Title: Sale v. Johnson

State: north-carolina

Issuer: North Carolina Supreme Court

Document:

129 S.E.2d 465 (1963) 258 N.C. 749 W. E. SALE, W. Frank Sale, and Fred A. Sale, Trading and Doing Business as W. E. Sale and Sons, Ronda, N. C., v. W. A. JOHNSON, Commissioner of Revenue of the State of North Carolina. No. 385. Supreme Court of North Carolina. February 27, 1963. *466 Atty. Gen. T. W. Bruton and Asst. Atty. Gen. Peyton B. Abbott, for the State. Allen, Henderson & Williams, by Hoke F. Henderson, Elkin, for plaintiff appellees. PARKER, Justice. Defendant assigns as error the judgment on the pleadings entered upon plaintiffs' motion. The complaint alleges, and the answer admits, the following: All procedural requirements of G.S. § 105-267 have been met by plaintiffs to maintain this action for a refund of North Carolina sales tax paid by plaintiffs under protest to defendant State Commissioner of Revenue for the period 1 August 1958 to 1 July 1961. Plaintiffs, doing business under the name of W. E. Sale and Sons, own and operate a manufacturing business at Ronda in Wilkes County, which is principally engaged in the manufacture of chicken and turkey coops. Paragraph five of the complaint alleges that "plaintiffs sell their coops to farmers, poultrymen, and persons, firms, and corporations engaged in the poultry business, and such coops are used for packaging, shipment, and delivery of tangible personal property which is sold either at wholesale or retail, or such coops are delivered with the chickens or turkeys to the customer, and therefore are exempt from the retail sales and use tax under the provisions of G.S. § 105-164.13, subsection 37." Paragraph five of the answer, replying to paragraph five of the complaint, says: The relevant part of the minutes of the hearing held before the defendant State Commissioner of Revenue on 28 September 1961, a copy of which minutes is attached to the answer and made a part thereof, reads: "DECISION: Paragraph six of the complaint alleges, and the answer admits, that on 15 December 1961 plaintiffs paid under protest to defendant State Commissioner of Revenue the sum of $4,487.73 in sales tax assessed against them for the period from 1 August 1958 to 1 July 1961. This paragraph of the complaint avers that this assessment of tax was contrary to the provisions of G.S. § 105-164.13, subsection (37). Defendant denies this conclusion of law in the corresponding paragraph of the answer. The General Assembly at its 1957 Session completely revised the North Carolina Sales and Use Tax Act. Session Laws 1957, chapter 1340, Article 5. This article became effective 1 July 1957, and is codified as General Statutes, chapter 105, Article 5, sections 105-164.1 et seq. Division III of this article is entitled EXEMPTIONS AND EXCLUSIONS. G.S. § 105-164.13 under this article reads: "The sale at retail, the use, storage or consumption in this State of the following tangible personal property is specifically exempted from the tax imposed by this article:" Thirty-eight subdivisions of tangible personal property are set forth as specifically exempt. Subdivision 37, which is relevant at all times here, reads as follows: Plaintiffs make these contentions in their brief: Defendant's contention is to the effect that G.S. § 105-164.13(37) exempts from the sales tax the articles of tangible personal property therein enumerated, when such materials are used for packaging, shipment or delivery of tangible personal property which is sold either at wholesale or retail, and when such materials attach to and constitute a part of the sale of such tangible personal property and are delivered with it to the customer. In our opinion, the language of G.S. § 105-164.13(37) is not plain and clear, but ambiguous. The difficulty of its construction arises from the terms that sales of the materials specified therein are exempt from the sales tax "when such materials are used for packaging, shipment or delivery of tangible personal property which is sold either at wholesale or retail or when such articles constitute a part of the sale of such tangible personal property and are delivered with it to the customer." Consequently, the duty devolves upon us to construe this subsection of the statute in order to ascertain and declare the meaning and intention of the Legislature, and to carry such meaning and intention into effect. Midkiff v. Granite Corp., 235 N.C. 149, 69 S.E.2d 166; Young v. Whitehall Co., 229 N.C. 360, 49 S.E.2d 797; Whitford v. Insurance Co., 163 N.C. 223, 79 S.E. 501, Ann.Cas.1915B, 270; 50 Am.Jur., Statutes, sec. 223. This Court said in Watson Industries v. Shaw, Comr. of Revenue, 235 N.C. 203, 69 S.E.2d 505: "The legislative intent is the essence of the law and the guiding star in the interpretation thereof." "And where the meaning of a statute is doubtful, the history of legislation on the general subject dealt with, including statutory changes over a period of years, may be considered in connection with the object, purpose, and language of the statute, in order to arrive at its true meaning." Victory Cab Co. v. Charlotte, 234 N.C. 572, 68 S.E.2d 433. On 10 November 1956 the Commission for the Study of the Revenue Structure of the State made its report to the then Governor of the State of North Carolina. On page 44 of this Report is set forth recommended changes in the sales and use taxes. Its second recommendation is that "the present levies on the retail sale and/or use, storage or consumption of tangible personal property now subject to the retail sales and/or use tax be retained in the main. There is, however, included in the proposed recodification some recommended changes as follows: * * * (c) Certain transactions or kinds of tangible personal property now exempt by administrative interpretation which in the opinion of the Commission should continue to be exempt are specifically set forth in the exemption section." The exemption section beginning on page 50 of this Report is entitled ITEMS *469 NOW EXEMPT BY ADMINISTRATIVE PRACTICE WHICH ARE SPECIFICALLY EXEMPTED IN THE PROPOSED NEW LAW. Ten items are listed. Item 9 on page 52 reads: G.S. § 105-164.13(37) is a verbatim enactment into law by the General Assembly of this Item 9. The power to exempt from taxation, as well as the power to tax, is an essential attribute of sovereignty. Atlantic Coast Line R. Co. v. Phillips, 332 U.S. 168, 67 S. Ct. 1584, 91 L. Ed. 1977, 173 A.L.R. 1. Since "[t]axation is the rule; exemption the exception" (Sir Walter Lodge, No. 411, International Order of Odd Fellows v. Swain, 217 N.C. 632, 9 S.E.2d 365), the general rule is that a grant of exemption from taxation is never presumed, and statutes providing exemption from taxation are strictly construed. Bragg Investment Co. v. Cumberland County, 245 N.C. 492, 96 S.E.2d 341; Henderson v. Gill, Comr. of Revenue, 229 N.C. 313, 49 S.E.2d 754; Harrison v. Guilford County, 218 N.C. 718, 12 S.E.2d 269; Rich v. Doughton, 192 N.C. 604, 135 S.E. 527; 84 C.J.S. Taxation § 225. In 50 Am.Jur., Statutes, sec. 282, it is said: To the same effect, see 82 C.J.S. Statutes § 335. In Union Ins. Co. v. United States, 6 Wall. 759, 73 U.S. 759, 18 L. Ed. 879, the Court said: Pursuant to the authority vested in the Commissioner of Revenue by G.S. § 105-262 and G.S. § 105-264 (In re Vanderbilt University, 252 N.C. 743, 114 S.E.2d 655), on 1 May 1958 the Department of Revenue filed in the office of the Honorable Thad Eure, Secretary of State of North Carolina, a true copy of the revised sales and use tax regulations, approved by the Tax Review Board, the original of which is now on file and a matter of record in his office. Rule 15, entitled CONTAINERS, WRAPPING AND PACKING MATERIALS AND RELATED PRODUCTS, reads as follows: This Rule 15 was in effect at all times relevant here. Considering the language of G.S. § 105-164.13(37) and the history of its enactment by the Legislature, and further considering the general rule that a grant of exemption from taxation is never presumed, and statutes providing exemption from taxation are strictly construed, and in addition considering the regulations of the Department of Revenue, approved by the Tax Review Board, in respect to this subsection of the statute exempting certain tangible personal property therein enumerated from the sales tax, and looking beyond the mere words to the obvious intent of the Legislature, it is our opinion, and we so hold, that the word "or" must be taken conjunctively and construed as "and," and that the manifest legislative intent of G.S. § 105-164.13(37) is that the materials therein enumerated shall only be exempt from the sales tax "when such materials are used for packaging, shipment or delivery of tangible personal property which is sold either at wholesale or retail or when such articles constitute a part of the sale of such tangible personal property and are delivered with it to the customer." Plaintiffs' motion for a judgment on the pleadings is in effect, or in the nature of, a demurrer to the answer, and admits for the purpose of their motion: One, the truth of all well-pleaded facts in the answer, and, two, the untruth of plaintiffs' own allegations insofar as they are controverted in the answer. Hill v. Parker, 248 N.C. 662, 104 S.E.2d 848; Burton v. Reidsville, 240 N.C. 577, 83 S.E.2d 651; McGee v. Ledford, 238 N.C. 269, 77 S.E.2d 638; Raleigh v. Fisher, 232 N.C. 629, 61 S.E.2d 897; Oldham v. Ross, 214 N.C. 696, 200 S.E. 393. The answer of the appealing defendant must be construed liberally, which *471 means that every reasonable intendment must be taken in favor of him, and if the answer contains well-pleaded facts sufficient to constitute a defense, or if it is good in any respect or to any extent, it will not be overthrown by a motion for judgment on the pleadings. G.S. § 1-151; Hill v. Parker, supra; Burton v. Reidsville, supra; Erickson v. Starling, 235 N.C. 643, 71 S.E.2d 384; Bessire & Co. v. Ward, 206 N.C. 858, 175 S.E. 208; Pridgen v. Pridgen, 190 N.C. 102, 129 S.E. 419. Exhibit "A" attached to the answer, and made a part thereof, may be considered in passing upon a judgment on the pleadings. 71 C.J.S. Pleading § 257; 41 Am.Jur., Pleading, sec. 246. See also Charlotte City Coach Lines, Inc. v. Brotherhood, 254 N.C. 60, 118 S.E.2d 37; Moore v. W O O W, Inc., 253 N.C. 1, 116 S.E.2d 186. Plaintiffs allege that they "sell their coops to farmers, poultrymen, and persons, firms, and corporations engaged in the poultry business, and such coops are used for packaging, shipment, and delivery of tangible personal property which is sold either at wholesale or retail, or such coops are delivered with the chickens or turkeys to the customer." Defendant admits "that the plaintiffs sell their coops to farmers, poultrymen and persons, firms and corporations engaged in the poultry business, and that such coops are used by such customers in the delivery of live poultry, which is sold by such customers at either wholesale or retail." Such allegations in the complaint and admissions in the answer are not sufficient to exempt plaintiffs' sales of coops from the sales tax within the purview and intent of G.S. § 105-164.13(37). There is no allegation in the complaint to the effect that when plaintiffs' vendees sold poultry the coops constituted a part of the sale of such poultry and were delivered with the poultry to the customer. It is obvious that the lower court committed reversible error in entering a judgment on the pleadings for plaintiffs on their motion. We are concerned here with pleadings alone. If plaintiffs prove everything they allege in their present complaint, they must eventually fail in their action. Why then should we not ex mero motu dismiss the action? Maola Ice Cream Co. of North Carolina v. Ice Cream Co., 238 N.C. 317, 77 S.E.2d 910. The answer is that not knowing the facts we cannot determine with certitude whether or not plaintiffs by amendment can state facts sufficient to constitute a cause of action. For the reasons stated above, the judgment on the pleadings is set aside, and the case is remanded to the lower court for further proceedings according to law Error.