Georgia Pacific Corp. v. Larry

Lyle Brown, Justice. The Arkansas Commissioner of Revenues assessed a sales tax against Georgia Pacific Corporation on materials manufactured in Arkansas by Georgia Pacific. The materials were sold; they were withdrawn from stock and utilized in Georgia Pacific’s facility at Crossett, Arkansas. Secondly, the commissioner assessed an Arkansas Compensating (Use) Tax against Georgia Pacific on products'which Georgia Pacific manufactured without the State and which were shipped to Crossett and likewise utilized in the Crossett facility. The trial court upheld both assessments. Sales Tax. The Arkansas Gross Receipts Act of 1941 (Sales Tax) is basically a tax on gross proceeds, or gross receipts, derived from the sale of tangible personal property and certain specified services. However, the 'Legislature enlarged the term “gross proceeds” or “gross receipts” to include stock withdrawals for personal use. Section 2 (d) of Act 386 reads as follows: “(d) [Standard definition of ‘gross proceeds’ or ‘gross receipts.’ The term ‘gross proceeds’ or ‘gross receipts’ shall include the value of any goods, wares, merchandise, or property withdrawn or used from the established business or from the stock in trade of the established reserves for consumption or use in such businesses or by any other person.” Ark. Stat. Ann. §§ 84-1902 (Repl. 1960). With respect to the second paragraph of Section 2 (d), it was interpreted by this court in Cook, Com. of Rev. v. Southwest Hotels, Inc., 213 Ark. 140, 209 S. W. 2d 469 (1949) : “It cannot be doubted that under § 2 (d) of Act 386 one who withdraws merchandise or commodities from his commercial establishment or stockpile, or who reserves it for personal use, is. chargeable with the two per cent tax.” It is our holding that Georgia Pacific is liable for the sales tas. Use. Tax. The Arkansas Compensating Tax Alct of 1941 has no provision even remotely resembling the “withdrawal for use” provision contained in the sales tax act. Ark. Stat. Ann. § 84-3105 imposes a tax on articles purchased for use, storage, or consumption within this State. Throughout the Act, the words, “sales,” “sales price,” and “purchase,” are used to predicate the taxing of the use of the articles purchased for use, storage, or consumption. Since there are no express words in the Use Tax Act which wonld justify the imposition of the tax on “withdrawals for use,” it is onr duty to resolve the question in favor of the taxpayer. See U-Drive-Em Service Co., Inc. v. Hardin, Commissioner of Revenues, 205 Ark. 501, 169 S. W. 2d 584 (1943). This case is distinguishable from Republic Steel v. McCastlain, 240 Ark. 979, 403 S. W. 2d 90 (1966). In that case, Republic shipped reinforcing steel bars from its manufacturing plant in Chicago to Arkansas. Here, Republic processed the bars into a finished product and used them in building certain improvements for the United States Government under a construction contract held by Republic Steel. The opinion emphasizes the fact that Republic was acting in two separate and distinct capacities — as a manufacturer, it made the steel bars; as a contractor, it used them to perform its contract. As a manufacturer, Republic transferred its title in the steel bars to itself or its agent in the capacity of a contractor. In this case, there was no dual capacity transaction. This was strictly a situation in which Georgia Pacific, for example, desired to remodel some offices in Crossett. In Oregon it owns a plant where panelling is manufactured. Georgia Pacific sent for a quantity of panelling and installed it in its offices. There the transaction ended. In this situation we hold Georgia Pacific is not liable for the use tax. Affirmed in part and reversed in part. FoglemaN and Byrd, JJ., would reverse as to both sales tax and use tax. Footnotes [1] On motion of B. Bryan Larey, presently Commissioner of Revenues, he is substituted as appellee in lieu of his predecessor, Doria McCastlain.