Opinion
March 28, 1949.
1. Trial — stipulations as to the facts.
When the parties stipulated and agreed that the pleadings in the case shall be taken as stating the facts, the defendant admitted thereby that the allegations of the declaration are true.
2. Taxation — sales tax — sales of land casually made as an incident to seller's main business as dealer in lumber.
When the declaration avers, and the averments are admitted as true, that the three sales of real property upon which a sales tax had been levied and paid were merely casual sales and only incidental to the taxpayer's main business of wholesale and retail dealer in lumber and building supplies, a good case is made for the recovery of the amount of the sales tax theretofore paid on the three realty sales. Sec. 10108, Code 1942.
3. Taxation — tax statutes — construction of.
Statutes imposing privilege taxes are liberally construed in favor of the person sought to be charged with such taxes and doubts in tax statutes should be resolved in his favor.
4. Taxation — tax sales on realty sales.
When the question is whether a person is engaged in the real estate business so as to be liable for the sales tax under Sec. 10108, Code 1942, the test is not how many sales were made in a given period of time, but whether the sales were a mere incident to the taxpayer's major business or whether the taxpayer was in fact engaged in the real estate business. And the sole fact, without more, that the taxpayer had sold eight parcels of real estate in two years was not sufficient to show that he was engaged in the real estate business.
Headnotes as approved by Hall, J.
APPEAL from the circuit court of Coahoma County; E.H. GREEN, J.
J.H. Sumrall, for appellant.
In the companion case of Harry D. Kanton and Son v. A.H. Stone, Chairman, 203 Miss. 260, 34 So.2d 402, decided by this court on March 22, 1948, Chief Justice Smith, in answer to the identical contention made in the declaration in the case now before the court with reference to the fact that the three sales involved for a period of less than sixty days, did not constitute doing business, used the following language: "It requires no argument to demonstrate that by buying and selling this real property the appellants were engaged in business under this statute, but they say this was not their main business and was only incidental thereto. The mere fact that one business is an incident to another does not relieve it from taxation under this statute."
I feel that I am correct in asserting that this language of the court shows plainly that it was the result of the conclusion that the language as contained in Section 10104 in defining "business" concluded the paragraph in which the term is defined by using the following language: "Each of such subactivities shall be considered business engaged in, taxable in the class in which it falls."
And since this record now discloses as many sales conducted over a longer period of time as was shown in the Kantor case just quoted from, the facts now before the court make this case a parallel case with that of the Kantor case, and makes the language employed equally applicable, even though the record in this case on the former trial did not disclose sufficient sales over a sufficient length of time to make such activity appear as other than only a minor isolated incident in the opinion of the court. But the fact that this record now discloses a continued activity begun early in the year 1945 and continuing through that year as well as the year 1946, supplies sufficient facts and proof to show that this appellee was engaged in a business of the same character as were the plaintiffs in the Kantor case, as well as the case of Holcomb and Longino.
I therefore confidently assert that in view of the fact that a sufficient number of sales are shown to have been made by this taxpayer over a sufficient length of time to show that the facts in this case are identical with the two companion cases in which the liability of the sellers for the tax was upheld, then, any other decision than one of holding the plaintiff in this case liable for the tax paid, as well as the additional taxes shown to be due, would in effect overrule the two previous cases, and establish a precedent not in keeping with the provisions of the statute involved as construed by former decisions of this court.
I respectfully submit that the decision of the lower court was erroneous for the following reasons: First: The present record which was before the lower court shows a sufficient number of sales over a sufficient length of time to establish the fact that this taxpayer was engaged in the business of selling real estate sufficiently to make the statute imposing the tax applicable, especially in view of the definition of "doing business" as contemplated by that statute, as hereinbefore quoted.
Second: Even under the former decision of this court, the facts now in this record supply the indicated deficiency which was responsible for the former decision of the court in this case.
Third: The fact that an additional liability was established by the facts alleged in the sworn plea of Set Off, which was accepted as a stipulation and therefore constitutes undisputed proof of such additional sales, would not only deny the right of this taxpayer to recover the taxes paid, but would definitely establish liability for the additional tax demanded in the plea of Set Off.
Fourth: Even though the lower court may have concluded that the plaintiff was entitled to recover the taxes sued for, because additional tax shown to be due by the plea of Set Off, and which was admitted to be correct, then the court should have adjudged the liability, if any, of the State to this taxpayer to be the difference between the Three Hundred Seventy One Dollars and Seventy Four Cents sued for, and the Two Hundred Seventy Dollars and Thirty Cents, the amount of the additional tax shown to be due, which would limit the amount of recovery to only One Hundred One Dollars and Forty Four Cents. Holcomb Curtis, for appellee.
The learned lower court correctly held that the additional sales of rear estate alleged in the Plea of Set-off by the appellant did not constitute doing business under the former opinion of the Supreme Court in this case rendered February 9, 1948, and that the said appellee was not in the business of selling real estate within the contemplation of Section 10108 of the Mississippi Code of 1942 and the opinion of Supreme Court in the Harry D. Kantor Son and Holcomb Longino cases, 34 So.2d 492 and 491, respectively, and that the said Motion to Strike should be sustained. And see also M.L. Virden Lumber Co. v. Stone, 33 So.2d 841.
It will be seen from the above cases that in this case the appellee was not engaged in the business or selling real esttae within the contemplation of the controversial statute, nor did the Plea of Set-off filed by appellant, wherein only three additional sales in 1945 totalling $1125.00 and two additional sales in 1946 totalling $12,390.00 change the complexion of the aforesaid announcement of the law applicable thereto, for as was said in this cause in the former opinion: "Merely disposing of investment assets at intermittent intervals, without more, is not engaging in business, even though some preliminary effort is necessary to render the asset saleable."
In no way did the appellant prove or even endeavor to prove that these five additional sales of real estate over a period of one year were of any differnt category than the practice before the court and in the declaration and briefs in the former hearing.
In fact, in the former opinion there were three sales involved over a period of less than sixty days. This was construed by this honorable court as not doing business.
Here, the deficiency sought to be supplied so as to bring appellee by construction into the real estate business is five sales in a period of a year, and these sales were incidental to appellee's business and "merely disposing of investment assets at intermittent intervals, without more." And, too, the sales of May 16 and May 31, 1946, totalling $12,390.00, were of the same category as mentioned in the former opinion in that appellee furnished all the lumber and materials used in the building of the houses, but they were constructed by another under contract with appellee, which contractor had paid all taxes required of him, including a sales tax on the labor in such construction; and the appellee realized no profit from the sale of the lots; appellee had paid all taxes owing by it, which necessarily included privilege tax, sales tax on all sales of lumber and supplies sold by it, including that which went into the construction of the two houses aforesaid, corporation franchise tax, ad valorem and gross income tax. The above is either quoted or paraphrased from M.L. Virden Lumber Company, Inc. v. Stone, supra.
It is respectfully submitted that the real estate sales made by appellee, including those mentioned in the Plea of Set-off, were merely incidental to the main business of appellee as a wholesale and retail dealer in lumber, building materials and supplies.
Further, the three lots sold on May 3, May 21 and October 18, 1945, as alleged in the Plea of Set-off, were simply a disposition of investment assets at intermittent intervals and to prospective builders and purchasers of building supplies and materials from the appellee.
Did eight sales of real estate over a period of more than 2 years, which represented less than .035% of appellee's gross business, constitute a separate, taxable activity, and this, particularly, when disposing of investment assets at intermittent intervals and when no extra office space, no extra personnel, no extra effort of any appreciable kind was necessary to render the assets saleable? Appellee did not maintain any other office, employees or facilities of any kind. These real estate sales were casual, incidental and an accommodation to veterans of World War II only, as was alleged in the declaration and as accepted in the judgment as a stipulation of fact.
Appellee brought suit against appellant to recover a tax refund of $371.74 sales tax paid by it under protest upon an assessment by appellant alleged to be due as a consequence of appellee's having engaged in the business of selling real property within this state. A demurrer to the declaration was sustained, and, upon appeal to this court, the judgment of the lower court was reversed and the cause remanded. M.L. Virden Lumber Company, Inc. v. Stone, Miss., 33 So.2d 841.
After the case went back to the lower court the appellant filed a plea of general issue and also a plea of set-off pursuant to the provisions of Section 1481 of the 1942 Code, wherein appellant sought to recover from appellee an additional assessment of $270.30 sales tax alleged to be due by virtue of other sales of real estate made by appellee. Appellee filed a motion to strike this plea of set-off, and thereupon the parties agreed that the pleadings in the case be taken and considered by the court as a stipulation of fact. On this stipulation, the lower court held that the additional sales of real estate alleged in the plea of set-off do not sufficiently show appellee to be engaged in the business of selling real estate under the sales tax law, Section 10108 of the 1942 Code, that the motion to strike should be sustained and that the plea of general issue is not good, and the defendant having declined to plead further the trial court entered judgment dismissing the plea of set-off, and awarding judgment on the original declaration in the amount sued for. From that judgment, this appeal is prosecuted.
In the former decision of this case, 33 So.2d 841, 843, this court held that the allegations of the declaration filed for recovery of the tax paid under protest were such as to state a good case and that a demurrer thereto was erroneously sustained, and particularly it was therein said "A development of all the facts may show appellant to be engaged in selling real property within the meaning of said Section 10108, but the allegations in this declaration show otherwise." (Italics supplied.) (Hn 1) Instead of developing the facts, as suggested in the former opinion, the appellant went back to the lower court and entered into an agreement and stipulation that the pleadings be taken and considered as a stipulation of fact. Thereby the appellant admitted that all the allegations of the declaration are true. (Hn 2) As pointed out in the former opinion, the declaration charged that the three sales upon which the sales tax was levied were merely casual sales and only incidental to the company's main business of wholesale and retail dealer in lumber and building supplies. This being true, the appellee was not subject to the tax and his declaration for recovery thereof stated a good case, and the lower court was correct in awarding appellee judgment therefor, in view of the above mentioned stipulation.
The plea of set-off alleged three sales of real estate throughout the entire year of 1945 and two sales in May 1946, upon which the 2% sales tax would be $270.30, and it then alleged that when these sales are taken into consideration with the three mentioned in the original declaration the appellee is thereby shown to have been "actually engaged in the business of selling real estate, notwithstanding the decision of the Supreme Court, in which it was held that the sale of only three lots was not sufficient to constitute `doing business' as contemplated by the statute", and that these additional sales show that the business was of sufficient volume and continued over a sufficient length of time to constitute doing a real estate business. Appellee's motion to strike the plea of set-off averred that the appellee was not engaged in the business of selling real estate, that the sales were only an incident to its business as a lumber company dealing in building supplies, materials and equipment at wholesale and retail, and were made only for the purpose of enhancing its major business, and this motion also denied liability for the tax sought to be recovered by the plea of set-off.
The aforementioned stipulation admitted that the facts alleged in the plea of set-off, and in the motion to strike, are true. Analyzing these facts, we find that the plea of set-off made no factual allegation except that the sales were made and that the tax thereon would be $270.30, and it then averred, as a conclusion of law, that when these sales are considered along with the others, there is a sufficient showing that the appellee was engaged in the real estate business; on the contrary, the motion averred that appellee was not engaged in the real estate business and that the sales were only incidental to its main business.
The appellant misconstrues the former decision in this case. What the court held was that sales of real estate as a mere incident to some other major business do not necessarily place the seller in the category of those whose business is dealing in real estate. In the case of Holcomb Longino, Inc., v. Stone, Miss., 34 So.2d 491, 492, the appellants were held liable for the tax on the sale of eight lots; the decision was not based upon the number of sales made, but upon the fact that the appellant there was actually engaged in a general real estate and insurance business, and the court said: "By its own averments, appellant is engaged in the business activity of selling real estate, and these sales were made in the course of its said business of selling real estate. By its own averments, it procured these parcels of land for the purpose of selling them in its real estate business." In the case of Harry D. Kantor Son v. Stone, Miss., 34 So.2d 492, 494, the appellants had been engaged in business as a general building contractor, but, being unable to obtain, without priority, materials with which to pursue their business, the appellants were unable to obtain contracts for building construction, and they accordingly purchased a number of building lots and constructed residences thereon for sale to veterans of World War II, being able to obtain priority in the purchase of materials for that purpose. In a period of four months, the appellants in that case made separate sales of ten lots to veterans; upon these facts this court held that: "the appellants' business, for the period of time covered by these two assessments, was mainly buying real property, constructing houses thereon, and selling them to a limited class of purchasers". (Italics supplied.) The court further said in that case that the mere fact that one business is an incident of another may or may not relieve it from the tax, depending upon its character and purpose.
It was pointed out in the former opinion of the case at bar that doubts in tax statutes should be resolved in favor of the taxpayer. In Miller v. Illinois Cent. R. Co., 146 Miss. 422, 111 So. 558, 559, it is said: "Before one is liable for taxes he must come within the express provisions of the taxing statute." And in Planters' Lumber Company v. Wells, 147 Miss. 279, 112 So. 9, 12, this court said: ". . . The principle of law should be kept in mind (Hn 3) that laws imposing privileges taxes are liberally construed in favor of the person sought to be charged with such taxes, and therefore strictly construed as against the claim of the state or any of its political subdivisions for such taxes." Much of the decision in the latter case is well applicable to this case.
Applying these principles, and considering the former decision of this case, in the light of what was said in the Holcomb and Kantor cases, supra, we are of the opinion that the lower court committed no error in its judgment. (Hn 4) The appellant did not see fit to develop the facts as suggested in the former decision herein, but merely agreed that all the facts stated in the pleadings are true, and relied upon the sole fact that the total of eight sales made by appellee in the course of about two years was sufficient to show that appellee was engaged in the real estate business. The question is not how many sales of real estate were made in a given period of time, but is whether these sales were a mere incident to appellee's major business, and whether appellee was in fact engaged in the real estate business. The judgment of the trial court is therefore affirmed.
Affirmed.