Calvert v. Canteen Co.

PHILLIPS, Justice. This suit was brought in the District Court of Travis County, Texas, by the Neelley Vending Company, Canteen Co., B & M Vending Company and Tom E. Conner-Business Investments for themselves and for all others similarly situated as a class, hereinafter referred to as plaintiffs, against Robert S. Calvert, Comptroller of Public Accounts of the State of Texas, Jesse James, State Treasurer of the State of Texas and Will Wilson, Attorney General of Texas, hereinafter referred to as defendants. This suit is brought as a class action. The following is taken from the stipulations agreed upon between the parties. Each of the plaintiffs has qualified under the provisions of Chapter 24, Acts of the 57th Legislature, First Called Session, 1961, commonly known as the Limited Sales, Excise and Use Tax Act, Chapter 20, Title 122-A, Taxation-General, Revised Civil Statutes, 1925, V.A.T.S.Tax.-Gen. art. 20.-01 et seq,, and has received from the defendant Comptroller sales tax permits as authorized and required by the Act. Each of the plaintiffs is in the business of making retail sales of tangible personal property from mechanical vending machines, and since the effective date of said Act, each of the plaintiffs has made retail sales of tangible personal property within this State from such mechanical vending machines. The property being so sold is candy, chewing gum, coffee, soda water or soft drinks, and other such items, with the sales price of each such separate item being twenty-four cents or less to the purchaser or consumer. For instance, the plaintiff Tom E. Conner-Business Investments makes sales from mechanical vending machines limited to chewing gum with a sales price of one cent each to the purchaser or consumer, and each of the other plaintiffs make sales of such property from such machines with prices ranging from the one cent chewing gum item to other items costing twenty-four cents or less each. Since the effective date of the Act, the plaintiffs have within the time required by said Act, and as required by the defendant Comptroller, filed with the defendant Comptroller a report on the form prescribed enumerating all retail sales of such tangible personal property made by the plaintiffs, and the plaintiffs have paid the Comptroller a tax required by the Comptroller of two percent of all receipts by plaintiffs from the total sales of such tangible personal property from the mechanical vending machines. At the time of making such payments to the defendant Comptroller, each of the plaintiffs made such payments under protest in writing, fully setting out in detail each and every ground or reason why the plaintiffs contend-that the Comptroller’s demand that they pay such tax is unlawful and [664] unauthorized by said Act. Subsequently, each of said plaintiffs filed with the Comptroller detailed written requests or claims that the money be refunded to the plaintiffs, or that said sums be applied and credited to future tax payment under said Act, which written requests or claims were filed in accordance with Article 20.10 of said Act. Thereafter, a public hearing was held before the Comptroller at which each of the plaintiffs was represented and evidence and argument presented to the Comptroller. Thereafter, the defendant Comptroller on April 24, 1962, issued an order to each of the plaintiffs giving notice of disallowance of such requests or claims for refunds of such sums paid under protest. The defendant Comptroller requires each of the plaintiffs to pay a two per cent tax of the total gross receipts such plaintiffs have from such sales of such tangible personal property from the mechanical vending machines, even though the sales price to the consumers or purchasers of each such item of tangible personal property is twenty-four cents or less, and even though the plaintiffs are prohibited by said Act from collecting from the consumer or purchaser of such tangible personal property the two per cent sales tax on each of such sales of twenty-four cents or less, and cannot therefore collect said tax from the consumer. The Trial Court held that the requirement of the Comptroller that the plaintiffs pay a two per cent tax on the total gross receipts of plaintiffs from their respective total sales of such tangible personal property to the consumers for one cent to twenty-four cents for each such separate sale, is not authorized by and is contrary to the provisions of the said Limited Sales, Excise and Use Tax Act. The Court found that both plaintiffs and defendants acknowledged to the Court that the Act levied and imposed the tax upon the consumer, and the Court further found that Article 20.02 thereof specifically provides that the tax imposed by said Act shall be collected from the consumer, not the retailer, and that as to each retail sale of tangible personal property of one cent to twenty-four cents, said Article specifically provides that there shall be no tax and no-tax shall be collected on such retail sales, and in requiring the plaintiffs, as retailers, to pay the taxes as they did, the Comptroller was acting contrary to the express terms of the statute. The Court further ordered the Comptroller to refund plaintiffs the sums paid under his ruling. This Court holds that the judgment of the Trial Court is correct. The provisions of the above mentioned Act pertinent to this opinion are as follows r “Art. 20.02. Imposition of Limited Sales Tax “There is hereby imposed upon each separate sale at retail of tangible personal property made within this State a limited sales tax at the rate of two-per cent (2%) of the sale price of each item or article of tangible personal property when sold at retail in this-State. “(A) Method of Collection and Rate-of Limited .Sales Tax. The tax hereby imposed shall be collected by the retailer from the consumer. “(1) The tax shall be as follows and' shall be collected by using the following bracket system formula on each retail sale: Amount Tax $ .01 to $ .24 No Tax .25 to .74 $ .01 .75 to 1.24 .02 1.25 to 1.74 .03 1.75 to 2.24 .04 Provided, further, that for each additional fifty cents (50⅜ of purchase,, or fraction thereof, one cent (10)-limited sales tax shall be collected! thereon. * * * * * ¡fe. [665] “Art. 20.05 Return and Payments “(B) Method Retailer is to Use in Computing Tax. The limited sales tax levied under Article 20.02 hereof shall be computed and paid to the Comptroller on the basis of two percent (2%) of all receipts from the total sales of such tangible personal property sold by such retailer under said Article.” This is the first time that a court has been asked to construe these provisions of the Act. The defendants contend that Section (B) of Art. 20.05 requires that the tax be computed and paid on the basis of two per cent of “all” receipts from the “total” sales. Defendants further argue that the only exceptions are found in Article 20.04 of the Act, which does not include an exemption for sales of less than twenty-five cents. All receipts from such sales are, therefore, to be used in the computation of the tax to be paid by the retailer to the State. Defendants contend that their position is a reasonable one in that the Act incorporates the “bracket system formula”, (Par. (A), Art. 20.02) and since there is no medium of exchange whereby this two per cent can be collected from the purchaser on sales below twenty-four cents,, the retailer may and does collect more than two per cent in some of the lower brackets taxed. In this way the ordinary retailer in computing his overall tax on his gross receipts will average two per cent. Defendants argue that even though the plaintiffs do not collect any tax whatsoever, they are still liable for the tax on their total sales. In support of their argument, the defendants rely on White v. Washington, Supreme Court of Washington, (1957), 49 Wash.2d 716, 306 P.2d 230; Smokey Mountain Canteen Company v. Kizer, Supreme Court of Tennessee, (1952), 193 Tenn. 598, 247 S.W.2d 69; Piedmont Canteen Service, Inc. v. Johnson, Supreme Court of North Carolina, (1962), 256 N.C. 155, 123 S.E.2d 582; and, Stevens Enterprises, Inc. v. Kansas, Kansas Supreme Court, (1956), 179 Kan. 696, 298 P.2d 326. A sales tax is the creature of the legislature and must be interpreted by the courts as written. The cases cited by the defendants involve statutes wholly different from the Texas Act. The tax in these cases is on the privilege of doing business, the incidence of such tax being placed on the retailer with the right of recoupment against the purchaser. In White v. Washington, cited above, the court allowed a tax on the gross receipts on sales from vending machines. The statute involved gave the tax commissioner the power to adopt rules as to the “schedule of collection” so as to eliminate the collections of fractions of one cent and so as to provide that the “aggregate collections of all taxes by the seller shall, * * * equal the amount of the tax imposed”, R.C.W. 82.08.-060. In his schedule, the tax commissioner set up a bracket system which provided that there would be no tax on items from one cent to thirteen cents. The Washington Act states, “ * * * [t]he tax accrued under the provisions of this chapter, whether or not collected from the buyer shall be paid by the seller * * ” R.C.W. 82.08.070, and “The commission may authorize a seller to pay the tax levied under this chapter upon sales made through vending machines * * * or where sales are made under conditions of business such as to render impracticable the collection of the tax as a separate item * * * [t]he commission, by regulation, may provide that the applicant, under this section, furnish a proper bond sufficient to secure the payment of the tax.” R.C.W. 82.08.080. Thus the bracket system under the Washington Act is an administrative device adopted by the tax commission to permit the retailer to collect from the purchaser, as nearly as possible, the amount levied against the retailer. In the Kizer case, cited above, where a tax on sales from vending machines was [666] upheld, the court described the Tennessee Act as being a tax on the vendor for the privilege of doing business. The Act contains no bracket system within itself but it does provide for the tax commissioner to install such a system. The schedule adopted by the Commissioner excluded the sales from one cent to fourteen cents from the tax.. Under the provisions of this act, the tax is computed on gross sales. In Piedmont Canteen Service, Inc. v. Johnson and Stevens Enterprises, Inc., Kansas, cited above, the court upheld taxes on sales from vending machines, however, both Acts imposed a tax on the vendor for the privilege of doing business and both were expressly taxes on gross receipts. Paragraph (A) of Article 20.02 of the Texas Act requires that the tax shall be collected by the retailer from the consumer. Subparagraph (1) states that no tax shall be collected on sales of one cent (.01^) to twenty-four cents (24‡). This section describes the method of collecting the tax. Paragraph (B) of Article 20.05 states that the tax levied under Article 20.02 hereof shall be computed and paid to the Comptroller on the basis of two per cent of all receipts from the total sales of such tangible personal property sold by such retailer under said Article. Paragraph (B) is the method the retailer is to use in computing the tax. In the one sentence that is Paragraph (B), Article 20.02 is referred to twice in describing first the tax and secondly the method of ascertaining the amount levied thereunder. Paragraph (A) and Paragraph (B) supplement one another and must be read together. The construction urged by the defendants would make this tax one on gross receipts as was expressly done by statute in the cases they rely on. Article 20.05, Paragraph (E), authorizes the retailer to deduct and withhold from the taxes paid to the State one per cent thereof to reimburse the retailer for the cost of collecting the tax. A prepayment of tax authorizes the retailer to deduct two per cent as reimbursement for collection of the tax. The tax is levied against the consumer, the retailer is merely the collector. The tax is on the sale transaction and sales of one cent to twenty-four cents are not taxed. Where a statute duly enacted by the Legislature is involved, the courts must first look to the statute itself for meaning. The wording of the statute is clear and unambiguous and this Court must give it effect according to its terms. See Gately v. Humphrey, 151 Tex. 588, 254 S.W.2d 98. The judgment of the Trial Court is affirmed.