Summary
In Thompson v. Rhodes-Jennings Furn. Co., 268 S.W.2d 376, the Supreme Court of Arkansas followed the General Trading Co. case on analogous facts, having concluded that Miller Brothers had in no way impaired its validity and authority.
Summary of this case from Topps Garment Corp. v. StateOpinion
No. 5-207 and 5-211 consolidated
Opinion delivered May 24, 1954. [Rehearing denied June 21, 1954.]
1. LICENSES — SALES AND USE TAXES — SELLER AS AGENT FOR COLLECTION OF TAX — A non-resident vendor, whose only entry into Arkansas is for purpose Of delivering, Without additional charge, merchandise purchased at its store to Arkansas residents, is not obligated to collect and remit the 2% sales tax. 2. LICENSES — SALES AND USE TAXES — PAYMENT AND COLLECTION — UNJUST ENRICHMENT. — Where sales tax was collected by vendor subject to return to customer in event vendor was not legally obligated to collect tax, the doctrine of unjust enrichments, applied in Cook Comm. v. Sears-Roebuck, 212 Ark. 308, 206 S.W.2d 20, does not apply to keen vendor from recovering money so collected, but paid under protest. 3. LICENSE — SALES AND USE TAXES — SELLER AS AGENT FOR COLLECTION OR TAX. — The regular use of traveling salesmen in Arkansas makes a non-resident vendor liable for collection of Use Tax although formal acceptance of orders is made in Tennessee.
Appeal from Pulaski Chancery Court, First Division E. R. Parham, Chancellor; Nos. 207 and 210 affirmed. Nos. 208, 209 and 211 reversed.
O. T. Ward, for appellant.
Daggett Daggett, for appellee.
Five separate cases were filed in the Pulaski Chancery Court against the Commissioner of Revenues of the State of Arkansas. In each case, the plaintiff was a Tennessee corporation or individual, seeking to prevent the said Commissioner from claiming a tax against such plaintiff. Two of the cases (numbered 207 and 210 in this Court) involved the Arkansas Gross Receipts Tax, being Act 386 of 1941 (84-1901 et seq. Ark. Stats.), which is a Sales Tax. The other three cases (numbered 209, 211 and 208 in this Court) involved the Arkansas Compensation Tax, being Act 487 of 1949 (84-3101 Ark. Stats. Pocket Supplement), which is a Use Tax. In each case, the Commissioner of Revenues of the State of Arkansas (hereinafter called "Commissioner") had assessed a tax against the Tennessee firm, which had been paid under protest as a prerequisite to the filing of the suit in the Pulaski Chancery Court to recover the amount paid. Such procedure is established by Legislative enactment.
In the Act itself, Section 1 says "Compensation Tax". In 84-3101 Ark. Stats. says "Compensating Tax".
When the cases were originally filed, Horace E. Thompson was Commissioner of Revenues, but since then, Vance Scurlock is Commissioner. However, we continue to style the cases as "Thompson, Commissioner".
See 10 of Act 386 of 1947 for Sales Tax cases; and 20 of Act 487 of 1949 for Use Tax cases. The Use Tax Act says "Circuit Court", but no objection to forum has been made herein.
The five cases were never consolidated, but each was separately tried, on its own stipulated facts. In each case, the Chancery decree was adverse to the Commissioner, and he has appealed. For convenience, we allowed the five cases to be jointly briefed, although they were never consolidated. the cases were submitted to this Court in October, 1953; but, by agreement of all parties, we delayed our decision until the Supreme Court of the United States delivered its opinion in the case of Miller Bros. v. Maryland, which case involved the Maryland Use Tax, sustained by the Court of Appeals of Maryland in 201 Md. 535, 95 A.2d 286. The decision of the Supreme Court of the United States, reversing the Maryland Court, was delivered April 5, 1954. See Miller Bros. v. Maryland, 347 U.S. 340, 98 L.Ed. 744, 74 S.Ct. 535. So each of the five cases pending in this Court is now ready for our decision. We have studied most carefully the decision of the Supreme Court of the United States in Miller Bros. v. Maryland; and, as a result, we find that two of the present cases must be affirmed; and three of the cases must be reversed. It thus becomes necessary for us to give the particular facts in each of the five cases; and this will, in effect, be a separate decision on each of the cases, but all contained in this one opinion.
Case No. 207
THOMPSON, COMMISSIONER, v. RHODES-JENNINGS FURNITURE Co.
In this case, the Commissioner claims that Rhodes-Jennings is liable to the State for the Gross Receipts Tax, under Act 386 of 1941 (84-1901 et seq. Ark. Stats.) because of sales of merchandise made by Rhodes-Jennings to residents of Arkansans. The facts were stipulated, as follows
Plaintiff Is a corporation organized under the laws of the state of Tennessee. It has not qualified to do business in Arkansas, nor does it own or maintain a place of business in this state, neither does it have agents or drummers who solicit business herein.
"Plaintiff has heretofore sold merchandise to residents of Arkansas, all of such sales being made in the following manner
"(a) Residents of Arkansas come in person to the place of business conducted by plaintiff in Memphis, Tennessee, and purchase and pay the consideration for certain items of merchandise, and
"(b) Residents of Arkansas use the Federal postal service or interstate telephone or telegraph service and offer to purchase from plaintiff such items of merchandise, and such offers are accepted or rejected by defendant in Memphis, Tennessee.
"That in either or all of such transactions so had, the offer to buy such merchandise so made by the resident of Arkansas, and the acceptance thereof by plaintiff, was made in Tennessee, and the consideration therefor was paid in Tennessee. Thereafter, plaintiff delivered the merchandise so purchased without additional charge to the home or place of business of the Arkansas resident by its truck. Plaintiff has an established policy generally known to its customers that such delivery will be made within a radius of 100 miles of Memphis, Tennessee, at no cost to the purchaser."
It is clear from the above stipulated facts that Rhodes-Jennings, place of business is in Tennessee, that it does not have any agents or salesmen traveling in Arkansas, that in each instance the sale to the Arkansas resident was completed in Tennessee, and that the only time Rhodes-Jennings, or any of its employees, ever entered the State of Arkansas, was when the truck of Rhodes-Jennings brought the articles into Arkansas for delivery.
The Commissioner claims that Rhodes-Jennings is liable for the Gross Receipts Tax levied by Act 386 of 1941 (84-1901 Ark. Stats.), which is a Sales Tax Act. In McLeod v. Dilworth, 205 Ark. 780, 171 S.W.2d 62, we held that sales made in Tennessee under similar circumstances were not subject to the Arkansas Sales Tax; and the Supreme Court of the United States affirmed the case in McLeod v. Dilworth, 322 U.S. 327, 88 L.Ed. 1304, 64 S.Ct. 1023. But the Commissioner now contends that the effect of the holding of the U.S. Supreme Court in General Trading Co. v. State Tax Commission, 322 U.S. 335, 88 L.Ed. 1309, 64 S.Ct. 1028, and Norton Co. v. Dept. of Revenue of Ill., 340 U.S. 534, 95 L.Ed. 517, 71 S.Ct. 377, was to overrule the holding in McLeod v. Dilworth; and the Commissioner also contended that the decision of the Maryland Court of Appeals in Miller v. Maryland showed a broadening of State taxing power, even as regards sales tax cases.
All the contentions of the Commissioner are answered adversely to him by the decision of the U.S. Supreme Court in Miller v. Maryland, 347 U.S. 340, 98 L.Ed. 744, 74 S.Ct. 535 (opinion of April 5, 1954), wherein McLeod v. Dilworth is cited, and General Trading Co. v. State Tax Comm, is explained. So we see no merit In any of the aforementioned contentions of the Commissioner.
Finally, and in this one case only, the Commissioner balls attention to the following stipulated facts:
That plaintiff holds in escrow the sum of $1,316.32, representing two per cent (2%) of the amount of said sales which is the subject of this litigation. Said purchasers made such deposits under protest, and under the express agreement between the parties that the amount so paid by each and every one of them would be held in trust by plaintiff; that plaintiff would contest the legality and validity of the Arkansas Gross Receipts Act and that the amount of such alleged tax so deposited would be returned to each and every one of them in the event it should be later determined that (1) plaintiff was not legally obligated to collect said tax, or (2) that it be held that the tax is not applicable to such sales and therefore illegal and invalid.
The Commissioner insists that the case of Cook, Comm. v. Sears-Roebuck, 212 Ark. 308, 206 S.W.2d 20, is authority to prevent Rhodes-Jennings from recovering the money paid under protest in the case at bar. But we find no merit in this contention of the Commissioner. It is stipulated that Rhodes-Jennings holds the money subject to return to its customers. When Rhodes-Jennings prevails in this case, then the customers get the return of their money. No such facts were shown in the Sears-Roebuck case, and the absence of such facts led to the application of the doctrine of unjust enrichment in the Sears-Roebuck case. That doctrine has no application here.
We affirm the Chancery decree in favor of Rhodes-Jennings Furniture Company in the case at bar.
Case No. 210
THOMPSON, COMMISSIONER, v. LEO KAHN FURNITURE COMPANY.
In this case, the Commissioner claims that Leo Kahn is liable to the State for Gross Receipts Tax under Act 386 of 1941 (84-1901 Ark. Stats.), because of sales of merchandise made by Leo Kahn to residents of Arkansas. The facts were stipulated as follows:
"Plaintiff is a corporation organized under the laws of the State of Tennessee, engaged in selling merchandise at its place of business in Memphis, Tennessee. It has not qualified to do business in Arkansas, nor does it own or maintain a place of business in this state, neither does it have agents or drummers who solicit business herein.
"Plaintiff has heretofore sold merchandise to residents of Arkansas, all of such sales being made in the following manner:
"(a) Residents of Arkansas come in person to place of business conducted by plaintiff in Memphis, Tennessee, and purchase and pay the consideration for certain items of merchandise, and
"(b) Residents of Arkansas use the Federal postal service or interstate telephone or telegraph service and offer to purchase from plaintiff such items of merchandise, and such offers are accepted or rejected by defendant in Memphis, Tennessee.
"That in either or all such transactions so had, the offer to buy such merchandise so made by the resident of Arkansas, and the acceptance thereof by plaintiff, was made in Tennessee, and the consideration therefor was paid in Tennessee. Thereafter, plaintiff delivered the merchandise so purchased without additional charge to the home or place of business of the Arkansas resident by its truck. Plaintiff has an established policy generally known to its customers that such deliveries will be made within a radius of 100 miles of Memphis, Tennessee, at no cost to the purchaser
This is also a case involving the Gross Receipts Tax levied under Act 386 of 1941 (84-1901 Ark. Stats.), which is a Sales Tax; and what we said in the Rhodes-Jennings case applies here.
Therefore, we affirm the decree of the Pulaski Chancery Court in favor of Leo Kahn Furniture Company.
Case No. 209
THOMPSON, COMMISSIONER, v. BRANYAN PETERSON, INC.
In this case, the Commissioner claims that Branyan Peterson, Inc., is liable to the State for the Use Tax levied by Act 487 of 1949 (84-3101 Ark. Stats. Pocket Supplement), because of sales of merchandise made by Branyan Peterson to residents of Arkansas. The facts were stipulated as follows:
"Plaintiff is a corporation organized under the laws of the State of Tennessee, engaged in the business of selling woodworking machinery at its place of business in Memphis. Plaintiff is not qualified to do business at Arkansas and does not maintain a place of business or warehouse in Arkansas. All of its sales of machinery to residents of Arkansas are made in the following manner:
"Plaintiff employs sales representatives who travel in Arkansas and solicit orders from residents thereof of certain machinery. If said offers be obtained, they are subject to acceptance by plaintiff in Memphis, Tennessee, and if so accepted the machinery is delivered by plaintiff to common carriers, f.o.b. Memphis, Tennessee, consigned to the Arkansas resident purchaser. The offer to purchase, the acceptance and delivery of the machinery to the common carrier is consummated in Memphis, Tennessee, where the consideration for the purchase thereof is paid. No Tennessee Sales Tax is collected on said sales."
The present case involves a Use Tax, just as was involved in Miller v. Maryland, 347 U.S. 340, 98 L.Ed. 744, 74 S.Ct. 535. We delayed our decision of this case until the Supreme Court of the United States decided the case of Miller Bros. v. Maryland; and after careful study of that opinion, we reach the conclusion that Branyan Peterson, Inc. is liable to the State of Arkansas for the Use Tax in the case at bar, because of facts which distinguish this case from those in Miller Bros. v. Maryland.
It was stipulated in that case, as contained in Item 8 of the Appendix to the majority opinion, that Miller Bros. ". . . does not have, nor has it ever had, any representative, agent, salesman, canvasser, or solicitor, operating in the State of Maryland for the purpose of selling or taking any order's for tangible personal property, or delivering the same". And the opening sentence of the majority opinion says: "Appellant is a Delaware merchandising corporation, which only sells' directly to customers at its store in Wilmington, Delaware."
In the case at bar, the stipulated facts show that Branyan Peterson, Inc., employs sales representatives who travel in Arkansas and solicit orders in Arkansas and we believe this use of traveling sales representatives is a substantial fact to differentiate the case at bar from the said holding of the supreme Court of the United States. In Miller Bros. v. Maryland, we find this language in the majority opinion: "If there is some jurisdictional fact or event to serve as a conductor, the reach of the State's taxing power may be carried to objects of taxation beyond its boundaries". And in discussing the case of General Trading Co. v. State Tax Comm., 322 U.S. 335, 88 L.Ed. 1309, 64 S.Ct. 1028, the writer of the majority opinion for the U.S. Court, in Miller Bros. v. Maryland, made these very pertinent remarks, in comparing the facts in General Trading Co. with the facts in Miller Bros. v. Maryland:
"That was the case of an out-of-state merchant entering' the taxing state through traveling' sales agents to conduct continuous local solicitation followed by delivery of ordered goods to the customers, the only nonlocal phase of the total sale being acceptance of the order. Probably, except for credit reasons, acceptance was a mere formality, since one hardly incurs the cost of soliciting orders to reject. The Court could properly approve the State's decision to regard such a rivalry with its local merchants as equivalent to being a local merchant. But there is a wide gulf between this type of active and aggressive operation within a taxing state and the occasional delivery of goods sold at an out-of-state store with no solicitation other than the incidental effects of general advertising. Here was no invasion or exploitation of the consumer market in Maryland. Or the contrary, these sales resulted from purchasers traveling from Maryland to Delaware to exploit its less tax-burdened selling market."
Without attempting to meticulously point out other possible distinctions between the facts in Miller. Bros. v. Maryland and the facts in the case at bar, we hold that the quoted language above is a recognition by the Supreme Court of the United States that the regular use of traveling salesmen in the taxing State makes the seller liable for the collection of the Use Tax of the taxing State.
We therefore reverse the decree of the Pulaski Chancery Court, and remand this cause, with directions that a decree be entered in favor of the Commissioner, in accordance with this opinion.
Case No. 922
THOMPSON, COMMISSIONER, v. P. H. WILLIAMS.
In this case the Commissioner claims that P. H. Williams is liable to the State for the Use Tax as levied by Act 467 of 1949 (84-3101 Ark. Stats. Pocket Supp.), because of sales of merchandise made by P. H. Williams to residents of, Arkansas. The facts were stipulated as follows:
"Plaintiff is an individual citizen of Memphis, Tennessee, engaged in the business of selling explosives at his place of business in Memphis. He does not maintain a place of business or warehouse in Arkansas. All of his sales of explosives to residents of Arkansas are made in the following manner:
"Plaintiff employs sales representatives who travel in Arkansas and solicit orders from residents thereof for dynamite and other explosives. If said offers be obtained, they are subject to acceptance by plaintiff in Memphis, Tennessee, and if so accepted the shipments are thereafter delivered by plaintiff without additional charge to the home or place of business of the Arkansas resident by his truck. No Tennessee sales tax is collected on these sales."
What we have said in the Branyan Peterson case (No. 209), supra, applies with equal force in this case. The situations are in all respects identical.
Therefore, we reverse the decree of the Pulaski Chancery Court, and remand this cause, with directions that a decree be entered in favor of the Commissioner of Revenues, in accordance with this opinion.
Case No. 208 THOMPSON, COMMISSIONER, v. FRED J VANDEMARK COMPANY.
The Commissioner claims that Vandemark is liable to the State of Arkansas for Use Tax as levied by Act 487 of 1949 (84-3101 Ark. Stats. Pocket Supp.), because of sales of merchandise made by Vandemark to residents of Arkansas. The facts were stipulated as follows:
"Plaintiff is a Corporation organized under the laws of the State of Tennessee, engaged in the business of selling machinery in its place of business in Memphis.
"(a) Plaintiff employs sales representatives who travel in Arkansas and solicit orders from residents thereof for certain machinery. If said offers be obtained they are subject to acceptance by plaintiff in Memphis, Tennessee; and if so accepted the machinery is delivered by plaintiff to common carriers, f.o.b. Memphis, Tennessee, consigned to the Arkansas resident purchaser. the offer to purchase, the acceptance, and delivery of the machinery to the common carrier is consummated in Memphis, where the consideration for the purchase thereof is also paid . . .
"(b) In certain instances offers to purchase machinery handled by plaintiff are taken from Arkansas residents by William Bigelow Robinson of 400 Shall Street, Little Rock, Arkansas, doing business under the firm name of Bigelow Robinson Company. The offers to purchase so taken by him are in accordance with a written contract between him and plaintiff, copy of which is attached to complaint, marked Exhibit `A'. . ."
The said contract between Vandemark and Robinson provides in part:
"1. Vandemark hereby authorizes Robinson to sell in the Arkansas Territory hereinafter described all of the equipment, materials, and supplies handled by Vandemark, including the Clark Equipment Co. products handled by Vandemark, as well as `Weldbilt' equipment and other materials and supplies handled and distributed by Vandemark. The dealer franchise agreement now in effect between the Clark Equipment Co., a Michigan corporation, and Fred J. Vandemark Co. is attached hereto for reference and for the purpose of acquainting Robinson with the terms thereof which are pertinent hereto . . .
"4. Robinson shall receive as compensation for the sales services rendered by him sixty (60%) per cent of the sales commission allowed to Vandemark by the manufacturer or other supplier from whom Vandemark purchases, except in the transactions dealt with in the next section hereof.
"5. Parts for any equipment handled by Vandemark shall be sold and shipped to Robinson at the manufacturer's published list price thereof, less fifteen (15%) per cent discount and f.o.b. Memphis, Tenn. Discount does not apply on parts shipped direct to customer even though ordered and invoiced by Robinson . . .
"6. Robinson agrees to maintain and operate a special truck to give on-the-spot service to users of equipment sold by him under the terms hereof to users of said equipment, and `agrees to render such truck services in accordance with policies prescribed by Vandemark, designed to comply with the requirements of the Clark Equipment Co. and other suppliers . . .
"10. All orders taken by Robinson within the said territory, except for such stock as may be carried by and in the hands of Robinson, and sold by him direct to customers, shall be taken by Robinson subject to acceptance by a duly authorized officer or agent of Vandemark, at Memphis, Tennessee.
"11. Robinson agrees to install and make 45-day and 90-day inspections and servicing of each new Clark machine delivered in the said territory in accordance with the policy and instruction of the Clark Equipment Co. The said 45-day and 90-day inspections and servicing are to be made within 15 days before or after 45 days and 90 days respectively after installation. The three reports required by Clark Equipment Co. and by Vandemark upon the said installation and two inspections and servicing are to be furnished Vandemark properly made out, and upon the proper performance of said installation and inspection and servicing and the making of said reports thereon, Vandemark agrees to pay Robinson the sum of $25.00 on each machine . . ."
Vandemark not only employed traveling salesmen in Arkansas, as did Branyan Peterson, Inc. in Case No. 209, but Vandemark also made a contract with an Arkansas resident (Bigelow Robinson); (a) that he maintain a salesroom in Arkansas; (b) that he maintain and operate a truck for "on-the-spot" service to equipment purchased from Vandemark and (c) that he make 45-day and 90-day inspections of Clark machinery sold by Vandemark. Without doubt, these activities under the Bigelow Robinson contract, brought Vandemark into the taxing jurisdiction of the State of Arkansas, under the holding of the United States Supreme Court in Miller Bros. v. Maryland.
We therefore reverse the decree of the Pulaski Chancery Court, and remand this cause, with directions to enter a decree in favor of the Commissioner, in accordance with this opinion.
The Chief Justice did not participate in any of these five cases.