Opinion
No. 27500
Decided February 21, 1940.
Retail sales tax — Vendor chargeable with purchasing prepaid tax receipts from state — Not tax collector, agent or officer amenable to process of mandamus — Mandamus — Writ not issued to compel observance of law generally — Discretion of court not substituted for that of administrative officer or commission, when.
1. A retail vendor of tangible personal property, charged by statute with the duty of purchasing prepaid tax receipts from the state of Ohio, and of collecting from consumers a specified tax on their purchases, is not a tax collector, agent, officer or trustee of the state, and is not amenable to the process of mandamus.
2. A writ of mandamus will not issue to compel the observance of law generally, but will be confined to commanding the performance of specific acts specially enjoined by law to be performed.
3. In an action in mandamus, a court will not substitute its discretion for that of an administrative officer or commission in the exercise of his or its authority, and in the absence of allegation and proof that an officer or commission charged with the duty of collecting sales taxes has refused arbitrarily to collect the amount due on a specific taxable sale or sales, the writ of mandamus will not lie.
IN MANDAMUS.
This is an action in mandamus, originating in this court.
The relator's first amended petition alleges, in substance, that he is a citizen of the state of Ohio, and a taxpayer, residing in the city of Columbus; that the respondents, Frank Miller, James Dunn, Jr., Walter Mitchell and Ralph Wilkins are the present duly appointed, acting and qualified members of the Tax Commission of the state of Ohio; that the respondent, Carlton S. Dargusch, was a member of the Tax Commission at the times the acts complained of in the petition were done or omitted to be done, and at those times in charge of the sales tax division of the Tax Commission; that the respondent, The Great Atlantic Pacific Tea Company, is a corporation, incorporated under the laws of the state of New Jersey and licensed to do business in the state of Ohio, and is engaged in the business of manufacturing and selling groceries and similar articles; that the respondent, The Kroger Grocery Baking Company, is a corporation, incorporated under the laws of the state of Ohio, and engaged in the general grocery business in this state; and further, that the other respondents, by name unknown to the relator, are vendors likewise engaged in business in the state of Ohio, making sales of tangible personal property, which sales were taxable under the laws of the state of Ohio.
Relator then alleges that on December 6, 1934, the General Assembly of the state of Ohio passed House Bill No. 134 (115 Ohio Laws, part 2, 306), known as the Sales Tax Act, and that throughout the period from January 1, 1935, to December 31, 1936, this act, with its subsequent amendment (116 Ohio Laws, part 2, 69), levied an excise tax on each retail sale made in this state of tangible personal property at the following rates: One cent if the price is forty cents or less; two cents if the price is more than forty cents and less than seventy cents; three cents if the price is more than seventy cents and not more than one dollar; three cents on each full dollar.
Relator says that during the years 1935 and 1936, this tax was levied on food and the necessities of life, with certain exceptions, and that each of these enactments contained the following provision:
"For the purpose of the proper administration of this act and to prevent the evasion of the tax hereby levied, it shall be presumed that all sales made in this state during the period defined in this section are subject to the tax hereby levied until the contrary is established."
Relator pleads that it is the duty of each vendor, under the act, to collect from the purchaser the full and exact amount of tax payable on each taxable sale made in the state of Ohio, and to evidence the payment of the tax in each case by cancelling prepaid tax receipts equal in face value to the amount so collected; that the tax shall be paid by the consumer in every instance; that the vendor must be licensed and when so licensed was required to purchase the prepaid tax receipts in amounts sufficient to satisfy the normal requirements of his business, and that prepaid tax receipts were sold to the vendors at a discount of three per cent.
Relator then says that if in any case the vendor fails to collect the tax, or fails to cancel the prepaid tax receipt when the tax has been collected by him, the vendor is personally liable for the amount he failed to collect, or for the amount of prepaid tax receipts he failed to cancel; that the vendor is required by the law to keep a record of sales so made by him and of the tax collected, and "that such vendor shall promptly pay to the state treasury all tax money so collected by him or which should have been collected and which is deemed collected by him under said act" for the state of Ohio; that the tax so levied is public money and revenue belonging to the state of Ohio and to the treasury of the state of Ohio, and by the provisions of the Sales Tax Act, each vendor is made a collector of taxes for the state, a trustee, official and agent of and for the state of Ohio for the purpose of the collection from the consumer and the payment to the Treasurer of the state of Ohio of the money collected under the provisions of this act.
Relator further alleges that the vendor, under the act "adopted December 20, 1935" (116 Ohio Laws, part 2, 69), is required to file quarterly sworn statements of the amount of taxable sales and of the amount of taxes collected; "that the commission shall make assessments against vendors who had kept no records of sales as made by such vendors and of the collections of the exact tax levied on such sales, or deemed collected thereon, which assessment shall include a penalty of 15 per cent"; that vendors so assessed are given the right of appeal to the Court of Common Pleas, and the Tax Commission is given power and authority to have recourse to any other remedy provided by law to collect this tax, including the right by virtue of Section 1465-32, General Code, to proceed in mandamus, injunction or other appropriate proceedings.
Relator then avers that all the provisions of the Sales Tax Act are mandatory and peremptory and admit of no discretion on the part of the vendor or the Tax Commission or its members; that in the years 1935 and 1936, the Tax Commission ascertained by investigation and audits of the sales, collection of the tax and cancellation of prepaid tax receipts under the Sales Tax Act, that the respondents, The Kroger Grocery Baking Company, The Great Atlantic Pacific Tea Company and other vendors in Ohio having large and extensive sales of tangible personal property during the years 1935 and 1936, had kept no records of the sales made and of the collection of the specific legal tax thereon from consumers, as the act required, and that these respondents were deficient in accounting to the state of Ohio for the tax collected, based upon their own sworn statements of sales.
Relator further asserts that the respondent Tax Commission, on the dates of July 24, 1936, September 3, 1936, and September 8, 1936, placed three entries on the minutes and records of the Tax Commission which recited that since investigation had disclosed that some vendors had kept accurate records of their sales and of the tax collected from the consumer, and other vendors did not keep such records, therefore rendering it impossible for the Tax Commission to determine the amount of tax of such vendors who kept no such record of the tax they had collected, or should have collected by law, or sales so made by them, the commission ordered that no further investigations or audits be made of the sales of vendors for the year 1935, and found that as to the vendors no deficiency existed in the collection of such taxes for the year 1935; that, pursuant to these resolutions, the Tax Commission illegally refunded out of the state treasury to other vendors who had heretofore paid deficiencies so found to be due, or assessments theretofore made, all of which deficiencies had been paid voluntarily, without the vendors exercising their right to appeal to the Court of Common Pleas.
Relator then avers that the respondent Tax Commission deliberately, knowingly and willfully failed and neglected to pursue any of the remedies specifically provided by the Sales Tax Act, or otherwise provided by law to compel vendors who were deficient in their payments to the state of Ohio to pay such sums so held or deemed collected by them; that there is due from the respondent, The Kroger Baking Grocery Company, the sum of $500,645.09 and from the respondent, The Great Atlantic Pacific Tea Company, the sum of $402,648, these sums representing the difference between the prepaid tax receipts cancelled by them and the amount represented by three per cent of their gross sales for the year 1935; and that the relator has no adequate remedy in law in the premises.
Relator then prays for a writ of mandamus, requiring The Kroger Grocery Baking Company and The Great Atlantic Pacific Tea Company to pay into the treasury of the state of Ohio the public funds and revenues now in their hands, collected and deemed collected by law, on sales made from consumers under the Sales Tax Act, as alleged specifically in the petition; that all other vendors who are holding such public funds and revenues collected, for which no prepaid tax receipts have been cancelled, and for which no accounting and payment to the treasury of the state of Ohio has been made, be required to forthwith pay the public funds so held into the treasury of the state of Ohio; that the Tax Commission be ordered to disclose from its records the names of all other vendors who are respondents herein, who were deficient when it entered on the records of the commission that no deficiencies existed (as stipulated in the entries made July 24, September 3 and 8, 1936), and the names of vendors to whom refunds were made by virtue of these entries; and "that said Tax Commission and its members should be required to forthwith and immediately discharge the specific mandatory duties imposed by law and said Sales Tax Act and as amended, with reference to said other matters alleged, in order that all funds and public revenues collected or which should have been collected and which are deemed collectible," shall be forthwith and immediately paid into the treasury of the state of Ohio, and for such other and further relief as may be necessary and proper in the premises.
To this amended petition, the respondents, the Tax Commission of Ohio, The Kroger Grocery Baking Company, and The Great Atlantic Pacific Tea Company, filed identical demurrers on the following grounds: (1) There is a misjoinder of parties defendant; (2) there is a defect of parties defendant; (3) several causes of action are improperly joined; (4) separate causes of action against several defendants are improperly joined; (5) such amended petition does not allege facts showing a cause of action; and (6) it fails to allege facts showing any act or acts which the law specifically enjoins this respondent to perform as a duty resulting from an office, trust or station.
The respondent, Carlton S. Dargusch, also demurred, but at the time of the submission of the demurrer to this court, the relator dismissed him as a respondent in the case. The other demurrers are now before this court for decision.
Mr. Matthew L. Bigger and Mr. Francis W. Durbin, for relator.
Mr. Thomas J. Herbert, attorney general, Mr. E.G. Schuessler and Mr. Perry L. Graham, for the Tax Commission of Ohio.
Mr. Paul R. Gingher and Mr. James N. Linton, for respondent, The Great Atlantic Pacific Tea Company.
Messrs. Frost Jacobs and Mr. H.J. Siebenthaler, for respondent, The Kroger Grocery Baking Company.
Although several questions are raised by the demurrers, the question whether the petition states a cause of action against any of the vendors is basic and dispositive of the entire case against them.
The relator claims that in the year 1935 every sale of tangible personal property was deemed a taxable sale until the vendor proved the contrary; that a vendor was delinquent when he failed to cancel prepaid tax receipts equal to three per cent of the gross sales; that as a result of the failure of the respondents, The Kroger Grocery Baking Company and The Great Atlantic Pacific Tea Company, and other unnamed vendors, to cancel sufficient prepaid tax receipts equal to three per cent of the gross sales, the respondents were holding large sums of money, which constituted public revenue.
Relator concedes that the Tax Commission of Ohio had found that there were no deficiencies for the year 1935, and had accordingly entered a finding on the journal of the commission, but contends that the Sales Tax Act was specific in terms, admitting of no discretion on the part of either the vendors or the commission, and that therefore the order and finding of the commission do not release vendors from their obligation to pay the amounts in which they are delinquent.
The claims for the year 1936 are similar, namely, that vendors are delinquent in accounting to the state of Ohio for sales taxes collected by them and not paid to the treasurer of the state, when they failed to cancel prepaid tax receipts in a sum equal to three per cent of the gross sales, since by the provisions of Section 5546-12 a, General Code (116 Ohio Laws, part 2, 77), it is conclusively presumed that the vendor who has kept no separate record of tax collected, or does not cancel prepaid tax receipts equal to three per cent of his gross sales, has failed to collect the tax from the consumer, and makes the vendor liable to the state for the deficiency. The relief sought is not only to compel the respondent vendors, by a writ of mandamus, to pay certain designated monies to the state, but also to compel the Tax Commission of Ohio to discharge its mandatory duties under the Sales Tax Act by collecting all "public funds and revenues" which have been collected, or are by law deemed collected, from consumers, and which are now held by the respondent vendors.
The basic theory underlying the relator's action, and the only one upon which an action in mandamus could be predicated, as against the vendors, is that under the provisions of the Sales Tax Act, which was effective in its original form during 1935 and in the amended form during 1936, the vendor of tangible personal property is made a collector of taxes for the state, is a trustee, official and agent of the state, and that the sales tax money collected by him constituted public revenues in his hands belonging to the state of Ohio.
In our opinion this view is untenable. A reading of the Sales Tax Law as originally enacted (115 Ohio Laws, part 2, 306, Section 5546-1 et seq., General Code) discloses that each retail vendor of tangible personal property is required to procure a license at the cost of one dollar (Section 5546-10, General Code), and to procure prepaid tax receipts from the state (Section 5546-9, General Code), for which he must pay full face value, less a discount of three per cent (Section 5546-8, General Code). Thus, before a single sale is made by the vendor, the state has collected from him the tax on an undetermined amount of his sales. When he makes a taxable retail sale, he tears a prepaid tax receipt into two parts and collects the tax. The destruction of the prepaid tax receipt by the vendor is a symbolic payment to the state, but the money thus and thereby collected belongs not to the state but to the vendor, in reimbursement for the money previously advanced by him to the state. Until sufficient taxable sales are made to return the money to the vendor, the state has, in its general fund, the money advanced to it by the vendor. A vendor who complies with the provisions of the Sales Tax Act cannot possibly have funds of the state in his possession. On the contrary, the state holds in its possession the funds of the vendor which he advanced to it. Consequently, such vendor cannot be said to be a collector of taxes, or an officer, agent or trustee of the state. Nowhere in the Sales Tax Act is he designated as trustee, agent or officer of the state. If he fails to collect the tax, or if upon collection he fails to cancel the proper prepaid tax receipts, the act makes no provision for proceedings in ouster for nonfeasance, misfeasance or malfeasance in office. The act merely provides that, in such case, the vendor shall be personally liable for the amount, plus a penalty and interest; that his liability shall be established by assessment, from which he has a right of appeal. As soon as he becomes liable for the tax which he should have collected from the consumer, his liability to the state is that of a taxpayer and his relationship to the state is that of a debtor. Not being an agent, officer or trustee of the state, a retail vendor of tangible personal property is not amenable to the process of mandamus.
Coming now to consider the demurrer of the Tax Commission, the relator pleads the entries of the commission finding that there were no delinquencies found against vendors for the year 1935.
The contention of the relator is that the duties of the Tax Commission under this act are peremptory and mandatory and admit of no discretion from a reading of the act as originally enacted. This contention is unsound. The Tax Commission is given general powers of enforcement of this act and the power to promulgate and enforce rules and regulations adopted by it. It is given the power to assess and penalize delinquent taxpayers. Obviously, if it has the authority and power to find that a taxpayer is delinquent, it may likewise find that he is not delinquent. In such a finding, it is exercising a discretion expressly conferred upon it by statute, and its exercise of this discretion cannot be controlled by mandamus. While a court will apply the spur of mandamus to compel performance of a clear, legal duty, it will not, after the discretion has been exercised, interfere therewith, unless an abuse thereof is clearly shown.
The objection raised by the relator as to the refunds by the commission is not well taken, since Section 5624-10, General Code, is clear, statutory authority for such refunds, if any were made.
Relator places much stress upon the fact that the prepaid tax receipts cancelled by respondent vendors did not amount to three per cent of the gross sales. So far as this contention pertains to the calendar year 1935, we find no provision in the act then in effect which required a vendor to cancel receipts equivalent to any given minimum percentage of his gross sales. Some sales were taxable, while others were exempt. Under such circumstances, cancelled prepaid tax receipts may fall below three per cent of the gross sales, and when that happens, no presumption of noncompliance arises against the vendor.
With respect to the contention made by relator as it is applicable to the calendar year 1936, a different situation is presented. During that year, there was in effect Section 5546-12 a, (General Code, which provided, in substance, that if on examination and audit of the vendor's books and records by the Tax Commission and its agents, it is found that no separate records have been kept of the tax collected from consumers and of the amount of such collections, or if it be found that the aggregate collection from consumers is less than three per cent of the vendor's sales, it shall be conclusively presumed that the vendor has failed to collect the tax from the consumer, and in such cases, the commission shall make a finding and assessment of the amount of the tax, plus a penalty of 15 per cent of the amount thereof, and forthwith proceed to collect the same.
Under the above-mentioned provision, a vendor may be assessed by the commission under one or two conditions — either when it is found that no separate records have been kept of the tax collected from the consumer and the amount thereof, or when it is found that the prepaid tax receipts which the vendor has cancelled amount to less than three per cent of the sales.
Although the aforementioned section of the act saddles every vendor of tangible personal property, large and small, with the burden of setting up and maintaining a detailed bookkeeping system, he may still be presumed to have failed to collect taxes from his customers if his tax collections fall below three per cent of his gross sales. In such case, the commission is required to make a finding against him and assess the amount of the tax, plus a penalty. The act is silent on the question as to the amount of tax to be thus assessed. The language is that the vendor shall be assessed the tax he "should have collected." Although the commission may believe the vendor to be honest and be convinced that he has collected the full amount of the tax, it is nevertheless, under the above-mentioned provision of the act, compelled to make an assessment against the vendor by reason of the fact that the statute establishes a conclusive presumption against him.
The petition does not set forth any failure on the part of the commission to collect any specific or even approximate delinquency in sales tax collections for the year 1936, or a refusal upon the part of the Tax Commission to perform any act specially enjoined by law.
In an action in mandamus, a court will not substitute its discretion for that of an administrative officer or commission in the exercise of his or its authority, and in the absence of allegation and proof that an officer or commission charged with the duty of collecting sales taxes has refused arbitrarily to collect the amount due on a specific taxable sale or sales, the writ of mandamus will not lie, since a writ of mandamus will not issue to compel the observance of law generally, but will be confined only to commanding the performance of specific acts specially enjoined by law to be performed.
In view of our holding that the petition does not allege facts sufficient to constitute a cause of action in mandamus, either against respondent vendors or against the Tax Commission of Ohio, it becomes unnecessary to pass upon the other grounds of the demurrers.
Demurrers sustained.
WEYGANDT, C.J., MATTHIAS and HART, JJ., concur.
ZIMMERMAN and WILLIAMS, JJ., concur in paragraphs one and two of the syllabus but not in the judgment as rendered.
MYERS, J., dissents.