Opinion
December 13, 1948. On Suggestion of Error
1. Sales tax — exclusive necessities in processing.
The machine called "Logger's Dream" used in the essential process of getting logs to the mill is within that provision of the statute, Section 10111, Code 1942, which prescribes a sales tax wholesale rate for "machinery, and machine parts . . . which are exclusive necessities to processing".
Headnote as approved by Montgomery, J.
APPEAL from the circuit court of Winston County; J.P. COLEMAN, J.
J.H. Sumrall, for appellant.
W.A. Strong, Jr. and Wilbourn Wilbourn and Jack-Young, Daniel Mitchell, for appellee.
Briefs on suggestion of error:
For appellee:
It is inconceivable that the language of the statute here involved was inserted without some purpose. It clearly is true that the legislature intended by the language to apply the wholesale rate rather than the retail rate to transactions described by the clause in the statute under review. There must have been some reason why the legislature conceived it to be to the public interest to make the wholesale rate applicable to the sales of the nature described in the clause of the statute here involved.
As we understand the opinion of the minority of the court, this purpose was to promote and encourage the progress and development of processing in Mississippi. This point, it occurs to us, is well substantiated by what is the well known policy of Mississippi, namely, to balance industry with agriculture. The statutes and the decisions of the Supreme Court of Mississippi indicate such a legislative policy. The purpose of such policy is manifestly to encourage capital to invest in industries which will carry on processing and manufacture in the State of Mississippi. It would hardly seem necessary to point out the many ways in which such legislative policy would promote the balance of industry and agriculture and promote the welfare of Mississippi. As processing and manufacture, which are partically and substantially the same, are carried on in Mississippi, there is a readier and more convenient market for the natural products of agriculture. There is more labor required to carry on processing and manufacturing which gives opportunity for employment to our citizens and increases their income and their buying power and the very fact that processing and manufacturing are carried on amongst us necessarily increases the products that get into the channels of trade and are sold in manufactured condition at retail so that the state's revenue from the retail sales tax on the products of manufacturing and processing is increased. If, therefore, there was a purpose and it seems inescapable that there must have been a purpose in the enactment of the provision in question, it was in the interest of the state.
We respectfully submit, therefore, that the language of the statute is to be construed in the light of that purpose and that it cannot be rightly said that the legislature intended the language to have so restricted and narrow a meaning as that accorded to it by the majority opinion.
Furthermore, the legislature did not use the singular term "necessity", but the plural term and the language "necessities to processing in this state". The legislature did not undertake to say that only certain types of processing were involved. The legislature intended the terms to apply to all processing in the broad meaning of that term, that was carried on in this state. Processing in this state was what the legislature was concerned about, not processing in some other state, not any particular type of processing, but simply processing in Mississippi. It wanted to encourage and promote processing in Mississippi and it sought to do so by classifying the sales not merely of machinery, but of machine parts and all character of supplies to manufacturers (who are, of course, processors) where such machinery or machine parts or supplies, whatever they may be, were necessities to processing, using the term "exclusive" as merely limiting necessities to the necessities of the broad business of processing, the term "exclusive" in the context here involved not qualifying merely the word necessities as such, that is, as to whether absolute or indispensable, but necessities as limited to the business of processing.
Webster's International Dictionary as a definition of "exclusive" this "Limiting or limited to possession, control, or use by a single individual, organization, etc., or by a special group, class, etc.; as the exclusive privileges of the citizens of a country."
We respectfully submit that it is a mistake to construe the word "exclusive" without taking into consideration the legislative purpose in the enactment of the statute, to-wit, the encouragement of processing in Mississippi and without giving it the meaning that it was intended to limit the wholesale rate to the types of property described, to-wit, machinery, machine parts and supplies, which are exclusive necessities to processing in Mississippi.
When the purpose of the statute is considered and the term "necessities" is construed in the light thereof, we respectfully submit that it is clear that "necessities" is not used in the sense of absolute necessities, nor of things that are indispensable to processing, but that the term is used in the sense of tangible property and supplies of the nature described as are reasonably needed and used in carrying on the business of processing.
The attorney for appellant considered in his original brief, page 4, that if the word "necessities" was used without any other qualifying word, then a liberal interpretation of said term would be permissible, and he adds, "There might be some merit in the construction which the appellee and his attorney place upon said word." But it will be noted that the attorney for the appellant laid great stress upon the term "exclusive" just ahead of the word "necessities" and as we view it gave a wrong interpretation to that word and construed it as characterizing necessities rather than as characterizing merely necessities to processing within this state in the sense of merely limiting the necessities referred to to those which were the necessities to processing in this state.
We respectfully submit that in the light of the legislative purpose in enacting this particular provision of the statute, it is error to disassociate the two words, exclusive necessities, from the other words in the statute, to processing in this state and that no correct interpretation can be arrived at without construing together the words, exclusive necessities to processing in this state, which as we earnestly insist merely means that the necessities referred to are those that pertain to, or relate to processing in this state, rather than those that pertain to any other character of business in this state.
It seems clear to us that what the legislature was concerned about was promoting processing within this state. All the words of the statute must be given some meaning and effect and we respectfully insist that the majority opinion has erred in failing to give due consideration to the legislative purpose in the enactment of the statute.
As a matter of fact, it is not denied in this case that the appellee is a manufacturer of machinery and machine parts, and it is not denied nor contended that "Logger's Dream" is not machinery, and this case does not involve any character of sales of the "Logger's Dream" except to manufacturers, that is, those who are engaged in processing within the State of Mississippi, a very material and substantial natural resource of our state, to-wit, timber into lumber. The processing of timber into lumber brings severance taxes into the State Treasury. It puts the manufactured lumber into the channels of trade from the sale of which the state reaps 2% sales tax and in addition to the increased and enlarged revenues flowing into the State Treasury from the promotion of processing in this state, there are more jobs opened to our citizenry from which their purchasing power is increased, all to the advantage of the state. It would seem to us pointless to classify such sales as are described in the clause of the statute here involved as wholesale sales taking the wholesale rate, unless the underlying purpose of it was the promotion of processing in this state as hereinabove pointed out and as held in the dissenting opinion. The tax at whatever rate is a consumer's tax, and the legislative intent was to give to processors the benefit of the wholesale rate on the types of tangible property mentioned in the statute, and thus to promote and encourage processing within this state.
When we come to consider "necessities to processing", not only should the purpose of the legislature in enacting the clause in controversy be considered, but it is, we submit, both proper and necessary to consider the term, "necessities to processing". The majority opinion has not disagreed with our interpretation of the term "processing". Without repetition of the citations and authorities, we think it is clear, and we think the court as a whole agrees with us, that the manufacture of growing timber into lumber by a sawmill manufacturer is "processing" within the meaning of the term as used by the legislature. This means, as we view it, that the whole procedure from the felling of the tree to the coming out of the lumber from the saw, is "processing". One of the necessities of processing standing timber into lumber in Mississippi is the assembling of the logs after the tree is felled and cut into lengths, the loading of it on to some type of conveyance that will bring it to the mill and to the ramp at the mill and then getting it from the ramp to the saw. Surely, it cannot be said that the handling of the logs from the woods to the saw is not one of the necessities to the processing of standing timber into lumber.
The first test laid down by the majority opinion to determine whether or not a device or piece of machinery is an exclusive necessity to processing within this state is stated to be this: "It must be at least one in general use by those engaged in the business." In laying down this test, however, the court seemed to be dealing with the question as to whether or not the device was an exclusive necessity. We submit in all deference that the real question is as to whether or not the machinery or device is one which can be classified among the necessities which exclusively pertain to processing within this state. At least, we suggest that this would be a more accurate way to pose the question. But we respectfully submit, with reference to test number one laid down by the court, that there is nothing in the statute to be construed which requires that the machine be one generally used by those engaged in the business. If so, how generally must the use be? Must it be universal? Or to what extent must its use be general? Must all of those engaged in the particular line of processing involved be the users of it? Did the legislature intend or require by the terms "necessities to processing within this state", that everybody should be the user of it before it could be classified as a necessity?
We respectfully submit not. If the machine is one adapted to and suitable for discharging some necessary function in processing in this state, we earnestly submit that it can be and should be classified as one of the exclusive necessities to processing within this state, always keeping in mind the necessities of processing as contra-distinguished from other lines of business.
The use of the plural "necessities to processing" and the inclusion along with machinery and machine parts of of "supplies" which are a necessity to processing, we submit, excludes the idea that there is any requirement in the statute that a particular type of supplies, a particular type of machine parts or a particular type of machinery, which serves the purpose of, or meets the necessity of processing in this state, are required to be used by all those engaged in particular business.
The second test laid down by the majority opinion is that the machinery must be "indispensable to an efficient, economical and practical prosecution of the particular work". We earnestly submit that this test is not required by the statute, that the statute by using the term "exclusive necessities to processing within this state" did not intend thereby to include only such machinery, machine parts and supplies as were indispensable or as were absolutely essential. We believe and insist that a more liberal interpretation of the terms was intended and is required in the light of the purpose of the legislature in adopting the provision and, also, in the light of the meaning of the term "necessities" in the context in this statute. If the machine or machinery be reasonably adapted to meeting the necessities of processing in this state, so as that processors engaged in the business (not necessarily all of them) could reasonably find it to their advantage to use the machinery in the prosecution of the particular work, then it seems to us that it comes within the classification indicated in the statute.
The third test laid down by the majority opinion is stated to be that the machinery or machine part is one "for which there is no practical, efficient and satisfactory alternative method". There is no such provision in the statute itself. It is a matter of common knowledge in the history of industry that all manufacturers and all industries do not employ either the same methods or the same machines or machinery in carrying on the work of processing. It would seem to us as reasonable to hold that the legislature had in mind that those engaged in processing in Mississippi would be free to choose among all available machines and machinery such as would serve the necessities of their processing in this state. To hold that a processor of standing timber into lumber could not buy and regard as one of the necessities to processing within this state, a "Logger's Dream" so long as he could accomplish the main purposes accomplished by the "Logger's Dream", with a skidder or a snaking apparatus or some method heretofore used, would be not promoting and encouraging processing within this state, not seeking to develop a better class of processing in this state, but to retard it. It is the equivalent of saying to the processor, "You must stick to the old method as long as it is an available method, notwithstanding there is a new method and a new machine which has more practical efficiency and accomplishes more satisfactorily your purpose than the old alternative method available to you."
In all deference, we submit the legislature did not mean the provision of the statute to have that interpretation.
The fourth test laid down by the majority opinion is that the machinery or machine parts involved must be available in point of original cost and expense of operation to those engaged in the business. In all deference, we do not find any such requirement in the language of the statute. Nor do we see how or why such test should be applied in determining whether or not the particular machine can be classified as one of the necessities to processing within this state. We submit that the processor, himself, is left free by the statute to determine whether or not considering the expense of operation and the cost of a particular machine, it will serve its purposes better than another type of machine that will do substantially the same work and whether or not his business interest will be promoted by using or not using the particular machine. We do not find that the legislature has stated in the provision in controversy that the machinery must be in general use, must be indispensable to an efficient, economical and practical prosecution of the particular work, must be a machine for which there is no practical, efficient and satisfactory alternative machine, nor that the machine must be available in point of the original cost and expense of the operation to those engaged in the business; and with all deference, we respectfully submit that none of those tests ought to be applied in the solution of the questions involved in this case.
Analyzing the test laid down by the court, such tests would exclude from the operation of the statute any machinery not in general use, any machinery where there was some other piece of machinery that was practical, efficient, and satisfactory and any machinery not available in power of original cost and expense of operation to those engaged in the business and any machinery except only such as was absolutely indispensable to an efficient, economical and practical prosecution of the particular work.
Now, if forsooth there are two types of machines either of which is a practical, efficient and satisfactory machine for the accomplishment of the purposes of the processor, both would be excluded since as to each, it could be truly said there was an alternative machine or method. In all deference that proposition seems to us to demonstrate the unsoundness of the test that there must be no practical, efficient and satisfactory alternative method. Also, where there are several types of machinery and several methods of doing the work of the processor and we will say 50% of those engaged in the particular business use one type of machine and 50% another type of machine, or say there were three types of machines some one of which must necessarily be used by the processor and 1/3 of the processors use one machine, another 1/3 another machine and the other 1/3 another machine, then no one of the machines could on that basis be said to be in general use by those engaged in the business and, therefore, all would be excluded, a situation which to our minds is unthinkable. In all deference, it seems demonstrable to us that the test that the particular machine must be one in general use is not a sound test and not within the meaning of the statute.
On the proposition that the machine must be available in point of original cost and expense of operation to those engaged in the business, it is indeed difficult to us to conceive how this test could have had any application. It seems to us that it would involve the whole proposition of classifying for purposes of application in the determination of the cost of the machine, the expense of its operation and the financial ability of those engaged in the business to acquire the machine and whether or not it was manufactured in sufficient quantities to be available. Such a test is, also, unthinkable to us as applicable in this situation.
But analyzing the factual situation here involved, it appears that the majority of the court in reaching its conclusion stressed the fact that there were other methods of assembling the logs and getting them to the mills and that until the last three or four years, the method of handling them with the "Logger's Dream" was not known. We do not see how the comparative newness of the machine can properly be held to have anything to do with the question as to whether or not it may be classed within the exclusive necessities to processing. We have tried to point out that there are alternative methods of assembling logs and transporting them to mills is not a proper test.
The "Logger's Dreams" are manufactured in Mississippi. The tax here asked to be refunded is a consumer's tax and the appellee is only asking for the refund of such tax as was not passed on to the consumer and the tax here sought to be recovered cannot now be passed on to the consumer because it was back assessed to the appellee after the appellee had collected of the consumer what the appellee assumed was the proper tax on the assumption that the "Logger's Dream" carried the wholesale rate. The purchasing manufacturers engaged in processing within this state were the consumers and the incidence of the tax was primarily on them and they were the ones, those engaged in processing within this state, that the legislature intended to encourage by the enactment of this provision. To hold that such sales could not be classified as sales at wholesale because of the newness of this machine and because there were alternative machines that could be used for assembling logs and transporting them to the mills, we respectfully submit would defeat the purpose of the legislature in the enactment of the act.
Furthermore, in denying the wholesale rate to the "Logger's Dream", we submit the court has overlooked even on the second test that the proof bears out the fact that the "Logger's Dream" is the most efficient and the most economical and the most practical method for use in the processing of standing timber into logs. Indeed, the majority opinion says the record supports the claim that "Logger's Dream" is the most economical and efficient machine yet devised for assembling logs into piles and transporting them to sawmills. We note in the record a pamphlet which we believe is referred to in the testimony, showing a picture of the "Logger's Dream" and of its operation and it seems to be clear that the machinery known as "Logger's Dream" here involved, is the more economical machine regardless of the price of it for the reason that with it logs may be handled out of terrain that would perhaps have to be abandoned to await a dry season or because of the steepness of the terrain or its otherwise inaccessibility of because of the fact that the logs can be assembled with fewer man-hours and timber can be saved which in the past has had to be passed over due to the difficulty of getting to it and getting it out, the saving of time in chaining the logs and loading on trucks and fiat cars with the right sizes of logs carefully placed is a district economy. We submit that "Logger's Dream" has been proven to be and is in fact an instrumentality which is now indispensable to the most efficient, economical and practical prosecution of the work of processing standing timber into lumber.
The majority opinion declared that the decided cases are of little help and makes no reference to any of them, but refers to Webster's New International Dictionary, Second Edition for the definition of the word "necessary" as "Essential to a desirable or projected end or condition; not to be dispensed with without loss, damage, inefficiency or the like; as a necessary tool". Strictly speaking, the word "necessary" is not the word used in the statute. Our thought is that since the statute employs the term "necessities" rather than the singular "necessity" and speaks of such necessities as necessities to processing within this state and makes the term "necessities" apply not only to machinery and machine parts, but to a general term "supplies", a broader and more liberal interpretation than the court has given, is indicated by the statute, itself. But be that as it may, even under the definition of the word "necessary" contained in the opinion of the court and quoted from Webster's New International Dictionary, Second Edition, "necessities" as referred to in the statute are neither absolute necessities nor indispensable necessities. Certainly, "Logger's Dream" is an instrumentality desirable in accomplishing the end of the manufacture, to-wit, the assembling of the logs from difficult terrains and all character of terrains in the woods, from the swamps, sides of hills to vehicles for transportation to the mill and to the ramp at the mill as indicated hereinabove. Surely, it cannot be denied that an instrumentality of this nature is both necessary and desirable to this end and in view of the superiority of this instrumentality in accomplishing this particular end, we submit it may very appropriately be held and and should be held that it is an instrumentality which cannot be dispensed with without loss, damage, inefficiency or the like.
There are many different kinds of tools which are ordinarily classed as necessary tools and which are used variously to accomplish the same end by those engaged in an industry. For instance some character of tool is necessary in felling a tree in the woods; either an ax or a saw must be used. Which of the two would be classed as a necessary tool? Could it be said to the ax, "You are a necessary tool in the felling of trees in the woods" and then to the saw, "You are not a necessary tool because forsooth the ax is a fairly efficient tool for the same purpose"? It would seem to us that both the ax and the saw are to be classed as necessary tools, even though the ax was the one first used; even though the ax may be the cheaper tool and even though it may have been used longer than the saw.
In other words, the processor of timber into lumber cannot proceed without either an ax or a saw and the absence of either of them would entail loss and damage and inefficiency. We submit, also, that it is equally true that the processor of standing timber into manufactured lumber cannot carry on that work without loss, damage, inefficiency, or the like unless there is available and he can procure a machine or instrumentality whereby to accomplish the more efficient and economical and speedy gathering of the logs out of the woods and whereby he can assure himself that he can more closely log the entire terrain and get more logs from otherwise inaccessible areas and get them more speedily.
If there is any soundness in the foregoing suggestion, then surely if we start our reasoning from even Webster's definition of the word "necessary", it logically follows that this record discloses that "Logger's Dream" is the more efficient and better instrumentality for the accomplishment of the desired end of the processor than any other machine that he could use in the assembling of logs. We suggest furthermore that the large amount of money which this record discloses has been invested by manufacturers of standing timber into lumber in this particular machine and the large number of purchases thereof by such manufacturers indicates very pointedly that farseeing operators engaged in this business recognize the efficiency and economy of this particular instrumentality in the practical prosecution of this particular work. It is inconceivable to our minds that Taylor Machine Works in so short a time could have developed this machine and a plant for its manufacture and could have successfully operated such plant and could have induced hardboiled operators of sawmills engaged in converting tracts of timber into lumber to put all the money that they have put in this instrumentality, if same was was not an instrumentality clearly desirable to their particular aim and indispensable to an efficient, economical and practical prosecution of the particular work of processing timber into lumber.
Certainly, it would seem that the manufacture and sale of this particular instrumentality by Taylor Machine Works and its purchase by sawmill operators has been so extensive in the short period of years that such instrumentality has been in use, indicates that the original cost and the expense of operation of such instrumentality has not deterred the sawmill operators from investing their money in it. A good business operator of a sawmill would not have bought this instrumentality without believing that its cost and its expense of operation would be to the benefit of his business. There is nothing to indicate that the purchases of "Logger's Dream" have been purely experimental and certainly it could never have been assumed that Taylor Machine Works would be manufacturing and selling the article unless it could be done; that there was a market for it which would consume the output of its plant. We think it can fairly be assumed from the record as is, that the appellee has a plant that is turning out large quantities of this instrumentality and is finding a ready market for it. We submit that the record as is, sufficiently shows the availability in point of original cost and expense of operation of this instrumentality to the business of converting standing timber into lumber.
We respectfully submit that Section 10108, Code of 1942, does not provide for a normal 2% tax on the gross proceeds of all sales of a business such as is dealt with by the statute. The statute is to be taken by the four corners and construed as a whole and so construing it, we submit that manifestly the legislature by the frequent use of the word "provided" in setting forth the rates of taxation clearly showed that they did not intend that 2% should be applied to the proceeds of all sales of a business. We submit that the proper and correct view of the section is that it establishes a rate for wholesale sales, a rate applicable to sales of automobiles, trucks and tractors, a rate applicable to the sales of pasteurized milk. In other words, the true meaning of the statute is that different rates are applicable to sales at wholesale and to sales at retail and to other types of sale as indicated in the statute. The statute, as it were, sets up classes of sales not as exemptions and not as exceptions to a general 2% sales tax. In other words, taking the statute by the four corners, the wholesaler within the meaning of the act, is taxed at a certain rate, the seller of automobiles, trucks and tractors at a certain rate, the seller of pasteurized milk at a certain rate and one selling at retail at a different rate. We respectfully submit that the real purpose of the statute is to set up classifications of sales and apply a specific tax thereto and not to set up a normal sales tax of 2% with exceptions.
Therefore, our contention is that the majority of the court is in error in holding that the appellee was under any burden to establish an exception to the normal rate. A construction of the statute favorable to the taxpayer in line with Independent Linen Service v. Stone, 192 Miss. 832, 6 So.2d 110, it seems to us and we respectfully submit, requires that the statute should be construed merely as one establishing different rates of taxation for sales at wholesale and sales at retail and sales of the other classes mentioned in the statute. So far as we know, no burden was ever held to have been placed upon a man engaged in the business of selling automobiles, trucks and tractors to convince the State Tax Commissioner and the courts that he was entitled to the 1% rate mentioned in the statute, nor that the seller of pasteurized milk was under any such burden, nor that the seller of goods at wholesale within the definition of the statute had any such burden. Other than to show in one case that he did sell automobiles, trucks, and tractors or in the other case that he did sell pasteurized milk or that the sales were at wholesale rather than at retail, there is no burden under the statute on the taxpayer. It is true that a party engaging in the business of selling at both wholesale and at retail is required to pay the retail tax on the retail sales and the wholesale tax on the wholesale sales and to keep sufficient records to distinguish between the two. But all these things are purely for purposes of classification. They are neither exemptions from taxation, nor exceptions to any normal rate within the true sense of that word.
We respectfully insist that it is not correct to say that Section 10108 by its terms provides a 2% normal rate on gross proceeds of all sales of a business so that the taxpayer has the burden of showing and proving that he does not have to pay the 2%. The taxpayer is only required to pay the rate applicable to the type of sale he makes and when the Tax Commissioner comes along and undertakes to back assess, he is under the duty to impose the rate of tax called for by the proper classification of the sale as to whether or not it was at wholesale or at retail. The clause here in controversy simply declares that sales such as are described therein are sales at wholesale and taxable at the wholesale rate provided they are evidenced by proper and adequate invoices and records. It is not disputed that such sales were so evidenced. Indeed, in this record, it occurs to us, that every phase of the provision of the statute here involved is admitted except that the Tax Commissioner denied that same were sales of exclusive necessities to processing within this state. The statute here involved was a direction to the State Tax Commissioner with reference to construing a sale of this machinery. Indeed, it is a direction to the courts as well, as to the construction to be placed upon such sales and the rate applicable thereto. Whether or not sales of "Logger's Dreams" in the instant case on this record were sales of machinery, machine parts and supplies which are exclusive necessities to processing in this state, we submit, is unquestionably a mixed question of law and of fact and more particularly a question of fact and that the decision of the lower court on that point should have great weight and should not be overthrown by this court unless this court can say that the conclusions of the lower court are unreasonable and clearly contrary to the law.
In determining the mixed question of law and fact here involved, the lower court had before it evidence which, the majority of the Supreme Court recognized in the controlling opinion, established the usefulness of the machine, its suitableness for the purposes of the process of standing timber into lumber and that it is the most economical and efficient machine yet devised for assembling logs into piles and aiding their transportation to sawmills. The lower court, also, had before it as is recited in his opinion as part of the record, the admission that the Tax Commissioner had construed a Diesel engine as an exclusive necessity to processing. Taking the record by the four corners, we respectfully submit and urge that there were so many facts before the lower court on which he based his conclusion, that it cannot be said that his decision as to how these particular sales were to be classified and the rate to be applied thereto was unreasonable and clearly contrary to law.
For appellant:
While it is true that in the opinion of the lower court the following statement is made: "The able and distinguished attorney for the State Tax Commission, who has made a brilliant argument in this case, admits that Diesel motors are not taxed by the State Tax Commission because of a Commission holding that they are an exclusive necessity in the manufacture of lumber." This is an erroneous statement, made by the court, no doubt, because one of the attorneys representing the plaintiff, in his argument before the court stated this as a fact. And in answer thereto I said that if true, it was doubtless on the theory that some kind of motive power was as necessary to operate a sawmill as was the saw, the carraige, the boiler, or engine of some kind to furnish the motive power without which these other features were useless.
But I deny positively that this attorney stated that such ruling had ever been issued, and as a matter of fact the records of this department do not disclose that any such ruling has ever been officially issued.
When this fact, which is not borne out by the record, is removed from the consideration of this court, then I say the court being confined to the pleadings, the stipulation filed in the case, and the oral testimony produced in the court, none of which established such fact, then it must be concluded that the lower court, as well as the dissenting opinion, are based upon a false premise.
The dissenting opinion seems to abandon the reasoning first set out as to the purpose of the legislature, and the supposed object of the enactment of the language relied upon in the statute, and finally "laying aside further discussion of that phase of the matter" states that "by its own confession in the record, the State Tax Commission treats Diesel engines as an `exclusive necessity in the process of manufacturing' lumber". And I respectfully submit that this statement in the dissenting opinion is not borne out by the record.
If the conclusion in the dissenting opinion that the "Logger's Dream" is an exclusive necessity in the process of manufacturing, merely because it is a device necessary to procuring logs without which a sawmill cannot operate, then by the same reasoning, the trucks or other vehicles with which the logs are transmitted from the place of procurement in the woods to the mill where the actual manufacturing takes place, are likewise such exclusive necessities for processing.
While I did not cite any cases covering this theory in my original brief, because it had never occurred to me that ordinary reasoning would cause such a conclusion to be reached, I now find a case bearing on this identical contention, under a similar law where the question of exemption from a high tax is claimed on the basis that the device in question is an exclusive necessity for processing.
The court must bear in mind that the sole question before this court is whether or not the sale of the devices in question were taxable at the rate of two per cent as provided by Section 2 (c) of the Sales Tax Law of Mississippi. In determining whether or not such sales are retail sales, necessarily the difference between a retail sale and a wholesale sale, which the plaintiff claims is the proper classification of the sales made, we must refer to the classifications as set out in Section I of the law, which defines a wholesale sale as follows: "A classification of wholesale sale should apply only to a sale of tangible property when made to a licensed dealer or jobber for the purpose of resale in the regular course of business".
This is a uniform definition which applies to all sales of tangible property when made within the State of Mississippi and any exception from that general provision for the purpose of reducing the amount of tax imposed under this general provision amounts to granting an exemption to the extent of the difference between the rate of two per cent imposed by said Section 2 (c), and such lesser rate as is imposed under certain conditions.
I therefore assert that there being no question that the sales involved in this case were not made to licensed dealers for the purpose of re-sale, but were sold for the use of the purchaser, then there could be no question as to the correctness of the rate demanded of two per cent, unless the rate of the tax should be reduced by one of the exceptions to the general provisions of the law fixing the retail rate at two percent.
This plaintiff having paid only one-forth of one per cent as a manufacturer's tax for the privilege of manufacturing said product, a demand having been made for the difference between the one-forth of one per cent and the two per cent rate imposed by law for such retail sales, then any provision of the statute which reduces the amount of said rate is necessarily in the nature of an exemption, and the language relied upon in claiming such reduction must be strictly construed.
Since the lower court reached an erroneous conclusion in this matter, based upon the facts that did not appear in the record, and, secondly, a conclusion which he reached only because of the absence of any cases in point; and the dissenting opinion likewise being based apparently upon facts which are not included in the record, as well as a misconception of the purpose of the statute, likewise in the absence of any definite authority for establishing a contrary view, then I think the case of State Tax Commission v. Baltimore Asphalt Block and Tile Company, decided by the court of appeals of Maryland and reported in 26 A.2d 371 is a correct conclusion reached upon a similar law under similar facts.
Since the facts in the case just cited, as well as the argument of the appellee in this case, and the reasoning set out in the dissenting opinion are so similar in all respects to the facts and argument disclosed by said quoted language, to my mind, it should be controlling since the principle involved is identical.
The rule with reference to the strict construction of exemption statutes is so well established that I do not deem it necessary to cite the many cases to this court on that subject. But in the case of Morris v. Riley, reported in 135 Miss. 1, 99 So. 466, there is contained an announcement of the rule in a concise, positive manner, in the following language: "Statutes exempting property from taxation are to be strictly construed against the `would-be' exemptionist. He must bring himself clearly within the statute under which the exemption is claimed. All reasonable doubts are resolved against him. New Standard Club v. McGowen, 111 Miss. 92, 71 So. 289, Ann. Cas. 1918 E, 274".
Another recent case which I think is exactly in point with the facts and the law involved in this case is that of Saunders Mills, Inc. v. Evatt, Tax Commissioner, decided by the Supreme Court of Ohio and reported in 39 N.E.2d 526.
Response by appellee.
The trial judge made the record as to what was conceded by the counsel for the appellant on the trial. His finding of fact thereon has not heretofore been challenged, until by way of response to the suggestion of error. The record, to which as counsel correctly argues, this court is confined, is clear on the point that the attorney for the Commission "admits that Diesel motors are not taxed — because of a Commission holding that they are an exclusive necessity in the manufacturing of lumber." Counsel's statement in the response to the suggestion of error cannot be effective to alter the record now.
But it is, also, manifest that counsel for appellant do not now say that the Commission actually imposes the 2% tax on Diesel motors, or that in fact the Commission does not deal with Diesel motors as among exclusive necessities to processing. The basis of not taxing Diesel motors at the retail rate must ex necessitate be the conviction of the department officials that such action is correct. The practical application of the law is just as revealing as if a written ruling had been made. It is a case where we may say "actions speak louder than words".
There is no question of an exemption or something in the nature of an exemption involved.
The question here is not has the legislature granted an exemption or provided an exception to a tax imposed. The question here is what tax is laid on this property under these facts under the provision of the statute involved.
We respectfully submit counsel is in error on all such observations, with which he has prefaced his citation of and comments upon the case of State Tax Commission v. Baltimore Asphalt Block Tile Company, 26 A.2d 371. Such case, so strongly relied on by appellant's counsel, is not as he argues based on a similar law under similar facts. Both the law and the facts are different; and the case is neither controlling nor persuasive here.
In said case of State Tax Commission v. Baltimore Asphalt Block Tile Company aforesaid there was involved a claim of absolute exemption of certain property from all taxes whatever. The law involved expressly purported to grant an exemption from taxation. What was claimed was an exemption. No such case is involved here. No exemption is purportedly granted nor is one claimed. The property here involved was subject to tax and concededly so. It is here purely a question as to what tax the legislature has directly imposed in the state of case here involved.
We most respectfully disagree with the contentions of the counsel for the appellant that the case of Saunders Mill, Inc. v. Evatt, Tax Commissioner, decided by the Supreme Court of Ohio and reported in 39 N.E.2d 526, is directly in point with the facts and the law involved in the instant case. The Ohio statute was, also, one whereby an absolute exemption from the tax levied on each retail sale of tangible personal property was expressly granted by the legislature and was claimed by the taxpayer. The thing there expressly involved was an exemption for the tax as laid as expressly stated in the Act.
This suggestion of error is filed by Taylor Machine Works and challenges the former decision of this court, reported in 36 So.2d 137 and not yet reported in our State Reports.
We have before us for construction the last paragraph of Section 10111, Code of 1942, and particularly that part of it using the language "machinery, machine parts, and supplies which are exclusive necessities to processing." The pertinent portion of this statute reads as follows:
"Sales of tangible personal property to manufacturers only, of machinery, machine parts, and supplies which are exclusive necessities to processing within this state shall be construed to be wholesale sales when the manufacturer to whom the sales are made is taxable under section 2-b (sec. 10107) of this act and the gross proceeds from such sales shall be taxable at the wholesale rate. Provided, however, that such sales may be classed as wholesale sales only if evidenced by proper and adequate invoices and records."
Taylor Machine Works is a Mississippi corporation and manufacturers in this state a machine called "Logger's Dream," a description of which may be found in the former opinion of this Court.
The question for decision is whether the wholesale rate of one-eighth of one percent or whether the retail rate of two percent should have been paid by appellee as sales tax on its sales during the years of 1944, 1945 and 1946 of this machine, called "Logger's Dream." It paid on the wholesale rate.
The question, therefore, is whether the "Logger's Dream" is an "exclusive necessity" to the processing of lumber in this state. Whatever its secondary purposes may be, it is clear that the primary use or purpose of the "Logger's Dream" is to assemble scattered logs into piles or placing them on trucks, tram cars, etc., for transport to sawmills. As a secondary use it may be used for lifting heavy articles, such as mired down, overturned or ditched automobiles or trucks, but such use would be the unusual and not the primary use for which the machine is intended, as indicated by its name "Logger's Dream."
Most every article in daily use can be and is at intervals used for other than its primary purpose for which it was intended to be used. We think of a hat, and there comes to mind its primary use as a shaped covering for the head, but hats are sometimes used for other purposes. Section 970, Code of 1942, in providing the manner in which shares in the partition of lands shall be allotted, provides that the commissioners shall publicly number as many tickets as there are shares to be allotted and put the tickets into a "hat" and allot the shares by drawing. Hats are frequently passed in assemblies for taking up collections or ballots. But still the primary use of the hat is as a covering for the head and the primary use or the "Logger's Dream" is for the collection and loading of logs onto trucks or cars for transport to a sawmill.
The gathering and loading of logs for transport to the sawmill is a necessary and essential step in their processing into lumber. The getting of the logs to the mill is a sine qua non to their processing into lumber. Hence the gathering of the logs, after felling, and the loading of the logs on trucks or cars for transport to the sawmill is a necessary operation for and a part of their manufacture into lumber. It is just as vital to the act of processing as is the power that operates the mill.
It is true that logs may be and generally are gathered and loaded on cars or trucks by instrumentalities other than the "Logger's Dream", but whatever the instrumentality used may be, that instrumentality is a necessity "to processing" within the state for it is performing a necessary step in the process of manufacturing, and when that is the constant and only recurring use made of such instrumentality then its use is exclusively for processing within the state.
It has been the public policy of this state for several years to encourage industry within the state. This is illustrated by the passage of the B.A.W.I. bill and the consequent encouragement to industry to set up factories within the state. It was the purpose of the Legislature, in the enactment of the statute here under review, to stimulate, in the state, the process of manufacture. The term "exclusive," as used in the act, was not intended to modify or limit "necessities," but the Legislature intended that "exclusive" should modify the words "to processing" within the state. The purpose and intent of the Legislature evidently was that a sale of machinery, machine parts and supplies that were "necessities" to processing within the state and whose primary usefulness was "exclusive" to processing "within the state" should "be construed wholesale sales," upon compliance with the other terms of the statute. In this way, industries engaged in processing within the state would be given the benefit of the lower wholesale rate on "necessities" "exclusive" "to processing" within the state. Such industries pay sales taxes on their manufactured products, pay ad valorem taxes on their properties, and their payrolls stimulate commerce and trade in the state.
It is evident therefore that the Legislature intended by the words "machinery, machine parts, and supplies which are exclusive necessities to processing" to classify as taking the wholesale sales tax rate any "machinery, machine parts, and supplies" whose primary use performs a necessary step in the operation of processing in the state, and whose actual use is exclusively in the operation of processing in the state. Any such tangible personal properties are "exclusive necessities to processing" in the state and take the wholesale rate. (Hn 1) The "Logger's Dream" meets these requirements and is an exclusive necessity to processing within the state, and when sold in full compliance with the terms of the aforesaid statute its sale shall be taxed at the wholesale rate.
Three of the members of this Court are of the opinion that the suggestion of error should be sustained, which under our rules of procedure results in the affirmance of the judgment of the trial court.
Suggestion of error sustained and judgment affirmed.
CONCURRING OPINION.
In voting to sustain the suggestion of error I do so in adherence to the dissenting opinion which is among the original opinions handed down on June 14, 1948. Therein mention was made of the ruling by the Tax Commission that a Diesel engine is to be given the lower classification. In the record in this case the following statement appears as having been made by the trial judge:
"The able and distinguished attorney for the State Tax Commission who has made a brilliant argument in this case, admits that Diesel motors are not taxed by the State Tax Commission because of a Commission holding that they are an exclusive necessity in the manufacture of lumber."
This statement was and is unchallenged by any method by which under the law such a statement may be challenged or corrected. A pertinent statement made by a trial judge must be accepted by us as true so long as it remains in and as a part of the record. National Box Co. v. Bradley, 171 Miss. 15, 16, 30, 154 So. 724, 157 So. 91, 95 A.L.R. 1500, and cases there cited.
The only basis for now saying that the statement by the trial judge was not in fact correct is upon assertions made in the Chairman's brief on the suggestion of error, but we have repeatedly held that in deciding cases we must act on the record (of which a statement of fact by the trial judge is a part) "not by assertions of fact made in briefs or suggestions of error, however sincere counsel may be in those assertions." Alexander v. Hancock, 174 Miss. 482, 498, 164 So. 772, 165 So. 126. See also Rayl v. Thurman, 156 Miss. 8, 14, 125 So. 912; McLendon v. Ravesies, 178 Miss. 428, 433, 173 So. 303.
Smith, J., concurs in the above opinion.
DISSENTING OPINION.
The question for decision here is clear and simple. Is it shown that "Logger's Dream" is an exclusive necessity for moving logs from the woods to sawmills where the logs are cut into lumber? The answer, under the proof in this record, is as clear and simple as the question. The use of this machine could not be an exclusive necessity for that purpose for these reasons:
First, the device had been in existence only three or four years when the case was tried. Patent had been applied for but not granted. During all the years in the past, since the use of sawmills began, other methods had been used for moving the logs to the mills.
Second, the cost of this machine is prohibitive to small sawmill operators. It sells for some twenty-eight hundred dollars. Hundreds of small operators could not afford to pay such a price.
Third, the proof shows that when the case was tried there were some seven thousand sawmills being operated in Mississippi. Approximately eight hundred of these devices had been sold. Part of these were sold out of this State. It is not shown how many had been sold in Mississippi. But even if all eight hundred had been sold in this State, less than one out of seven mills was using the "Logger's Dream."
Many methods are used to get logs from the woods to sawmills — skidders, tram cars operated on dummy rail lines, caterpillar and other tractors to drag or haul them, snaking them by horse or motor power.
How, then, can it be said, as a simple matter of reason and logic, that "Logger's Dream" is the exclusive method necessary for doing that? A dozen other methods are used. The use of this device is not a necessary method — much less an exclusive necessity.
The controlling opinion now being handed down lays much stress upon the assumption that this machine was being used exclusively to move logs to mills, whereas it could have been used for a number of other purposes. With great deference to my brethren who have adopted the controlling opinion, they have the spade by the wrong end of the handle. They have permitted themselves to run off on a tangent to the real issue in the case. The question is not whether the device is being used exclusively to move logs but whether its use is an exclusive necessity for that purpose. If exclusive use is the test, then the owner may exempt all trucks, trains, or other devices from the applicable tax, by simply showing that they are being used only to move logs, although they be just as suitable, or more so, for doing numerous other things, and although there are dozens of other devices better adapted to moving logs, and are actually being used for that purpose.
The trial judge, and the Members of this Court joining in the original dissenting opinion, apparently grounded their conclusions mainly upon the assumption that the State Tax Commissioner had ruled that Diesel engines, furnishing motive power, came within the statute here involved. There is no proof whatever in the record that such is the fact, and it has developed on the Suggestion of Error that no such ruling has ever been made, and no such exemption has been allowed by the State Tax Commissioner. The present controlling opinion has abandoned that assumption. It makes no mention of it. Thus, in my humble judgment, the only plausible reason in support of the former dissenting opinion and the now controlling opinion has entirely disappeared. It was a collateral matter in the first place. It is now shown the assumed fact never existed. The foundation having fallen, it would seem that the superstructure builded thereon should fall also.
Alexander and McGehee, JJ., join in this dissent.