#### STATE OF NORTH CAROLINA, ex Rel. UNEMPLOYMENT COMPENSATION COMMISSION OF NORTH CAROLINA v. L. HARVEY & SON COMPANY, Employer, No. 53-54-012, and ALTON PATE, KINSTON, NORTH CAROLINA.

(Filed 9 April, 1947.)

1. Master and Servant § 63—

The findings of the Unemployment Compensation Commission are conclusive when supported by evidence, both in the Superior Court and upon further appeal to the Supreme Court. G. S., 96-4 (m).

2. Same—

Where the findings of the Unemployment Compensation Commission are supported by evidence, the Supreme Court may determine only whether the conclusions of law and orders of the Commission are properly predicated upon the facts found.

3. Master and Servant § 59b — Contract held to constitute defendant con-tractee and not landlord for purpose of levy of unemployment compensation tax.

The corporate defendant operated a department store. Upon the discontinuance of its shoe department it entered into a contract with the individual defendant under which he occupied space in the store at a rental of a fixed percentage of the gross, and carried on the shoe business under the name of the corporation, with full authority to hire and fire employees and order stock, but under which the corporation required money from sales to be turned over to it immediately as received, controlled the extension of credit and owned all accounts, paid sales tax, advertised in its own name with individual defendant paying for the proportion of advertising devoted to shoes. *Held,:*That the corporation was a contractee and not a mere landlord is a legitimate inference from the contract and the course of dealing thereunder, and the conclusion of the Unemployment Compensation Commission to this effect and its determination that the corporate defendant is liable under G. S., 96-8 (e), for unemployment compensation tax on wages paid by the individual to his employees for the period of operation prior to the amendment of Chap. 531, Session Laws 1945, is upheld.

4. Same—

In imposing liability for unemployment compensation taxes, the General Assembly is not limited to the relationship of employer and employee as defined under the common law, but may determine “employing units” subject to the tax either by direct definition or by reasonable administrative procedure.

5. Same—

A person who is a contractor within the meaning of G. S., 96-8 (f) (8), is liable for unemployment compensation taxes for wages paid to his employees for the period subsequent to the effective date of Chap. 531, Session Laws 1945, until March 18, 1947, the effective date of the repeal of this section.

*2926. Same—

The “contribution.” imposed by the Unemployment Compensation Law is a tax, and an amendment which repeals a former provision imposing the tax upon specified persons will be given prospective effect only, and such persons will be held liable for taxes accrued prior to the repeal in the absence of a provision expressly or impliedly releasing them from such liability.

DEFENDANTS’ appeal from *Carr, J.,.*at September Term, 1946, of Lenoir.

This proceeding was instituted in the Unemployment Compensation Commission for the purpose of determining the liability of the corporate respondent for contributions on wages paid by Pate to his employees down to March 13, 1945, and to determine a similar liability of Pate for contributions on wages paid his employees subsequent to that date. The liability of L. Harvey & Son Company, if any, arose under Section 96-8 (e) of the Unemployment Compensation Act of 1943, which was partly repealed by amendment effective March 13, 1945, which struck out the sentence currently imposing the tax.1 The proceeding relates to contributions on taxes alleged to have accrued prior to that date. It is sought to hold respondent Alton Pate as a “covered unit” liable for contributions subsequent to the effective date of the repeal. Eeferring to the cited statute it will appear that the liability or non-liability of the Harvey company depends upon a proper determination of the contractual relation existing between the Company and Pate during the period covered by the then existing law, and the effect of its repeal. The status of Alton Pate subsequent to the repeal is a matter for further consideration. 2

The inquiry went through its several procedural stages, including hearings before a Deputy Commissioner, the Chairman of the Commission and the Full Commission, until it reached Lenoir Superior Court on appeal from the Full Commission and the final determinations and orders of that Body with respect to the liability of each respondent. *293The procedure is unassailed and its history is not essential to an understanding of the case.3

The hearing before the Full Commission resulted in a determination that the respondents, respectively, were liable for the contributions as demanded, and an order was made that they report and pay them as required by law.

The review in the Superior Court involved the consideration of evidence before the Full Commission at the final hearing and respondents’ exceptions taken on the hearing. The' exceptions were to the findings of fact by the Commission as not being supported by evidence, and to the conclusions of law and determinations and orders predicated thereon, as erroneously made.

The evidence, as certified by the Commission on respondents’ appeal, is summarized in its bearing on these exceptions:

The respondent L. Harvey & Son Company operated a department store in which they carried in stock and sold merchandise of a general character, including shoes. They had in all some 8 or 10 departments of classified merchandise. In September, 1942, the Company sold the stock of shoes on hand to a New York concern and contemplated discontinuing the business. However, it entered into a parol agreement with respondent Alton Pate, who had been theretofore engaged in selling shoes, by which he was to occupy a space in the store about 10 feet wide and 100 feet long, exclusively devoted to the sale of shoes. There is evidence from the respondent that this space was rented to Pate for his own use at a rental of 10 per cent of his gross sales. The Company furnished janitor service, heat and lights. In the early days of his occupancy and dealing the stock of goods was bought from the wholesalers in the name and upon the credit of L. Harvey & Son Company. The manager of the Company explained that this was for the reason that wholesalers did not care to take on new accounts and it was in order that Pate might get his quota. The manager of the Company further testified that this was continued for a few months, after which purchases were made by Pate in his own name. Pate testified:

“I am operating in my name as far as buying is concerned; everything is bought in my name with the exception of this — I’ll say two or three. I have my own books, order books. Sometimes I send them in my name, sometimes in his, but it never goes to the office; I pay the bills myself. I am.operating under my name. L. Harvey & Son does not have anything to do with the way I operate it.”

All the sales tickets are in L. Harvey & Son’s name. The tickets go up to the bookkeeping department of L. Harvey & Son Company, *294through, the distributor system, where the record is kept. The cash also goes up to the Harvey Company office, and if there is any change due it is sent back down.

The shoe business carried on by Pate is advertised in the papers in the name of L. Harvey & Son Company and Pate pays to the Harvey Company part of the advertising. L. Harvey & Son Company purchases the credit accounts of goods purchased from Pate without recourse on him. However, when a purchase is made on account a slip is sent up to L. Harvey & Son’s office with a notation and if it is not approved the sale is not made. Respondents testify that this is to secure to the Harvey Company the collectibility of the accounts they buy. The Company buys no other accounts and Pate sells accounts to no other person. About 90 per cent of Mr. Pate’s business, as testified to by the investigating deputy, is accounts. Whatever interest or carrying charges due upon them go to L. Harvey & Son Company.

Respecting the manner of conducting the business the respondent Pate testified that “as far as the general public is concerned they are dealing with L. Harvey & Son.” The tickets and the wrapping paper used in Harvey’s business had upon them the name of L. Harvey & Son Company, and not Pate’s.

Respondents testify that L. Harvey & Son Company has nothing to do with the operation of Pate’s shoe business. Pate hired his help and dismissed employees at his own will. The employees in the sale of shoes did not help in any other department. Pate alone was concerned with the payroll. C. F. Saville, manager of the Harvey store, testified, “Pate keeps his own records and operates in his own name and L. Harvey *&*Son Company has nothing to do with the manner in which he operates his business.”

The findings of fact closely parallel and embody the evidence as above summarized, and as noted in the opinion. Exceptions were filed to six of the eight findings, and in two instances were, in part, sustained — (a) by the Commission upon certification of the appeal, and (b) by the Superior Court.

From finding of fact No. 8, with the parts stricken out enclosed in brackets, is as follows:

“8. It is further found that (Alton Pate, who operated the shoe department, and contracted with the said L. Harvey & Son Company, is in employment which is a part of the usual trade, occupation, profession or business of the said company) ; that the said L. Harvey & Son Company is an employing unit within the contemplation of the Unemployment Compensation Law, and also an employer within the terms of such law. It is further found that the said Alton Pate is a subcontractor of the said L. Harvey & Son Company for employment which is a part of the Company’s business.”

*295From finding No. 3, tbe following was stricken out:

“That tbe money wbicb was taken in by tbe said Alton Pate and wbicb goes to tbe cashier’s office of tbe company, is deposited in tbe company’s bank account as any and all money wbicb tbe Company itself takes in for sale of merchandise.”

Tbe conclusion upon tbe findings follows :

“That tbe Company is responsible for tbe payment of contributions on tbe wages paid by Alton Pate to bis employees, from tbe date that tbe company entered into its contract with Alton Pate, to March 13, 1945, tbe date that tbe section of tbe law was repealed; that subsequent to March 13, 1945, tbe said Alton Pate continued bis contractual relationship with L. Harvey & Son Company and because of this contractual relationship tbe said Alton Pate, subsequent to March 13, 1945, is an employer within tbe contemplation of Section 96-8 (f) (8) of tbe Unemployment Compensation Law as amended.”

With tbe exceptions noted tbe trial judge affirmed tbe findings of fact and conclusions of law made by tbe Pull Commission and affirmed its determinations, orders and decrees.

Tbe respondents appealed, assigning errors.

*W. D. Holomcm, Charles U. Harris, and R. B. Billings for plaintiff, appellee.*

*J. A. Jones for defendants, appellants.*

1

 “Sec. 96-8 (e) — Employing unit: (Whenever any employing unit contracts with or has under it any contractor or sub-contractor for any employment which is a part of its usual trade, occupation, profession, or business, unless the employing unit as well as each such contractor or sub-contractor is an employer by reason of sub-section (f) of this Section, or, paragraph Section 96-11 (c), the employing unit shall, for all of the purposes of this Chapter, be deemed to employ each individual in the employ of each such contractor or sub-contractor for each day during which such individual is engaged in performing such employment) . . .” The bracketed portion was stricken out by Chapter 531 of the Session Laws of 1945.

2

 Section 96-8 (f) (8) in a further definition of “employer” applies a tax also to the contractor or sub-contractor who operates under conditions similar to those above quoted. Repeal became effective March 18, 1947. Session Laws, 1947, HB 127.

3

 Section 96-4, *et seq.*

Seawell, *J.*

Upon appeal from tbe Unemployment Compensation Commission tbe Superior Court is bound by tbe findings of fact made by tbe Commission where there is evidence to support it, and tbe same rule, of course, applies here.4 Where there is such supporting evidence our office is to determine whether tbe conclusions of law and subsequent orders of tbe Commission may be properly based or predicated upon tbe facts found.

Tbe pertinent sections of tbe Compensation Act in force during tbe period for wbicb tbe respondent Harvey & Son Company has been held liable for contributions on wages paid by Pate to bis employees have been quoted *ante.*Tbe respondent Harvey &- Son Company contends that the statute is inapplicable to it for that tbe facts in evidence only go so far as to show Pate to be a tenant of tbe Harvey & Son Company and not a contractor in carrying on or aiding any branch of tbe Harvey *296business. The proponents of the tax liability contend that the existing contract between the parties during the period of alleged liability and their course of dealing between themselves under it, give rise to legitimate inferences of a more intimate business association between them than ordinarily attaches to a rental contract, and point to various customary transactions and dealings between the parties as *indicia*of a contract within the meaning of the statute, rendering the Harvey Company liable for the tax. The status of Pate as an employing unit subsequent to the repeal of the statute will be further considered.5

Perhaps no one incident of the contract and dealings between the parties, however unusual between landlord and tenant, might be of sufficient significance to definitely establish the contention that the purpose and effect of the contract was to carry on any business in behalf of the Harvey Company or in connection with the merchandising activities of the latter, such as to be essentially a part thereof and within the coverage of the statute. But taken as a whole and in combination, they are impressive; and seemingly at variance with the explanations and reasons assigned for them in respondents’ testimony, or at least engendering contrary inferences.

The relation contended for by respondents is strongly challenged by a *modus vivendi*which would lead the public to believe that they were dealing with the Harvey & Son Company rather than Pate; which advertises the shoe business as still being carried on by L. Harvey & Son Company, not only in the newspapers, but even upon the wrapping paper and sales tickets used every day; which required Pate’s money and credits to be turned over to Harvey & Son Company immediately as received; puts Harvey in position to control the extension of credit to each customer; requires all credits' to belong to Harvey on the principle of immediate purchase; includes the payment by L. Harvey & Son Company of sales tax on merchandise it claims was sold by Pate independently ; and many other circumstances in evidence so at variance with the simple relation of landlord and tenant as to greatly over-burden that conception. On the other hand, these practices could hardly be satisfactorily explained on any theory other than that the business ivas really that of the Harvey & Son Company and that the limitations and restrictions imposed upon Pate were such as to classify him as a contractor within the meaning of the statute.

Court decisions under statutes which make the tax liability to depend upon the relation of master and servant, as we know it at common law, and which, therefore, make control of the person employed a criterion of the liability to be imputed to the alleged employer, may be found to put more emphasis on the *indicia*of such control than may be warranted in the present case.

*297Tbe statute under review is frankly predicated upon conditions arising out of contract, which in substance make the business carried on virtually that of the superior party to the contract. Since the statute openly deals with the subject of contract its application might be expected to pretermit some of the factors supposed to be *insignia,*of the relation of master and servant as distinguished from that of independent contractor. There is, in this jurisdiction at least, no question that in fixing the coverage of the Unemployment Compensation Act the Legislature may go much farther in imposing the contributions than the supposed limitations of master and servant, or employer and employee, as those terras are generally defined and dealt with in the common law; and may, if essential to the imposition of the tax, augment the meaning of the term “employer” beyond the popular definition. In *Unemployment Compensation Commission v. Insurance Co.,*219 N. C., 576, 14 S. E. (2d), 689, the Court said :

> “The fact that the state has engaged in a cooperative scheme with the Federal Government does not necessarily imply strict uniformity in the incidence of the tax levied by the State and the Federal laws.”6

and

> “We think it is evident that the Legislature, for the purpose of levying a tax may determine what shall constitute employment subject to taxation without regard to existing definitions or categories ... it may do this by direct definition, or, perhaps with greater exactness, by providing a reasonable administrational procedure by which such employment may be defined or ascertained.”7

There are many decisions supporting this view.8

The circumstances summarized, *supra,*from the evidence as incidents of the Contract and their mutual dealings, are not directed to showing these relations and making available their common law implications, but to the issue whether the contract was of the nature described in the statute. The judicial determination of that question must depend upon inferences fairly drawn from the evidence by those whose office it is to find the facts. We cannot say that the findings of the Commission are unsupported by evidence, or that they are inadequate to sustain the conclusions drawn from them.

*298The evidence tends to show that tbe whole business conducted by Pate was absorbed by L. Harvey & Son Company as fast as production occurred, under conditions which secured to that Company exclusive control of both cash and credit, and paid the Company a revenue based on its gross, rising and falling with its volume, without reasonable relation to the rental value of the space occupied by Pate in the store. Under these circumstances the outward forms or devices by which the result was accomplished are relatively immaterial to the purpose of the law. Apparently, the contract makes Pate an *entrepreneur*deriving his compensation from the difference which prudent management may effect between cost of production and a fixed 10 per cent gross on the Company’s business.

This contract between L. Harvey & Son Company and Pate continued in force after the amendment of the law concededly releasing L. Harvey & Son Company from further contribution with respect to wages paid Pate’s employees. Because of the continued existence of this contract the Commission contends that Pate was himself a “covered unit” and liable for contributions under Section 96-8 (f) (8) of the Act.9 It is conceded that by amendment to the Act, effective March 18, 1947, Pate is released from further contributions under this subsection. The demand' upon him is for contributions with respect to employment subsequent to March 13, 1945, while the law was in force. ¥e are of the opinion the contributions were currently required by the statute as it then stood.

The “contribution” imposed by the law is a tax.10 While under our decisions accrued taxes are not in all respects regarded as a debt, although sometimes treated similarly in remedial procedure,11 we have no doubt that the State has a vested interest in accrued taxes which is not destroyed by simple repeal of the statute currently imposing them, without any accompanying provision in the nature of expressed or implied release and where the procedure for their collection is not involved in the repeal.

The Unemployment Compensation Act presents a general scheme to secure current contributions from employers in furtherance of the purposes of the Act, provides for the determination thereof with right of appeal, and procedure for the enforcement of the law and the collection of the contributions, and all of the machinery for that purpose is left intact. We are of the opinion that it was not the purpose of the Legislature in amending the law to make it retroactive in the sense that it released any employer from the obligation of reporting and paying con*299tributions wbicb bad accrued in tbis connection. *We*conceive tbe law in tbis State to be as stated in Cooley on Taxation:

> “Tbe rule favoring a prospective construction of statutes is applicable to statutes wbicb repeal tax laws. Accordingly it is beld tbat where sucb a statute is not made retroactive a tax assessed before tbe repeal is collectible afterwards; and where taxes are levied under a law wbicb is repealed by a subsequent act, unless it appears clearly tbat tbe legislature intended tbe repeal to work retrospectively, it will be assumed tbat it intended tbe taxes to be collected according to tbe law in force when they were levied.”12

*We,*therefore, conclude tbat tbe judgment of tbe trial court in affirming tbe determinations, orders, and decrees of tbe Unemployment Compensation Commission is free from error, and it is

Affirmed.

4

 Sec. 96-4 (m).

5

 Sec. 96-8 (f) (8) *ante.*

6

 Loc. cit. p. 586.

7

 Loc. cit. p. 587.

8

*U. C. C. v. City Ice,*etc., *Co.,*216 N. C., 6, 3 S. E. (2d), 290; *U. C. C. v. National Life Ins. Co.,*219 N. C., 576, 14 S. E. (2d), 689; 139 A. L. R., 895; *U. C. C. v. Jefferson Standard Life Ins. Co.,*215 N. C., 479, 2 S. E. (2d), 584; See cases cited *U. C. C. v. Ins. Co., supra, p.*587; c/p citations in respondents’ brief; annotation 147 A. L. R., 828; annotation 152 A. L. R., 525; *McGruder v. Yellow Cab Co.*(C. C. A. 4th), 141 Fed. (2d), 324, 152 A. L. R., 516.

9

 See Citation, note 2, *ante.*

10

*Prudential Ins. Co. of America v. Powell,*217 N. C., 495, 8 S. E. (2d), 619.

11

*Gatling v. Carteret County,*92 N. C., 536, 53 A. L. R., 432; *State v. Georgia Co.,*112 N. C., 34, 17 S. E., 10, 19 L. R. A., 485.

12

 Cooley on Taxation, 4th Ed., Vol. 2, sec. 538; *Higgins Estate v. Hubbs,*242 Pac., 515; *In re Moseley’s Estate,*164 Pac., 1073; *In re Meinerts Estate,*213 N. W., 983; *McDonald v. State Tax Commission,*158 Miss., 331, 130 S., 473; *Moore v. Commonwealth*(Va.), 155 S. E., 635; *Trippett v. State,*149 Cal., 521, 86 Pac., 1084; *Commonwealth v. Mortgage Trust Co. of Penna.,*227 Pa., 153, 76 Atl., 5; *Riley, State Comptroller v. Howard, et al.*(Cal.), 226 Pac., 993.