July 17, 1975.
Appeal from the Circuit Court, Montgomery County, D. W. Crosland, J.
William J. Baxley, Atty. Gen., Willard W. Livingston, Counsel, Dept. of Revenue, and Asst. Atty. Gen., B. Frank Loeb, Asst. Counsel, Dept. of Revenue, and Asst. Atty. Gen., for petitioner.
Tangible personal property which performs an integral function in the procedure by which an end product is produced is part and parcel of the machinery used in its production. State v. Newbury Mfg. Co., Inc., 265 Ala. 600, 93 So.2d 400 (1957); State v. Taylor, 262 Ala. 639, 80 So.2d 618 (1954); State v. Four States Drilling Co., 278 Ala. 273, 177 So.2d 828 (1965); State v. Calumet Hecla, Inc., Alamet Division, 281 Ala. 549, 206 So.2d 354 (1968); City of Durant v. Allen, 67 Okl. 1, 168 P. 205 (1917). Tangible personal property bought and used as a machine part is subject to the one and one-half percent machine levy even though some part of such property either by intent or inadvertence becomes an ingredient or component part of the end product. Title 51, § 788(b), as amended, Code of Alabama, Recompiled 1958. An administrative construction can and should be changed by the taxing authority if it is not in accord with the existing law. State v. Wertheimer Bag Co., 253 Ala. 124, 43 So.2d 824 (1949); Hamm v. Continental Gin Co., 276 Ala. 611, 165 So.2d 392 (1964); Crutcher Dental Supply Co. v. Rabren, 286 Ala. 686, 246 So.2d 415 (1971); State v. Hunt Oil Co., 49 Ala. App. 445, 273 So.2d 207 (1973); Utah Hotel Co. v. Industrial Commission, 107 Utah 24, 151 P.2d 467, 153 A.L.R. 1176 (1944); 73 C.J.S., Public Administrative Bodies and Procedure, § 109, p. 432.
Steiner, Crum Baker and M. R. Nachman, Jr., Montgomery, opposed.
The sale of tangible personal property to a manufacturer or compounder which enters into and becomes an ingredient or component part of the tangible personal property which such manufacturer or compounder manufactures or compounds for sale is a "wholesale sale" and not subject to use tax. This is so regardless of the dominant purpose of the purchase, and regardless of how small a portion of the tangible personal property becomes an ingredient or component part of the manufactured product. State v. Southern Kraft Corp., 243 Ala. 223, 8 So.2d 886; State v. U.S. Steel, 81 Ala. 553, 206 So.2d 358; Title 51, Section 787(d), Alabama Code, as amended, Departmental Regulation, W27-171. Where an administrative construction by appropriate taxing officials is fair and reasonable and has been followed for the prescriptive period of twenty years or longer, the courts are not disposed to alter that construction merely because the highest officials may have changed their minds about the matter under consideration. Hamm v. Consolidated Gin Co., 276 Ala. 611, 165 So.2d 392; State v. Southern Elec. Gen. Co., 274 Ala. 668, 151 So.2d 216; Haden v. McCarty, 275 Ala. 76, 152 So.2d 141. If tangible personal property is used by the purchaser as a fuel or lubricant, it is not a "machine, attachment or replacement" within the meaning of relevant taxing statutes, even though it performs an integral function in the procedure by which other tangible personal property is produced. State v. Newbury, 265 Ala. 600, 93 So.2d 400.
Petition of Charles A. Boswell for certiorari to the Court of Civil Appeals to review and revise the judgment and decision of that court in Boswell, as Commissioner of Revenue of the State of Alabama v. Abex Corporation, 55 Ala. App. 477, 317 So.2d 314.
The Circuit Court of Montgomery County issued an alternative writ of mandamus to the Commissioner of Revenue ordering the Commissioner to refund $8,562.00 to the taxpayer. The Commissioner appealed and the Court of Civil Appeals affirmed.
In denying the writ in this case, we do not approve a statement made in the trial court's opinion and adopted by the Court of Civil Appeals. The statement reads:
"* * * Another [rule of statutory construction] is that administrative construction which is fair and reasonable and of long standing is given controlling weight by courts which are called upon to construe the statutes; and courts are not disposed to change this construction simply because the state officials have changed their minds. Only legislatures have this power. State v. Southern Elec. Gen. Co., 274 Ala. 668, 151 So.2d 216; Hamm v. Consolidated [sic] Gin Co., 276 Ala. 611, 614-615, 165 So.2d 392; Haden v. McCarty, 275 Ala. 76, 152 So.2d 141."
In Southern Electric Generating Co., supra, the administrative construction had been the same for 25 years and in Haden, supra, for 22 years. This court approved the following in Hamm, supra:
"The State, in insisting that the administrative construction has had such effect, relies on the statement appearing in the last paragraph of the opinion in State v. Southern Electric Generating Co., 274 Ala. 668, 671, 151 So.2d 216, to the effect that the State is 'bound by the administrative construction of twenty-five years.' This expression was considered in the recent case of International Union of Operating Engineers, Local Union No. 321 (AFL-CIO) v. The Water Works Board of the City of Birmingham, 276 Ala. 462, 163 So.2d 619, where it was said, viz:
'* * * such administrative rulings having been in force and effect for many years, are highly persuasive authority of the correctness of the rule. State v. Southern Electric Generating Co., 274 Ala. 668, 151 So.2d 216; Haden v. McCarty, 275 Ala. 76, 152 So.2d 141. Such administrative construction is neither binding on the State nor its agencies nor on the court. Therefore, the use of the word "bound" in the last paragraph of the opinion in State v. Southern Electric Generating Co., supra, was not intended to impinge upon the longstanding rule hereinabove adverted to. A clearer statement of what was there intended is that where an administrative construction by proper officials is fair and reasonable and has been followed for the prescriptive period of twenty years or longer, the courts are not disposed to alter that construction merely because the highest officials may have changed their minds about the matter under consideration." (Emphasis supplied.)
The correct rule is that an administrative interpretation of the governmental department for a number of years is entitled to favorable consideration by the courts; but this rule of construction is to be laid aside where it seems reasonably certain that the administrator's interpretation has been erroneous and that a different construction is required by the language of the statute. State v. Wertheimer Bag Co., 253 Ala. 124, 43 So.2d 824; Drennan Motor Co. v. State, 279 Ala. 383, 185 So.2d 405; East Brewton Materials, Inc. v. State Department of Revenue, 45 Ala. App. 584, 233 So.2d 751.
Taxpayers have no vested right to rely upon an erroneous interpretation of the statute exempting them from taxation, and under Section 100 of the Constitution of Alabama of 1901, the taxing authority has no discretion in a matter of this kind. The reason for this rule is that in the assessment and collection of taxes, the State is acting in its governmental capacity and it cannot be estopped with reference to the enforcement of taxes, even when the taxpayer was advised that it was not responsible for a tax. Were this not the rule the taxing officials could waive most of the State's revenue. State v. Maddox Tractor Equipment Co., 260 Ala. 136, 69 So.2d 426; Crutcher Dental Supply Co. v. Rabren, 286 Ala. 686, 246 So.2d 415.
Opinion corrected and writ denied.
HEFLIN, C. J., and MADDOX, JONES and SHORES, JJ., concur.