Opinion
No. 1961702.
Decided August 6, 1999.
Appeal from Jefferson Circuit Court, CV-95-1008; Court of Civil Appeals, 2951320.
A. Allen Ramesy, and Jeffrey M. Sewell, asst. county atty., for petitioner.
Michael D. McKibben and Richard H. Monk III, and Bruce P. Ely, for respondent.
Kenneth Smith, league counsel, for amicus curiae Alabama League of Municipalities, in support of the petitioner.
Robert D. Segall and E. Terry Brown, for amicus curiae Alabama Education Ass'n, in support of the petitioner.
James W. Webb and Bart Harmon, for amicus curiae Association of County Commisioners of Alabama, in support of the petitioner.
Matthew C. McDonald and Thomas J. Woodford, for amici curiae Alabama Retail Ass'n; Business Council of Alabama; Alabama Branch of the Associated General Contractors of America; Alabama chapter to The National Federation of Independent Business; Automobile Dealers Ass'n of Alabama, Inc.; Alabama Oilmen's Ass'n; and Alabama Press Ass'n.
Bill Pryor, atty. gen.; Ron Bowden, general counsel, Department of Revenue, and asst. atty. gen.; and J. Wade Hope, asst. counsel, Department of Revenue, and asst. atty. gen., for amicus curiae Alabama Dep't of Revenue, in support of the respondent.
The writ of certiorari is quashed as improvidently granted. In quashing the writ of certiorari, this Court should not be understood as approving all the language, reasons, or statements of law in the opinion of the Court of Civil Appeals. Horsley v. Horsley, 291 Ala. 782, 280 So.2d 155 (1973).
WRIT QUASHED.
Hooper, C.J., and Houston, Lyons, and Johnstone, JJ., concur.
See, J., concurs specially.
Cook, J., dissents.
Brown, J., recuses herself.
I concur in quashing the writ of certiorari issued to the Court of Civil Appeals. I write specially to address the points raised in the dissent.
The issue in this case is whether Jefferson County is authorized under local Act No. 405, 1967 Ala. Acts 1021 (Regular Session), to impose on an appliance retailer located in Walker County and having no physical presence in Jefferson County the duty to collect Jefferson County sales taxes on sales of appliances that are delivered to customers in Jefferson County. The dissent, relying on Ala. Code 1975, § 40-23-1(a) (5) and (11), states that Jefferson County is authorized under Act No. 405 to collect county sales taxes on these sales because the sales are closed in Jefferson County and, thus, the Walker County retailer, Yelverton's, Inc., is doing "business" in Jefferson County. The dissent further states that Alabama Department of Revenue regulation 810-6-3-.51 ("regulation .51") is not applicable to the sales tax levied by Jefferson County under Act No. 405, and that, even if it were applicable, regulation .51 is preempted by Ala. Code 1975, § 11-3-11.2.
Section 3 of Act No. 405 levies a sales tax "upon every person required to pay, on account of business done by him in the county, the State sales tax or upon whom, on account of business done by him in the county, the State sales tax is levied." Act No. 405, § 3(b), 1967 Ala. Acts 1021, 1023. Thus, under Act No. 405, only those persons who are doing business within Jefferson County are required to collect Jefferson County sales tax. Although Section 3 does not specify what constitutes doing "business," for purposes of imposition of the county sales tax, § 4(e) of Act No. 405, which provides for the levy of a county use tax, expressly recognizes that the county sales tax is to be collected only "from a retailer maintaining a place of business in the county." Id. § 4(e), 1967 Ala. Acts at 1026. Therefore, under Act No. 405, Yelverton's, which does not maintain a place of business in Jefferson County, is not required to collect Jefferson County sales tax.
Further, Act No. 405 incorporates by reference, and makes applicable to the county sales tax, "[a]ny procedure or provision involving the State Department of Revenue" that is provided for in the state sales-tax statutes. Act No. 405, § 3(h), 1967 Ala. Acts 1021, 1025. One such procedure or provision that is incorporated in Act No. 405 and made applicable to the county sales tax is regulation .51. Under regulation .51, only those "sellers located in [the] city or town" are required to collect local municipal sales tax. Ala. Admin. Code r. 810-6-3-.51(2). Therefore, under regulation .51, as incorporated by Act No. 405 and made applicable to Jefferson County sales tax, Yelverton's is not required to collect Jefferson County sales tax, because it is not located in Jefferson County.
Ala. Code 1975, § 40-23-31, authorizes the Alabama Department of Revenue to promulgate such rules and regulations.
In its amicus curiae brief, the Department of Revenue states that regulation .51 follows the decision of the United States Supreme Court in Miller Brothers Co. v. Maryland, 347 U.S. 340 (1954). In Miller Brothers Co., the United States Supreme Court held that the Commerce Clause of the United States Constitution requires that an out-of-state seller have a physical presence in a state in order for that state to have the power to impose on the seller the duty to collect and remit state use and sales taxes. See 347 U.S. at 345-46. The physical-presence rule was reaffirmed in Quill Corp. v. North Dakota, 504 U.S. 298, 308 (1992). As stated in its amicus curiae brief, the Department of Revenue has interpreted regulation .51 for several years as requiring a seller to have a physical presence in a local taxing jurisdiction in order to be subject to that jurisdiction's taxes. This Court gives substantial deference to an agency's interpretation of its own regulation, unless the interpretation is plainly erroneous or inconsistent with the regulation. SeeBrunson Constr. Environmental Services, Inc. v. City of Prichard, 664 So.2d 885, 890 (Ala. 1995); see also Haden v. McCarty, 275 Ala. 76, 152 So.2d 141 (1963) (holding that the Department of Revenue's interpretation of its own regulation, an interpretation that had been in effect for 22 years, was highly persuasive authority).
The dissent contends that Regulation .51 is preempted by § 11-3-11.2. Section 11-3-11.2 provides in pertinent part that the provisions of any local act that authorizes the levy of a local tax and that was enacted before February 25, 1997, prevails over any inconsistent rules and regulations of the Department of Revenue. However, because regulation .51 is incorporated into Act No. 405, it is not inconsistent with Act No. 405. Thus, there is no preemption.
Jefferson County did not present its § 11-3-11.2 argument to the trial court, and the trial court did not rule on it. Moreover, § 11-3-11.2 became effective May 15, 1996, more than a year after the commencement of this case and almost two years after the period audited by Jefferson County.
Although the sales involved in this case are not subject to Jefferson County sales tax, they do not escape all Jefferson County taxes. Section 4 of Act No. 405 levies a county use tax on "[e]very person storing, using or otherwise consuming in the county tangible personal property purchased at retail." § 4(e), 1967 Ala. Acts at 1026. Unlike the county sales tax, the imposition of the county use tax does not depend on "whether the retailer who made the sale is or is not engaged in business in the county." § 4(a), 1967 Ala. Acts at 1025.
Because Jefferson County is not authorized under Act No. 405 to collect from Yelverton's county sales tax on the sales at issue in this case, I concur in quashing the writ of certiorari.
Jefferson County commenced this action against Yelverton's, Inc., a retail appliance store located in Walker County, seeking to recover $8,625.73 in sales tax assessed by Jefferson County on appliances sold by Yelverton's to be delivered in Jefferson County. Because I would reverse the judgment of the Court of Civil Appeals, I respectfully dissent from the order quashing the writ of certiorari.
The effect of the judgment of the Court of Civil Appeals, and of today's order quashing the writ, is well stated by Jefferson County: "Every retailer [in Alabama may] escape all local sales tax by simply delivering [its product,] or having the customer pick up the product[,] in another taxing jurisdiction. The resulting loss in public revenues [will] be staggering." Reply Brief of Jefferson County, at 13 (emphasis in original).
Jefferson County's right to collect these taxes is clear and straightforward. It is based on (1) Act No. 405, 1967 Ala. Acts 1021 (Regular Session); and (2) Ala. Code 1975, § 40-23-1(a) (5) and (11). Act No. 405, § 3(b), authorizes counties to collect a sales tax from "every person required to pay, on account ofbusiness done by him in the county, the State sales tax." (Emphasis added.) Section 40-23-1(a) (11), which is contained in the article of the Code dealing with sales taxes, defines "business" as: "All activities engaged in, or caused to be engaged in, with the object of gain, profit, benefit, or advantage, either direct or indirect. . . ." Section 40-23-1(a) (5) defines a "sale" as being "completed . . . when and where title is transferred by the seller or seller's agent to the purchaser or purchaser's agent." (Emphasis added.) According to these provisions, once Yelverton's has delivered an appliance into Jefferson County to a customer, it has "completed" a sale in Jefferson County, for tax purposes. SeeState v. Service Engraving Co., 495 So.2d 695, 697 (Ala.Civ.App. 1986) ("For tax purposes, the sales taxes apply to sales that are 'closed,' that is, they apply when title to the goods has passed to the purchaser, which occurs as of the time and place of the physical delivery of the goods, unless otherwise explicitly agreed."). Such activity fits the definition of "business" as set forth in § 40-23-1(a) (11). Jefferson County is, therefore, entitled to collect county sales tax on this exchange, pursuant to Act No. 405, § 3(b), because the sale was subject to the state sales tax.
This fact is significant, because the reasoning of the Court of Civil Appeals and many of the arguments of Yelverton's and various amici curiae have incorrectly focused on provisions dealing with use taxes. However, it is abundantly clear that the tax at issue in this case is not a use tax. These arguments have seriously, and unnecessarily, confused the issues involved in this case.
In opposition to this clear, statutory authority, Yelverton's and amici cite Ala. Admin. Code, Reg. 810-6-3-.51, an administrative regulation promulgated by the Department of Revenue Regulation 810-6-3-.51 states in pertinent part: "If the sale is made and as a part of the sales agreement the seller is required to deliver the item purchased outside the taxing jurisdiction of the city or town, the sale is exempt from tax." (Emphasis added.) However, Reg. 810-6-3-.51, on its face, appliesonly to municipalities. Indeed, it is entitled: "Sales and Use Tax, Municipal Gross Receipts Tax." I see no basis for ignoring the plain language of this regulation in order to apply it to counties.
Moreover, if by some construction of Reg. 810-6-3-.51 it could be deemed applicable, it was preempted in 1996, when the Legislature enacted Act No. 96-471, 1996 Ala. Acts 584, codified at Ala. Code 1975, § 11-3-11.2. That Code section provides in pertinent part:
"(a) The county commission may, by ordinance or resolution, administer and collect, or contract for the collection of, any local sales and use taxes or other local county taxes levied or authorized to be levied by a general or local act. Where the county commission provides by ordinance or resolution for the administration and collection of the local taxes, the collection of the local sales and use taxes shall occur at the same time as state sales and use taxes are due to be paid to the Department of Revenue, unless otherwise provided by law.
"(b) Any county commission which elects to administer and collect, or contract for the collection of, any local sales and use taxes or other local taxes, shall have the same rights, remedies, power and authority, including the right to adopt and implement the same procedures, as would be available to the Department of Revenue if the tax or taxes were being administered, enforced, and collected by the Department of Revenue. Any rules and regulations adopted or utilized by the county or its designee shall be consistent with the rules and regulations adopted through the provisions of the Alabama Administrative Procedure Act by the Department of Revenue for the corresponding state tax. If a specific provision of the rules and regulations of the Department of Revenue is inconsistent with a specific provision of a local act, resolution, or general law authorizing or levying a local tax, including a gross receipts tax in the nature of a sales tax, as defined in Section 40-2A-3(8), which was enacted or adopted prior to February 25, 1997, the local act, resolution, or general law provision shall prevail."
(Emphasis added.)
If Reg. 810-6-3-.51 is construed to apply to counties, then it is inconsistent with the statutes expressly applicable to counties. Specifically, it suggests that county taxes would be due only if the sale is completed within the county. Because the statutory scheme applicable to counties contains no such provision, and because § 11-3-11.2 provides that inconsistent regulations are preempted, the sentence quoted above from Reg. 810-6-3-.51 does not apply. Therefore, Jefferson County was entitled to collect the taxes at issue in this case. I respectfully dissent.