Title: Tennessee Blacktop, Inc. v. Benson
Citation: 494 S.W.2d 760
Docket Number: N/A
State: Tennessee
Issuer: Tennessee Supreme Court
Date: May 7, 1973

494 S.W.2d 760 (1973) TENNESSEE BLACKTOP, INC., Appellant, v. Thomas D. BENSON, Commissioner of Revenue, State of Tennessee, Appellee. Supreme Court of Tennessee. May 7, 1973. *761 Vincent Fuqua, James M. Doran, Jr., Manier, Crouch, White &amp; Herod, Nashville, for appellant. David M. Pack, Atty. Gen. of Tenn., Everett H. Falk, Asst. Atty. Gen., Nashville, for appellee. JOHN W. WILSON, Special Justice. The parties will be referred to as in the trial court; that is, Tennessee Blacktop, Inc., as plaintiff, and Thomas D. Benson, Commissioner of Revenue, State of Tennessee, as Commissioner. The plaintiff filed this action in Part I of Chancery Court of Davidson County seeking to recover from the Commissioner the sum of $34,143.22, plus penalty and interest, which sum it paid under protest with all rights reserved, and which plaintiff avers was wrongfully collected as use taxes. *762 The cause comes before this Court upon the appeal of the plaintiff from the decree of the Chancellor dismissing the original bill. By consent order the bill of complaint was amended, as follows: The original bill avers that the funds in controversy were wrongfully collected as taxes, among other things, as set forth in the amendment above and Tennessee Sales and Use Tax Rules: The bill further makes allegations as follows: That the taxes were wrongfully collected, in violation of T.C.A. § 67-3012, reading in part, as follows: That the assessment and collection of the tax was illegal because it is discriminatory and is a denial of the equal protection of the laws of the State of Tennessee, and in violation of the Fourteenth Amendment to the Constitution of the United States, which reads as follows: That the assessment and collection of tax is in violation of Article I, Section 8, Clause 3 of the Constitution of the United States, which reads as follows: That the assessment violates T.C.A. § 67-3007, relating to exemptions as to interstate commerce. The Commissioner, in his answer, admits the complainant has paid the alleged amount, under protest, but denies that any of the amounts collected were wrongfully collected, but avers that such assessment for the cost of fabrication is pursuant to the dictates of T.C.A. § 67-3004, as interpreted by the Court in McDougall v. Atkins, 201 Tenn. 589, 301 S.W.2d 335 (1957). The Commissioner admits that Rules 103(b) and (d) of the Tennessee Sales and Use Tax Rules (copied hereinabove) are as quoted in the bill, but avers that all portions of the Rules are relevant and inserts in the answer (a) and (c) of such Rules, as follows: The Commissioner denies that T.C.A. § 67-3012 is relevant, as the plaintiff is not alleged to be an arm of the State; it is denied the exception contained in T.C.A. § 67-3004 is in violation of the equal protection clause, or any constitutional provision. The Commissioner denies that the tax is in violation of Article I, Section 8, Clause 3 of the Constitution of the United States; denies that the instant collection is in violation of T.C.A. § 67-3007; avers that all activity and taxable incidents relative to the taxed process occurred in Tennessee; avers that the tax herein does not regulate commerce and in fact has no relation to interstate commerce; avers that the instant tax is not levied upon the receipts from interstate commerce; avers that no direct sale to the United States Government is alleged in the bill, and avers that the tax imposed herein is upon the privilege of use by the complainant of tangible personal property, such property not previously having been taxed. The Chancellor filed a written memorandum which, by reference, was made a part of his decree. In this memorandum the Chancellor made a concise statement of the facts, which we insert as follows: We think the Chancellor correctly stated the prime question presented, as follows: The plaintiff, in his brief, assigns errors as follows: After the decision in McDougall v. Atkins, supra, the Legislature enacted Chapter 166 of the Public Acts of 1957, which created an exception to the McDougall holding by amending T.C.A. § 67-3004, as follows: The defendant assessed and collected the use tax under T.C.A. § 67-3004 with respect to the labor expense incurred by plaintiff in compounding the asphalt under the general theory noted in the case of McDougall v. Atkins, supra; that had plaintiff purchased asphalt rather than ingredients, plaintiff would have been liable for a sales tax on the purchase price. Such a purchase price necessarily would have included labor expense in compounding the asphalt. Under the assessment made the plaintiff was required to pay, in taxes, what it would have paid had it purchased a finished product (asphalt) and applied it to road surfaces. Much of the argument in the briefs of the parties revolves around the exception contained in T.C.A. § 67-3004 in favor of tangible personal property which becomes a component part of a building and which exception, as we have stated above, was subsequent to the decision in McDougall v. Atkins, supra, and from which opinion we quote as follows: It is urged by the plaintiff that the Legislature did not intend to differentiate between "building" and other structures which are considered a part of real property. On the other hand, the defendant contends that in limiting the exception to a building, the Legislature did not intend to embrace within the scope of the exception all improvements to the realty. Statutes conferring exemptions from taxation are to be strictly construed against the taxpayer and in favor of the taxing authority. Phillips &amp; Buttorff Mfg. Co. v. Carson, 188 Tenn. 132, 217 S.W.2d 1 (1949). Exceptions from taxation must positively appear in the statute, not by implication. American National Bank &amp; Trust Co. v. MacFarland, 209 Tenn. 263, 352 S.W.2d 441 (1961). Words of a statute should be taken in their natural and ordinary sense without any forced or subtle construction. Moto-Pep, Inc. v. McGoldrick, 202 Tenn. 119, 303 S.W.2d 326 (1957). In the memorandum filed by the Chancellor, he stated: "It seems clear to me that if the Legislature had intended to extend the coverage of the exemption in the passage of the amendment it would have included other subjects such as a `road'." With this we agree. We quote approvingly from the memorandum of the Chancellor, as follows: Under the second assignment the plaintiff contends that the Chancellor erred in holding that plaintiff was liable for the entire amount of the assessment. Plaintiff bases this contention on the proposition that the base used by defendant in determining plaintiff's tax liability was arbitrarily set at $1.00 per ton of asphalt. The pleadings in this case reflect that the issue of the correctness of the amount of the assessment was not raised therein. Since this issue was not raised by the pleadings, the Chancellor did not err in making his determination. We are of the opinion that the judgment of the Chancellor should be affirmed. The costs will be assessed against the plaintiff. DYER, C.J., and CHATTIN, HUMPHREYS and McCANLESS, JJ., concur.