statute the tax assessed was clearly intended.
TAXATION:
Use tax — imposed only on property purchased for use
in Iowa.423.2
TAXATION: Use tax — language used —
presumption. In the 3 interpretation of section
423.2, C., '46, '50, imposing a use tax, it is presumed the legislature used
the words "purchased * * * for use in this state" advisedly and for a
purpose.
TAXATION: Use tax — date property
purchased. Under the use-tax 4 statutes,
whether property is purchased for use here should be determinable at or near
the time of its purchase.
TAXATION:
Use tax — construction of statute — purpose sought
to be accomplished.
TAXATION: Use tax — purpose of the
act. The use-tax law is 6 supplementary
to the sales-tax law and protects Iowa dealers who must collect and pay sales
tax by placing them on an equality with competing out-of-state vendors whose
sales are not subject to sales tax, its principal purpose being to remedy the
evil of out-of-state buying to escape the sales tax.
TAXATION:
Use tax — ruling of commission — statutory basis
essential.
TAXATION:
Use tax — appeal — commission's ruling may not be
raised for first time on appeal.
TAXATION:
Use-tax statute — reading words out of statute.
423.2
TAXATION:
Use tax — collection on property purchased long
prior to its use in Iowa — refund. held,423.2
MANDAMUS:
Proper proceeding to compel refund of use tax —
remedy provided by section 422.54,
C., '46, '50, not exclusive.
HALE, BLISS, OLIVER, and MULRONEY,
JJ., dissent.
Appeal from Polk District Court. —
RUSSELL JORDAN, Judge.
Mandamus to compel a refund of money
paid for use tax. Trial to the court on stipulated facts. Decree for defendant.
Plaintiff appeals. — Reversed and remanded.
Valentine Greenleaf, of Centerville,
for appellant.
Robert L. Larson, Attorney General,
and Henry W. Wormley, Special Assistant Attorney
General, for appellees.
GARFIELD, C.J.
This appeal presents two main
questions: 1) Was the property upon which plaintiff paid a use tax
"purchased * * * for use in this state" within the meaning of section
423.2, Codes 1946 and 1950? 2) If not so purchased, does mandamus lie to compel
defendant, State Tax Commission, to refund the tax?
From the stipulated facts it appears
plaintiff is a corporation organized under Delaware laws with its principal
place of business at Boise, Idaho, engaged in large construction jobs for
railroads and others throughout the United States. In performing such work
plaintiff purchased, transported from place to place and used in various states
many pieces of construction equipment. About May 1945, plaintiff commenced
construction work in Iowa for the Rock Island railroad which it completed later
that year. In performing such work plaintiff brought into Iowa one hundred five
items of construction equipment which it removed from the state upon completion
of the work.
Shortly after plaintiff began the
work in Iowa an employee of defendant-commission set up a proposed assessment
of use tax against plaintiff based on the original purchase price of the
equipment brought into Iowa. Plaintiff denied liability for use tax on the
equipment and also contended if it was liable at all for such tax, it should be
imposed on the basis of the value of the equipment when brought into Iowa
rather than its original purchase price. In all plaintiff paid $5121.86 of use
tax upon the original cost of its construction equipment. It later filed with
defendant-commission its claim for a refund of such amount which defendant
denied. We will mention later some other facts.
The trial court held the use tax was
rightly collected and plaintiff is not entitled to any refund.
I. The tax paid by plaintiff is
imposed by Code section 423.2 in this language: "Imposition of tax. An
excise tax is hereby imposed on the use in this state of tangible personal
property purchased * * * for use in this state, at the rate of two per cent of
the purchase price * * *."
Plaintiff contends this statute is
not broad enough to subject it to a tax on the use of much of its property. It
does not rely upon any proviso, exemption or exception in the applicable law as
the taxpayer did in Peoples Gas Elec. Co. v. State Tax Comm., 238 Iowa
1369, 28 N.W.2d
799; Hale v. Iowa State Board of Assessment and Review, 223 Iowa 321,
271 N.W.
168, affirmed 302
U.S. 95, 58 S. Ct.
102, 82 L. Ed. 72,
and other cases.
[1] Section 423.2 should be strictly construed against the
taxing body — liberally in favor of the taxpayer. It must appear from the
language of the statute the tax assessed against plaintiff was clearly
intended. See Palmer v. State Board of Assessment and Review, 226 Iowa 92, 94, 283 N.W. 415, 416, and
citations; Moorman Mfg. Co. v. Iowa Unemployment Comp. Comm., 230 Iowa
123, 130, 296 N.W.
791, 794; Merchants Supply Co. v. Iowa Employment Sec. Comm., 235
Iowa 372, 378, 16
N.W.2d 572, 576; 2 Cooley Taxation, Fourth Ed., section 503; 51 Am. Jur., Taxation, sections 308, 310; 61 C.J., Taxation,
section 119.
We think section 423.2 does not, in
clear and unmistakable terms, impose a tax upon personal property first used in
this state for a limited period long after its purchase and use in other
states, without prior intent to use it here.
[2, 3] Contrary to the argument of the tax commission, the statute
does not impose a tax on the use in this state of all personal property but
only such property as was purchased for use here. The effect of the
commission's argument is that a tax is imposed by statute on the use here of
all personal property used here at any time during its life, whether or not
purchased for such purpose. Defendant construes the statutory language
"purchased * * * for use in this state" to mean "purchased and
later, regardless of time, used in this state." This amounts to reading
the quoted language out of the statute. Of course the
legislature is presumed to have used the words "purchased * * * for use in
this state" advisedly and for a purpose. Hartz v. Truckenmiller,
228 Iowa 819,
824, 293 N.W. 568;
50 Am. Jur., Statutes, section 358.
That the words "purchased * * *
for use in this state" were deliberately used in section 423.2 is
indicated by section 423.5 which states "* * * evidence that tangible
personal property was sold * * * for delivery in this state shall be prima
facie evidence * * * [it] was sold for use in this state." Neither section
423.5 nor any other statute provides, what defendant in effect argues, that use
in Iowa is prima facie evidence the property was purchased for use in this
state. Certainly most of the property here involved
was not sold "for delivery in this state" as contemplated by 423.5.
An indication similar to that in
423.5 appears in section 423.3 which makes 423.2 applicable to surplus
government property but provides, "Industrial materials and equipment
owned by the federal government within the state of Iowa of a character not ordinarily
readily obtainable within the state, shall not be subject to use tax when sold,
if * * * [they] would not be subject to use tax if such were sold outside of
the state for use in Iowa." (Italics added.)
In Dain Mfg. Co. v. Iowa State Tax
Comm., 237
Iowa 531, 534, 22
N.W.2d 786, 788, we say the use tax is upon the use of property sold and
"designed for use in Iowa."
As stated, one hundred five items of
construction equipment are here involved. Defendant admits in argument,
"When brought into Iowa the equipment was of varying age and value and had
been purchased in various states outside Iowa and used for appellant's purposes
in various states before brought into Iowa." Defendant also concedes
"There is nothing in this record to show the purchaser's intent to use the
property in any particular state." That of course includes Iowa.
The equipment was purchased at
numerous times during the eight years before brought into Iowa for use here
commencing in May 1945. It was bought mostly in states remote from Iowa and
used in various remote states long before its use here. Nineteen items were
purchased in California. Most of them were first used there. Much of the
equipment was bought in Washington, Oregon, Idaho (where plaintiff has its
principal place of business), Utah, New York (thirteen items), and North
Carolina.
One caterpillar tractor was
purchased in Alaska in August 1943 for $6150 and first used there. Another
caterpillar tractor was bought in Washington in September 1943 for $6653 and
first used in Alaska. Still another tractor was purchased in Oregon in June
1940 for $7882 and first used in Arizona. A scraper was bought in California in
January 1939 for $8000 and first used there. Two other scrapers were purchased
in California in July 1940 for $6332 each and first used there. Numerous
comparable examples are shown by the record.
It was stipulated that $1000
"is a reasonable approximation of the actual value at date shipped to
Iowa" of each of the three tractors and the first scraper just referred
to, and $500 was such actual value of each of the two scrapers bought in July
1940. The tax assessed on all the equipment was at two per cent of the original
purchase price which many times exceeded its value when brought into Iowa, as
to numerous items.
It cannot fairly be held this
property was "purchased * * * for use in this state." No decision is
cited by defendant, and we think none is to be found, which would support such
a holding. Certainly in the practical and realistic
sense, and it would seem legally, the tractor first above referred to was
purchased for use in Alaska. It was in fact used there. There is no evidence it
was purchased for use here unless the fact it was used here for a time nearly
two years after its purchase is sufficient. As before explained, the use in
this state of property affords no basis for the tax unless the property was
"purchased * * * for use in this state."
[4] Whether property is purchased for use here should be
determinable at or near the time of its purchase. It should not be necessary to
delay determination of that question eight years until the property is first
used here. Not until such use in Iowa could any claim possibly be made a use
tax was owing. To repeat, the only basis for such claim is the fact of use in
Iowa.
[5] As stated in Chicago Bridge Iron Co. v. Johnson, 19
Cal.2d 162, 165, 119 P.2d
945, 947, cited by defendant, " * * * the purpose sought to be
accomplished by a statute relating to taxation is important in construing such
statute and in determining the scope of its application." To much the same
effect are State v. City of Des Moines, 221 Iowa 642,
644, 646, 266
N.W. 41; 2 Cooley Taxation, Fourth Ed., section 503; 51 Am. Jur., Taxation, section 309; 61 C.J., Taxation, section
119.
[6] Our decisions have been careful to point out that the
use-tax law is supplementary to the sales-tax law and protects Iowa dealers who
must collect and pay a sales tax by placing them on a tax equality with
competing out-of-state vendors whose sales are not subject to the sales tax. Also that the principal purpose of the use-tax law was to
remedy the evil of out-of-state buying to escape the sales tax.
Peoples Gas Elec. Co. v. State Tax
Comm., supra, 238
Iowa 1369, 1372, 28
N.W.2d 799, 802, states:
"The use-tax law is
supplementary to the sales-tax law. It indirectly taxes sales by taxing use. It
serves not only to produce revenue but also to protect Iowa dealers by placing
them on a tax equality with out-of-state vendors whose sales are not subject to
a two per cent sales tax. [Citations.] * * *
"This out-of-state buying to
escape the sales tax was harmful to Iowa sellers and to the sales tax. The
principal purpose of the enactment of the use-tax law was to remedy this
evil." (Italics added.)
See also Dain Mfg. Co. v. Iowa State
Tax Comm., 237
Iowa 531, 534, 22
N.W.2d 786, 788; Zoller Brewing Co. v. State Tax Comm., 232
Iowa 1104, 1106, 1107, 5 N.W.2d
643, 6
N.W.2d 843.
Other courts have frequently
expressed views similar to those stated by us. See for example Henneford v. Silas Mason Co., 300 U.S. 577,
581, 57
S. Ct. 524, 526, 81 L. Ed. 814,
818, from which we quote with approval in the Zoller Brewing Co. case;
Nelson v. Sears, Roebuck Co., 312 U.S. 359,
363, 61
S. Ct. 586, 588, 85 L. Ed. 888,
892, 132
A.L.R. 475, 477, from which we quote approvingly in the Peoples Gas Elec.
Co. case, supra (at page 1372 of 238
Iowa, page 802 of 28 N.W.2d); Chicago Bridge Iron Co. v. Johnson, supra, 19
Cal.2d 162, 165, 119 P.2d
945, 947, cited by defendant.
It may not fairly be said, and
defendant does not argue, plaintiff's equipment was purchased outside Iowa in
an effort to escape our sales tax or to take unfair advantage of Iowa dealers,
nor that the dealers in Alaska, California and other remote places from whom
the purchases were made were in reality out-of-state competitors of Iowa
dealers. There is no reasonable possibility plaintiff would have purchased this
equipment in Iowa even if the state had no sales-tax law. Iowa dealers need no
protection from such purchases as were made here. These transactions are not
only not within the letter of the use-tax statute, they are not within its
spirit. The law was not aimed at such transactions. Certainly
it is not an "evil" against Iowa dealers for a nonresident to
purchase property in a remote state for use there.
Defendant attempts to justify the
trial court's holding on the theory the equipment was purchased for use
wherever plaintiff's business required it. The argument is unsound and involves
an unwarranted extension of section 423.2 which requires purchase for use in
this state. Under defendant's reasoning a resident of another state which has
no sales tax would be subject to the Iowa use tax if he moved here for a few
months and brought with him his eight-year-old automobile or household
furniture on the theory it was necessarily purchased for use wherever he might
live. And such tax would equal two per cent of the original purchase price even
if the property were worth only a small fraction thereof when brought to Iowa.
If the legislature intends to impose a use tax under such circumstances it is
not too much to require it to do so in terms more clear and
unmistakable than the present section 423.2.
Chicago Bridge Iron Co. v. Johnson,
supra, 19
Cal.2d 162, 168, 119 P.2d
945, 948, cited by defendant, falls far short of support for its argument.
The tax there was imposed on "the storage, use or other consumption in
this state of tangible personal property purchased * * * for storage, use or
other consumption in this state * * *." The statute thus taxes not only
"use" but also "storage" and "other consumption."
The taxpayer, a manufacturer of tanks, purchased unassembled parts which were
delivered to it and stored in California. The greater part of the
materials were assembled by it into tanks to be
erected in California. Some other materials were purchased and stored by
plaintiff outside the state for use in California as its business might require
and were subsequently used there but were not intended for use in the
performance of any particular contract. The court very properly holds the
materials were purchased for use, storage, or other consumption in California.
These brief excerpts from the cited opinion demonstrate its inapplicability
here: "* * * the materials * * * were sold to it to be fabricated by it
and stored and used in this state. * * * Those materials were purchased for
use, storage or other consumption in this state."
It has been suggested Henneford v. Silas Mason Co., supra, 300 U.S. 577,
580, 57
S. Ct. 524, 525, 81 L. Ed. 814,
is much like the present case and supports the trial court's decision.
Defendant says in argument the Washington statute involved in the Henneford case "was practically identical to section
423.2." The cited case furnishes no support for the trial court's decision
here. There is a vital distinction between the Washington statute and our own.
The former imposed "a tax or excise for the privilege of using within this
state any article of tangible personal property purchased subsequent to April
30, 1935." Unlike our 423.2 the Washington statute is not limited to the
use of property purchased for use in the state. Further, the only questions
urged or considered in the Henneford case were that
the tax was upon the operations of interstate commerce, a discrimination
against such commerce, obstructing it unlawfully, and that the tax was in fact
upon the foreign sale though in form upon the use. Still further, there is no
indication in the Henneford opinion or the opinion of
the three-judge court from which the appeal was taken (Silas Mason Co. v. Henneford, 15 F. Supp. 958)
that the machinery, materials and supplies there involved were not actually
purchased for use in Washington and so used there.
[7] We are told in argument the "tax commission has for
many years interpreted the law so as to require the payment of a use tax where
property has been brought into Iowa for use even though it was originally sold
and used in another state." Such interpretation would be correct if the
property were purchased for use in this state. There is no statutory basis for
a use tax on property not so purchased and the tax commission certainly cannot
create one.
[8] Further, the case was submitted to the trial court upon
stipulated facts which do not mention any administrative ruling or
interpretation of the law. So far as shown, no such contention was raised in
the trial court and upon familiar principles defendant is not entitled to
advance it for the first time here.
However, defendant's argument cannot
be accepted in any event. Neither the record nor defendant's argument calls
attention to any rule or regulation of the commission under which a use tax
would be owing upon most of plaintiff's equipment. We have taken the trouble to
procure a pamphlet which purports to contain rules and regulations of the
commission relating to the sales tax and use tax. We assume without deciding we
may resort to this pamphlet.
Rule 151, contained in the pamphlet,
is as follows: "The law imposes a two per cent use tax on all purchases
made outside the state of Iowa. This includes all machinery, tools, equipment
and material used in the performance of a contract."
Rule 152 reads: "Contractors
are required to pay two per cent use tax on all tools, equipment and machinery
purchased since April 16, 1937, which are used in the performance of a contract
in Iowa, unless a retail sales or use tax of two per cent or more has been
previously paid in this or some other state."
[9] It would seem rules 151 and 152 were intended to read out
of section 423.2 the words "purchased * * * for use in this state."
At least they ignore this language in the statute. If the rules were so intended they are clearly in conflict with the plain
provisions of the statute which must control. See in this connection Iowa Farm
Serum Co. v. Board of Pharmacy Examiners, 240 Iowa 734,
742, 35
N.W.2d 848, 852; Dain Mfg. Co. v. Iowa State Tax Comm., 237
Iowa 531, 536, 22
N.W.2d 786, 789, 790; 50 Am. Jur., Statutes, section
319, page 312; 59 C.J., Statutes, section 610, page 1030; Crawford Statutory
Construction, section 219, page 397 ("But under no circumstances should
the interpretation placed upon a statute by an administrative * * * official
alter its plain language").
Under our repeated holdings this
court has no power to read out of section 423.2 the words "purchased * * *
for use in this state." See for example In re Guardianship of Wiley, 239 Iowa
1225, 1228, 34 N.W.2d
593, 594, and citations; Chappell v. Board of Directors, 241 Iowa
230, 232, 39 N.W.2d
628, 629. See also 50 Am. Jur., Statutes, section
231. Obviously the commission has no such power. It
has authority to prescribe only such rules and regulations as are not
inconsistent with the provisions of statute. Code section 422.61.
[10] Twenty-two of the one hundred five items of equipment were
in fact purchased commencing in May 1945 for use in Iowa and first used here.
They are the only items purchased after January 1945 that plaintiff brought
into Iowa except one purchased in April upon which no use tax was due under
Code section 423.25 because a sales tax in excess of two per cent was paid
California in which state the purchase was made. Plaintiff concedes it is
liable for use tax as to these twenty-two items. We hold the remaining
equipment was not purchased for use in this state and no use tax was due
thereon under section 423.2.
[11] II. We think mandamus lies to compel defendant to refund
the tax which was not due.
Code sections 422.66, 422.67, made
applicable to the use tax by 423.23, provide:
"If it shall appear that, as a
result of mistake, an amount of tax, penalty, or interest has been paid which
was not due under the provisions of this chapter, then such amount shall be
credited against any tax due, or to become due, under this chapter from the
person who made the erroneous payment, or such amount shall be refunded to such
person by the commission. * * * [ 422.66].
"Wherever in any division of
this chapter a refund is authorized, the commission shall certify the amount of
the refund and the name of the payee to the state comptroller. Upon
certification from the commission, the state comptroller shall draw his warrant
on the state general fund in the amount specified payable to the named payee,
and the state treasurer shall pay the same."
It appears the tax, except on the
twenty-two items for which liability is conceded, was paid as a result of
mistake of the tax commission in interpreting the law. Sections 422.66, 422.67
are mandatory in requiring such a tax to be credited against any tax due or to
become due or refunded to the person who made the erroneous payment by
certifying the amount of the refund to the comptroller. Here there is no tax
due or to become due. The commission's mandatory duty was therefore to refund
the tax. Mandamus lies to compel the performance of such duty. See Code section
661.1; Commercial National Bk. v. Board of Supervisors, 168 Iowa 501, 504, 150
N.W. 704, Ann. Cas. 1916C 227, and citations; annotation 93 A.L.R. 585; 55
C.J.S., Mandamus, section 187.
Sections 422.66, 422.67 are much
like section 445.60, pertaining to ordinary property taxes, which reads,
"The board of supervisors shall direct the treasurer to refund to the
taxpayer any tax or portion thereof found to have been erroneously or illegally
exacted or paid * * *." Because of this statute we have uniformly held
mandamus lies to compel the refund of taxes erroneously or illegally paid even though
payment was voluntary. Jewett Realty Co. v. Board of Supervisors, 239 Iowa 988,
995, 33
N.W.2d 377, 381, 382, and citations; Eyerly v.
Jasper County, 72 Iowa 149, 33 N.W. 609.
Section 8613.3, Code of 1939 (now
505.11, Code of 1950), providing for refund of taxes paid by insurance
companies, states: "Whenever it appears to the satisfaction of the commissioner
of insurance that because of error, mistake, or erroneous interpretation of
statute that [an] * * * insurance corporation has paid * * * taxes * * * in
excess of the amount legally chargeable against it, the commissioner * * *
shall have power to refund to such corporation any such excess * * *." By
virtue of this statute we have held mandamus lies to compel the refund of taxes
erroneously paid whether or not such payment was voluntary. Lincoln National L.
Ins. Co. v. Fischer, 235 Iowa 506,
17 N.W.2d
273.
See also Craig v. Security Producing
Refining Co., 189 Ky. 565, 225 S.W. 729, from which we quote with approval in
the Lincoln National L. Ins. Co. case (at page 515 of 235 Iowa,
page 277 of 17 N.W.2d); Craig v. Frankfort Distilling Co., 189 Ky. 616, 225
S.W. 731.
Defendant contends plaintiff was
confined to the administrative remedy provided by section 422.54 and since it
failed to pursue such remedy the tax became irrevocably fixed. Section 422.54
is made applicable to the collection of a use tax by 423.16, which states:
"If any return required by this
chapter is not filed, or if any return when filed is incorrect or insufficient,
and the maker or person from whom it is due fails to file a corrected or
sufficient return within twenty days after the same is required by notice from
the commission, the commission shall have the same power to determine the
amount due, as is vested in the commission by sections 422.54, 422.55, and
422.57, subject to all of the provisions, and restrictions, and rights of
appeal provided in said sections."
Section 422.54 is too long to quote.
Like 423.16 it provides that where a return is not filed, or when filed is
incorrect or insufficient and the maker fails to file another return within
twenty days after notice from the commission, the commission shall determine
the amount of tax due and give notice thereof to the taxpayer. Section 422.54
also states that such determination shall irrevocably fix the tax unless the
taxpayer applies to the commission for a hearing within thirty days from such determination
or the commission on its own motion reduces the tax.
It does not appear plaintiff did not
file a return nor that it filed an incorrect or insufficient one, nor that
notice was ever given plaintiff to file another return. Section 422.54 is therefore
not applicable here. Plaintiff paid the commission $4118.17 on September 10,
1945, as use tax for the second quarter of 1945. It was stipulated the state
treasurer, relying upon Code section 324.51, required plaintiff to pay said use
tax before it could obtain a refund of Iowa motor vehicle tax due plaintiff in
an amount substantially in excess of the amount of the use tax. On September
21, 1945 (eleven days after the use tax had been paid), the commission sent
plaintiff a notice of use-tax assessment in the amount of $4118.17 (which was
already paid) and $288.27 penalty, with the statement that the remittance of
$4118.17 was to be credited on the charge. On October 3, 1945, defendant
notified plaintiff the penalty (of $288.27) had been waived. So far as shown no
notice of assessment was sent plaintiff for the tax claimed for the third or
fourth quarters of the year.
As previously indicated it is the
rule in this state by virtue of Code section 445.60 that mandamus lies to
compel the refund of property taxes "erroneously or illegally exacted or
paid" notwithstanding the taxpayer's failure to pursue the administrative
remedy of complaint to the board of review and, if relief is denied, appeal to
the district court. Such administrative remedy is not exclusive where taxes
were "erroneously or illegally exacted or paid." See Charles Hewitt
Sons Co. v. Keller, 223 Iowa 1372,
1378, 1379, 275
N.W. 94, and citations; Griswold Land Credit Co. v. County of Calhoun, 198
Iowa 1240, 1245, 201 N.W. 11; Commercial National Bk. v. Board of Supervisors,
supra, 168 Iowa 501, 504, 150 N.W. 704, Ann. Cas. 1916C 227.
In line with these decisions we now
hold the administrative remedy provided by Code section 422.54 (of complaint to
the tax commission) is not exclusive where as here,
as a result of the commission's mistaken interpretation of the statute, a use
tax was paid which was not due under the provisions of statute. Under such
circumstances, by virtue of sections 422.66, 422.67, mandamus lies to compel a
refund to the taxpayer.
After consideration of all questions
argued the cause is reversed and remanded for a decree in harmony with this
opinion.
One third the costs are taxed to
plaintiff, two thirds to defendant. — Reversed and remanded.
WENNERSTRUM, SMITH, MANTZ, and HAYS,
JJ., concur.
HALE, BLISS, OLIVER, and MULRONEY,
JJ., dissent.
HALE, J. (dissenting)
I am unable to agree with the
majority opinion in its finding as to the interpretation of the statute in
question. The tax is imposed on "the use in this state of tangible
personal property purchased * * * for use in this state." The difference
between the two constructions centers around the words "for use in this
state", the majority holding that the primary intent must be "to use
in the state of Iowa." The theory of this dissent being that in the case
of a general contractor who had work in more than one state the original intent
in purchase of the property would be to use the property where such property is
actually taken and used, I think this the more reasonable interpretation of the
words used in the statute.
Plaintiff cites section 423.5 of the
1946 Code relating to evidence of use, and section 423.25 relating to taxation
in another state, as evidence of the intent of the legislature. The first of
these two sections merely provides that evidence of tangible personal property
sold by any person for delivery in this state shall be prima facie evidence
that such tangible personal property was sold for use in this state, and
second, the exemption for use tax on property that has already been subjected
to a sales tax or a use tax.
Defendants' argument, in brief, is:
A general contractor who purchases personal property has the intention at the
time of purchase to use the property wherever his business may take him; that
the intent is comprehensive and includes any state where the work requires the
use of that property; that in this case the plaintiff did bring his property
into the state of Iowa and used it here, as "use" is defined in the
statute; that therefore, coupled with the use in Iowa, this constitutes a use within
the intent of the legislature.
"Use" as defined in Code
section 423.1 is as follows:
"The following words, terms,
and phrases when used in this chapter [on use tax] shall have the meanings
ascribed to them in this section:
"1. `Use' means and includes
the exercise by any person of any right or power over tangible personal
property incident to the ownership of that property, except that it shall not
include processing, or the sale of that property in the regular course of
business * * *."
There is no question but that the
property within the definition was used by the plaintiff in the state of Iowa.
Defendants argue that the tax in question is on the privilege of that use
within the state of Iowa, and we do not have to speculate about the plaintiff's
intent because it is presumed to have intended the natural consequences of its
act, namely, the use of the property in Iowa.
In Chicago Bridge Iron Co. v.
Johnson, 19 Cal.2d
162, 168, 119 P.2d
945, 948, it is said:
"Those materials were purchased
for use, storage or other consumption in this state. While it is true that they
were not acquired with the express purpose of performing any specified contract
or order, plaintiff was engaged in the business of selling and constructing
tanks in California. In the course of its business those materials might be
used in California or elsewhere. It cannot be said therefore that they were not
purchased for use here. They were purchased for use in California if and when
the business required their use here to fill an order. The requirement arose
and they were used in this state. It follows that those particular materials
were purchased for use in California. The materials being used here follow the
intent to use them here upon a certain contingency, it objectively follows that
they were acquired for use here."
The California use statute differs
from ours in including the word "storage", but, under our statutory
definition of use, storage would be included as an incident to the exercise of
right or power incident to the ownership of property. I would hold, therefore,
that the principles set forth in the foregoing case apply to the situation
here. The equipment or a large part of the property in question was purchased
for use where the business of the plaintiff required it to be used, and it was
used here. I am satisfied that to carry out the purpose of the law and at the
same time equalize the burden upon the local taxpayer, when equipment is
purchased for the general purpose of use wherever needed the commission is
within its rights in assessing a tax in such amount as will equalize it with
the burden of tax assumed by retailers in Iowa.
The statute under consideration
seeks to equalize, since it may be offset if another use or sales tax has been
paid on the same thing. The purpose of the use tax is that retailers in the
state of Iowa shall not be subjected to an unfair advantage taken by one who
purchases at retail in another state where no sales tax is exacted, and it was
held in Felt Tarrant Mfg. Co. v. Gallagher, 306 U.S. 62, 59 S. Ct. 376,
83 L. Ed. 488,
that the rule laid down in Henneford v. Silas Mason
Co., Inc., 300
U.S. 577, 57
S. Ct. 524, 81
L. Ed. 814, is that the tax was not upon interstate commerce but upon the
privilege of use after commerce is at an end. See the latter case and
authorities cited therein.
The intent of the statute seems to
be the determining question in the case. Holding as I do
I would affirm the ruling of the trial court.
BLISS, OLIVER and MULRONEY, JJ.,
join in this dissent.