Opinion
SC 1166.
July 17, 1975.
Appeal from the Circuit Court, Montgomery County, Eugene W. Carter, J.
William J. Baxley, Atty. Gen., Willard W. Livingston, Counsel, Dept. of Revenue, and Asst. Atty. Gen., Philip C. Davis, Asst. Counsel, Dept. of Revenue, and Asst. Atty. Gen., for petitioner, the State.
The term "sale at retail" or "retail sale" shall mean all sales of tangible personal property except those defined as wholesale sales under the provisions of the sales tax law. The term "wholesale sale" or "sale at wholesale" means any one of the following: A sale of tangible personal property by wholesalers to licensed retail merchants, jobbers, dealers, or other wholesalers for resale and does not include a sale by wholesalers to users or consumers not for resale. Title 51 Section 786(2), Code of Alabama 1940, Recompiled 1958, cumulative pocket parts. State v. Consumers Bagging Co., 48 Ala. App. 95, 262 So.2d 297. The courts will give favorable consideration to the construction of a tax statute by the official whose duty it is to administer the tax laws, especially if such construction has stood unchallenged for a considerable period of time. The weight to be given an administrative interpretation of a taxing statute is increased when the legislature, when re-enacting the law, fails to indicate in any way its disapproval of the settled administrative construction. East Brewton Materials, Inc. v. State of Alabama, Department of Revenue, 45 Ala. App. 584, 233 So.2d 751; State v. Southern Electric Generating Co., 274 Ala. 668, 151 So.2d 216; Hardin v. McCarthy, 275 Ala. 76, 152 So.2d 141; Hamm v. Proctor, 281 Ala. 54, 198 So.2d 782. It is the rule in Alabama that the presumptions that attend the equity courts finding on the facts do not apply where the question of the equity courts application of the law to the facts is involved. Pruitt v. Key, 281 Ala. 443, 203 So.2d 450; State Department of Revenue v. Consumers Bagging Co., 48 Ala. App. 95, 262 So.2d 297.
Thomas B. Hill, Jr., Neal H. Acker, Montgomery, for respondent.
The term "wholesale sale" or "sale at wholesale" as used in the Alabama Sales and Use Tax Law, includes the sale of meals, snacks and non-alcoholic beverages to an airline when such items are served to and consumed by passengers of the airline and payment is received for said items by the airline from the passengers. Title 51, Section 786(2), (j) and (i), Code of Alabama of 1940, as amended; United Custom Coach, Suspension And Investigation, 26 Cab Reports 23 (1957); Undercofler, Et Al. v. Eastern Airlines, Inc., 221 Ga. 824, 147 S.E.2d 436 (1966); United Airlines, Inc. v. Department of Treasury, Revenue Division, (Circuit Court of Ingham County, Michigan. Decided July 30, 1972; Application For Leave To Appeal Denied By Michigan Court Of Appeals On December 26, 1972, And By Michigan Supreme Court On March 29, 1973; Application For Reconsideration Denied By Michigan Supreme Court On June 8, 1973.) Agreement entered into on May 15, 1974, between United Airlines, Inc., and the Department of Revenue, State of Missouri. The administrative construction of a statute by the Alabama Department of Revenue is invalid and unenforceable if said construction conflicts with regulations or decisions of the Civil Aeronautics Board which has primary regulatory authority over air transportation companies operating in interstate commerce, thus imposing a burden on interstate commerce. Houston, East And West Texas Railway Company v. United States, 234 U.S. 342, 34 S.Ct. 833, 58 L.Ed. 1341 (1913). Philadelphia And Reading Railroad Company v. Penn., 82 U.S. 177, 21 L.Ed. 146 (1872). Gloucester Ferry Company v. Penn., 144 U.S. 196, 5 S.Ct. 826, 29 L.Ed. 158 (1884). Helson v. Kentucky, 279 U.S. 245, 49 S.Ct. 279, 73 L.Ed. 683 (1928); Article 1, Section 8, Clause 3, United States Constitution; Island Airlines, Inc. v. Civil Aeronautics Board, 352 F.2d 735 (9th Cir. 1965); Railway Express Agency, Inc. v. Civil Aeronautics Board, 120 U.S.App.D.C. 228, 345 F.2d 445 (1965); Baltimore Shipping and Receiving Association v. Public Utilities Commission of California, 268 F. Supp. 836 (D.C. N.D.Cal., 1967); 49 U.S.C. § 1373 (b); Transcontinental Bus System, Inc. v. Civil Aeronautics Board, 383 F.2d 466 (5th Cir. 1967); Lichten v. Eastern Airlines, 189 F.2d 939 (2nd Cir. 1951); U.S. Mainland — Hawaii Fares, CAB Docket # 22364, decided May 26, 1972. The Court is not bound by the administrative construction of a statute which has been made by the Alabama Department of Revenue. International Union of Operating Engineers Local No. 321 v. Water Works Board, 276 Ala. 462, 163 So.2d 619 (1964); Hamm v. Continental Gin Company, 276 Ala. 611, 165 So.2d 392 (1964).
The question presented to us by the State's petition for writ of certiorari is:
"When food prepared by Hertz Skycenter, Inc., a company engaged in the business of preparing food for human consumption, is sold to United Air Lines, Inc., a company engaged in the business of furnishing air passenger services, which food is to be served by United to its passengers departing from the Huntsville-Madison County Airport, are such sales 'retail' or 'wholesale' sales within the meaning of the Alabama Sales Tax Law [Tit. 51, § 786(2)]?"
The Court of Civil Appeals concluded that such sales are "wholesale sales," within the meaning of the Alabama Sales Tax Law, and are not subject to sales tax inasmuch as the food purchased by United was intended to be resold to United's passengers for their consumption in flight. We agree.
The Court of Civil Appeals held, 55 Ala. App. 481, 317 So.2d 319, inter alia, viz:
"In the case at bar the trial court found as a fact, and such finding is based on the agreed statement of facts filed in this case, that the food sold by Hertz to United was in turn sold to and consumed by United's passengers, i. e., the price of the food was included in the price of the ticket and the food was consumed by United's passengers."
* * * * * *
"Based on its findings of fact from the agreed statement of facts, the only evidence before the court on this subject, the trial court in the instant case concluded that the sale by Hertz to United was a wholesale sale inasmuch as the food purchased by United was intended to be resold to its passengers. Being a wholesale sale, the food items sold by Hertz to United were not subject to sales taxes. The trial court was correct in this aspect of its decree."
We affirm the Court of Civil Appeals' decision as to this aspect.
The Court of Civil Appeals also held:
"Inasmuch as United Airlines was not a party to the present proceeding and the fact that Section 786(25) [requiring the retailer to collect sales taxes] was not an issue in the case, the trial court exceeded its jurisdictional authority in decreeing that Section 786(25) was not applicable to sales of food by United Airlines to its passengers. See Rogers v. Smith, 287 Ala. 118, 248 So.2d 713." [Bracketed material supplied.]
Since the validity vel non of this holding is not raised by the petition for writ of certiorari, we do not undertake to examine the holding.
Finally, the Court of Civil Appeals held that the trial court erred in declaring that Revenue Department Regulation M5-053 conflicted with Civil Aeronautics Board regulations and was therefore invalid. Regulation M5-053 declares that the price of meals served by any transportation company (including airlines) are not required to be reported as "retail sales" by the company when "no separate charge is made" therefor and the meals are served "as a part of its transportation service."
Although the validity and applicability of this regulation is presented to us, in view of the fact that the regulation purports to regulate the reporting and collection of sales taxes (pursuant to Tit. 51, § 786(25)) by transportation companies, including airlines, and since United Air Lines is not a party to this cause, we decline to consider the validity or applicability of the regulation nor do we think the trial court or the Court of Civil Appeals could do so for the same reason. Doby v. State Tax Commission, 234 Ala. 150, 174 So. 233 (1937). See also Rogers v. Smith, 287 Ala. 118, 248 So.2d 713 (1971).
The issue in the case at bar simply presents a conflict between two opposing interpretations of our sales tax statutes. Hertz, the caterer, says its sales to United were "wholesale sales" and it is not liable for collecting the sales tax. The State, on the other hand, contends the sales were "retail sales" and Hertz is liable for collecting the tax. United, the airline, is not a party to the lawsuit. (The conclusion is, of course, inescapable, that it will ultimately be the passenger who will pay the tax, regardless as to which party is made the collector. State v. T. R. Miller Mill Co., 272 Ala. 135, 130 So.2d 185.)
To conclude, we agree with the Court of Civil Appeals in its conclusion that the sales from Hertz to United were "wholesale sales" and were not therefore subject to sales taxes.
The judgment and decision of the Court of Civil Appeals is affirmed, as corrected by this decision.
Affirmed, as corrected.
HEFLIN, C. J., and MERRILL, FAULKNER, JONES, ALMON, SHORES and EMBRY, JJ., concur.
MADDOX, J., not sitting.