Opinion
No. 35082.
October 26, 1942.
LICENSES.
Where nonresident manufacturer of tractors permitted dealers to accept in part payment trade-in tractors which dealers retained and when such trade-in tractors were sold on part cash and part credit dealers took notes for balance due with privilege of transferring notes at face value to manufacturer to be applied on tractor purchases, manufacturer was not liable for privilege or occupation taxes under the statute on notes taken from purchasers of trade-in property on theory that it was engaged in "lending money" or "purchasing, discounting or otherwise acquiring notes . . . secured by liens" (Laws 1940, chap. 110).
APPEAL from chancery court of Hinds county, HON. GARLAND Q. WHITFIELD, Special Chancellor.
Geo. H. Ethridge, Assistant Attorney General, J.H. Sumrall, of Jackson, and Heidelberg Roberts, of Hattiesburg, for appellant.
The appellant admits that, if this court adheres to its decisions in the Allis-Chalmers Manufacturing Company case and the International Harvester Company case, the appellee here would not be liable for any tax under Chapter 110, Laws of 1940, because of its acquisition of this character of security. The appellant is not urging the court to overrule its decisions in these two cases. That is a matter which he leaves entirely to the sound judgment and discretion of this court. However, the agreed statement of facts in this case shows that this appellant was engaged in a character of business which is not shown to have been true in the Allis-Chalmers Manufacturing Company case or in the International Harvester Company case, and that is, in connection with what is generally called in trade circles, "trade-ins."
The "trade-in" transactions referred to are handled in this way: The retail dealer in Mississippi will sell to one of his customers machinery manufactured by the appellant and placed with the retail dealer on conditional sales contract, and instead of covering the entire sales price to each customer by cash and installment notes, he will accept, as part payment for the machinery, other machinery whether manufactured by the appellant or not. After so acquiring such other machinery, this retail dealer will then sell same to still another party for part cash and part installments evidenced by notes secured by conditional sales contract thereon. After the sale of such "trade-in," the appellant will acquire from this retail dealer the installment notes and conditional sales contract secured by such "trade-in" machinery and pay the retailer therefor by crediting same on the indebtedness due by the retailer to the appellant. In other words, the securities acquired in this manner by the appellant, from these retailers in the State of Mississippi, are no part of or incident to the transaction by which the machinery manufactured by the appellant reaches the ultimate user, to-wit, the customer of the retailer, but is a transaction separate and apart therefrom and one which takes place after the appellant's machinery has reached the hands of the ultimate user or consumer.
We, therefore, respectfully submit, for the serious consideration of the court, the question of whether or not the appellant, in the acquisition of such "trade-in" securities, is not engaged in doing a business of purchasing, discounting, or otherwise acquiring notes, trust receipts or other forms of indebtedness secured by liens on tangible personal property located in the State of Mississippi.
We call the court's special attention to paragraph four of its opinion in the Allis-Chalmers Manufacturing Company case, dealing with what is termed "allied equipment"; that is, equipment which the retailer sells with and as a part of the machinery manufactured by the Allis-Chalmers Manufacturing Company, manufactured by some other company. The court calls special attention to the fact that, in those instances, the Allis-Chalmers Manufacturing Company would pay the other manufacturer for such allied equipment, and thereby become the owner thereof, so far as concerned the sales to and the securities from the customer. But the appellant does not become the owner of the trade-ins referred to. It has no lien thereon. The sale of such "trade-in" equipment is separate and distinct from the sale of the equipment manufactured by the appellant, while, as to the allied equipment, the manufacturer acquires ownership thereof, arranges for it to be sold with and as part of its own manufactured product, in order to make a complete unit for use by the customer. There is a strong intimation in the language used by the court, in the Allis-Chalmers Manufacturing Company case, that, if a separate note and conditional sales contract were taken for this allied equipment and it, in turn, sold to or acquired by the Allis-Chalmers Manufacturing Company, it would then be engaged in doing the character of business covered by the act of the legislature, but, as stated, the transactions by which the retailer sells the "trade-ins" are still further removed from the main business in which appellant is engaged, to-wit, the manufacture and sale of its own manufactured products, and if the Allis-Chalmers Manufacturing Company would have been liable under this statute, in the event the conditional sales contracts covering the sales of allied equipment had been separate and distinct from the contracts evidencing sales of its own equipment and had been acquired by it by purchase or otherwise from the owner thereof, then surely it would follow that the appellant here would be liable for the tax on account of its acquisition of the paper covering "trade-in" sales.
It must be borne in mind that under the general privilege tax statute of Mississippi, Section 243, Chapter 20, Laws of 1935, any person pursuing or engaging in more than one of the businesses for which a privilege tax is imposed shall pay separately the privilege tax imposed upon each separate business so engaged in. This principle has long been upheld by this court.
Postal Telegraph-Cable Co. v. Miller, State Tax Collector, 155 Miss. 522, 124 So. 434.
But it might be contended that the agreed statement of facts in this case shows that the appellant makes no profit on account of its acquisition of so-called "trade-in" paper. Whether it makes a profit or not is immaterial. Whether a profit is made as a result of a transaction is immaterial in determining whether transaction is subject to privilege tax measured by gross proceeds of sales.
Stone v. Rogers, 186 Miss. 53, 189 So. 810.
There is quite a difference between an activity which is merely incidental to a business in which a person is engaged and an activity which is in connection with a separate and distinct transaction or series of transactions, which is engaged in, not primarily for profit on such particular transaction or series of transactions, but which causes some benefit or profit in the other business in which such person might be engaged.
It is submitted that, under the Allis-Chalmers Manufacturing Company case, the acquisition by that company, as well as the appellant here, of installment notes secured by conditional sales contracts on its machinery which it is selling is merely incidental to its business of manufacturing and selling such machinery, but its acquisition of installment notes and conditional sales contracts on "trade-in" equipment, executed by the purchaser thereof, in a transaction separate and apart from the sale of appellant's own machinery, is not merely incidental to its business of manufacturing and selling machinery.
Sidney A. Smith, Jr., and W. Calvin Wells, III, both of Jackson, and Clark M. Robertson, of Milwaukee, Wis., for appellee.
Chapter 110 of the 1940 General Laws of Mississippi does not apply to the instant case regarding acquirement by complainant of purchaser's notes given on trade-in tractors
Stone v. Allis-Chalmers Mfg. Co., 193 Miss. 294, 8 So.2d 228; Craig v. Ballard Ballard Co., 189 Miss. 60, 196 So. 238; Garbutt v. State, 116 Miss. 424, 77 So. 189; Gully v. Goyer Co., 165 Miss. 279, 147 So. 327; Gully, State Tax Collector, v. Gulfport Loan Brokerage Co., 168 Miss. 449, 151 So. 721; Hugo v. City of Oxford, 179 Miss. 450, 176 So. 156; Carney v. Hamilton, Sheriff, 89 Miss. 747, 42 So. 378; Bluff City Ry. Co. v. Clarke, 95 Miss. 689, 49 So. 177; Planters Lumber Co. v. Wells, 147 Miss. 279, 112 So. 9; Independent Linen Service Co. v. State ex rel. Rice, 169 Miss. 62, 152 So. 647; Postal Telegraph-Cable Co. v. Miller, State Tax Collector, 155 Miss. 522, 124 So. 434; Stone v. Rogers, 186 Miss. 53, 189 So. 810; Gen. Laws of Miss. 1940, ch. 110, pp. 93-97.
We submit that the tax levied on finance companies has no application to the notes taken by the Case Company as an incident to the sale by it of its farm machinery. And that the question raised in this appeal was among those decided by the court in the Allis-Chalmers case, in that (1) the trade-in plan is to assist dealer in selling new Case tractors. (2) The Case Company has an interest in the trade-in tractor itself as provided in the contract between the Case Company and the dealer, and therefore it is a sale of goods which this company has acquired and has an interest in but permits dealer a special program in order to satisfy dealer's indebtedness to the company for this new tractor sold. (3) The acquisition of the paper is not a purchase and the company does not "deal in" such paper as a business; it accepts such paper solely as an accommodation to dealer in accord and satisfaction of dealer's pre-existing indebtedness for Case goods. (4) The transaction is clearly an incident to and part of the sale of Case goods.
The facts of this case are the same as those in Stone, Chairman, v. Allis-Chalmers Mfg. Co., 193 Miss. 294, 8 So.2d 228, but with the following additional feature:
Appellee, in the present case, in order to promote the sale of its tractors, permits its dealers to accept in part payment trade-in tractors, similarly to the familiar course of business in the automobile trade, wherein the purchasers of new cars are allowed to trade in their old cars as a part of the purchase price of the new. When an old tractor or other used farm equipment is traded in as a part of the purchase price of a new tractor, the dealer retains possession of the trade-in chattel or chattels, and when he sells this property on part cash and part credit, and takes a note for the balance due, he has the privilege to transfer the note at its face value to appellee to be applied on tractor purchases by the dealer from appellee.
It is contended by appellant that this makes appellee liable under Chap. 110, Laws 1940, for the privilege or occupation taxes on the notes taken from the purchasers of the trade-in property. We are of the opinion that the contention is not maintainable. The plan is simply an incidental means and its own means by which appellee promotes the sales of its tractors, and wherein it realizes on that which was taken as a part of the purchase price of its tractors, not the tractors of some other person.
Affirmed.