Opinion ID: 2073503
Heading Depth: 1
Heading Rank: 3

Heading: The Use Tax law as to food sold.

Text: While the bank is not liable for the sales tax on food sold, it does not follow it can recover the $1,073.19 paid the state as such tax. In our opinion the bank was and is liable to pay a use tax (which is at the same rate as the sales tax) on the food and refreshments it sold, and so may not recover 298/> the amounts so paid. As counsel have not considered this feature, it is necessary to refer to some other statutes and the reasoning by which that result is reached. The Use Tax Act of 1939 includes the following: SDC 1960 Supp. 57.4307 Every retailer maintaining a place of business in this state, and making sales of tangible personal property for storage, use or other consumption in this state    shall, at the time of making such sale,    collect the tax imposed by this chapter from the purchaser. SDC 1960 Supp. 57.4309 The tax herein required to be collected by any retailer pursuant to sections 57.4307 and 57.4308, and any tax collected by any retailer pursuant to said section, shall constitute a debt owed by the retailer to this state. Commentaries on the purposes of the use tax may be found in many opinions. See Holloway v. State, 262 Ala. 437, 79 So.2d 40; Bank of America, etc. v. State, 209 Cal.App.2d 780, 26 Cal.Rptr. 348, and cases cited under West Key No. Licenses 15.1(2). In addition to raising money it is to help the retailers in this state, who are subject to the sales tax, compete on an equal footing with out-of-state competitors. SDC 1960 Supp. 57.4303 is broad in coverage, subsection (1) including property purchased for use in this state, (2) property not originally purchased for use in this state and thereafter used therein, with both levies being on the privilege of use, storage and consumption, for which terms the word use is sometimes substituted in this opinion. Subsection (3) in addition to the above imposes the tax on every person using such property within the state until such tax is paid directly to a retailer or the Commissioner. The use tax complements and supplements the sales tax (Roberts, J., dissenting in Mitchell Publishing Co. v. Wilder, 74 S.D. 343 at 347, 52 N.W.2d 732 at 734; Southern Pacific Co. v. Gallagher, infra, and cases above cited) by imposing upon those subject to it a tax burden equal to the sales tax in order that property sold or utilized in this state would be taxable once for support of state government. It is not intended to apply to property subject to the sales tax. SDC 1960 Supp. 57.4304(1) specifically exempts those transactions. The import of the California use tax law and indeed the wording of many of the statutes set out in a footnote to the Bank of America opinion, supra, are much the same as our use tax act. The logic and reasoning of that opinion appear sound and so comparisons will be made of the California Revenue and Taxation Code sections cited first and our comparable statutes, all in SDC 1960 Supp. Sections 6201, 6202 and 57.4303 impose the tax on the user and make him liable for the tax; Sections 6203 and 57.4307 both require that every retailer maintaining a place of business in this state and making sales of tangible personal property for use in the state shall, at the time of making such sale    collect the tax    from the purchaser (S.D.); Sections 6204 and 57.4309 state the tax required to be collected by any retailer pursuant to the last mentioned section shall constitute a debt owed by the retailer to this state (S.D.); Sections 6006, 6007, 6014 and 6015 define a Sale, Retail sale, Seller and Retailer respectively while 57.4302 (3), (6) and (7) define a Purchase, a Retailer and a Retailer maintaining a place of business in the state. Finally Sections 6401 and 57.4304(1) exempt items subject to sales tax from the use tax. It can hardly be disputed the bank is a retailer maintaining a place of business in this state, that patrons of the cafeteria were purchasers of the food and refreshments from it, that such items were sold for their use and consumption, that 299/> such purchasers were primarily liable for the tax imposed on them and were not exempt from the tax for any reason. It became the duty of the bank to collect the use tax from the purchaser (SDC 1960 Supp. 57.4307) and the tax which it was required to collect became a debt of the bank as retailer (SDC 1960 Supp. 57.4309). Where collection is not made, the retailer is liable for default in performance of its duty as such. Bank of America, etc. v. State, supra. Failure of the bank to collect the use tax is no defense as it was under duty to do so and became indebted to the state in the amount thereof. As we view the record no claim is made of unconstitutionality of the use tax act or its application to the bank, except as may be otherwise here mentioned. Challenges to its constitutionality as violations of the commerce and due process clauses of the Constitution of the United States and for other reasons have been of no avail. Felt & Tarrant Mfg. Co. v. Gallagher, 306 U.S. 62, 59 S.Ct. 376, 83 L.Ed. 488; Southern Pacific Co. v. Gallagher, 306 U.S. 167, 59 S.Ct. 389, 83 L.Ed. 586; Douglas Aircraft Co. v. Johnson, 13 Cal. 2d 545, 90 P.2d 572. In Felt & Tarrant a nonresident Illinois corporation brought suit to restrain defendants from enforcing the California Use Tax Act claiming they could not compel it to serve as agent to collect the tax. The Supreme Court denied the relief sought quoting from an earlier opinion: Instead of collecting the tax from the user through its own officers, the state makes the distributor its agent for that purpose. This is a common and entirely lawful arrangement.    the requirement that the appellant as the shipper into Iowa shall, as agent of the state, report and pay the tax on the gasoline thus coming into the state for use by others on whom the tax falls imposes no unconstitutional burden either upon interstate commerce or upon the appellant.' That a national bank may be made the agent of the state to collect a valid tax imposed on a third person with whom it deals seems to be implicit in the decision in Colorado National Bank of Denver v. Bedford, 310 U.S. 41, 60 S.Ct. 800, 84 L.Ed. 1067, which cited First National Bank of Louisville v. Commonwealth of Kentucky, 9 Wall. (US) 353, 19 L.Ed. 701, with approval. In the Kentucky case the state laid a tax on bank shares and required the bank's cashier to pay it. The bank refused payment. On this issue the Bedford opinion commented: It was decided    that the state in a legal proceeding against the shareholder could have garnisheed the bank and that because the bank was a federal instrumentality was no reason for not requiring it to collect and pay over the money from the shareholder. (Emphasis supplied) The obligation of the bank is not to pay the use tax as such. We have held the use tax may not be imposed on a national bank. The obligation of the bank is to collect the tax from the taxpayer it serves and pay that amount to the state. This is a debt owed the state and so is not within the proscription of U.S.R.S. § 5219. Bank of America, etc. v. State, 209 Cal. App.2d 780, 26 Cal.Rptr. 348. We hold the bank is liable as debtor to the state in the amount of use tax it failed to collect and pay over to it. It is therefore unnecessary to discuss the effect of SDC 1960 Supp. 57.30A08. The questions involved on this appeal were based on stipulated facts which only present questions of law. A right result will not be overturned though based on a wrong reason. Holmes v. Miller, 71 S.D. 258, 23 N.W.2d 794, and cases cited in SDC Vol. 4, page 365. From the record it appears the amount of the use tax 300/> ($1,073.19) due the state from plaintiff bank and which it failed to pay is equal the amount it erroneously paid as sales tax, so the judgment denying recovery thereof is affirmed. The judgment denying recovery of the $1,320.48 paid by plaintiff bank as use tax and penalty on materials and supplies purchased outside the state for use by it in its banking business is reversed with directions to enter judgment for plaintiff in that amount. No costs are to be taxed. ROBERTS and HANSON, JJ., concur. HOMEYER, P. J., and RENTTO, J., not participating.