Court Opinion

ID: 9704934
Source: CourtListenerOpinion
Date Created: 2023-08-26 00:52:17.374378+00
Date Added: 2024-06-11T18:22:06.650868
License: Public Domain

Mulroney, J.
(dissenting) — I respectfully dissent. My nonagreement with the majority opinion is chiefly with Division II where the majority holds the time to determine whether the property is readily obtainable in Iowa is not the date of the purchase from the out-of-state vendor but the date of delivery into Iowa after the purchase. The commission rule, 172A, which the majority strikes down, provides:
“When determining* whether an item of tangible personal property is or is not ‘readily obtainable in Iowa’ the facts and the law existing at the time the contract to purchase was made shall govern and not the facts and the law existing at the time the item was delivered into the state of Iowa.”
As I read the majority opinion it seems two reasons are given why the above rule is wrong: (1) since delivery in Iowa *1035governs taxability under tbe use tax law, it must follow tbe facts and the law at the time of delivery must be when “readily obtainable” must be determined, and (2) the rule, which was adopted after the effective date of chapter 193, 53d G.A., is .an attempt to change the law, and is in derogation of that law. By a not too subtle statement the commission is accused of adopting the rule “for a special purpose and to avoid the application of chapter 193.”
I. The original use tax law enacted in 1937 contained this exemption from tax for the use of certain industrial material purchased from an out-of-state vendor. The first condition precedent to the application of the exemption was that it be “not readily obtainable in Iowa.” All through the years the commission and the taxpayers have considered the date of the purchase as the date when the question of obtainability w.as to be determined. A reading of the opinion in Dain Mfg. Co. v. Iowa State Tax Comm., 237 Iowa 531, 22 N.W.2d 786, shows clearly that both parties and the trial court and this court considered the time of placing the order was the time to be used in determining whether or not property was obtainable. So too in Peoples Gas & Electric Co. v. State Tax Comm., 238 Iowa 1369, 1378,-28 N.W.2d 799, 805, the opinion shows the exemption as to the use of certain items was “based upon the circumstances surrounding their purchase.”
This section of the use tax law giving a tax exemption for the use of certain industrial material purchased out of the state when the same material was “not readily obtainable in Iowa” has proved a fertile source of difficulty for the commission — not because of the time when obtainability should be determined but because “readily’.’ is a word of comparison .and a definition of “obtainable” can range from “conveniently at hand” to “possible to secure.” The commission was charged with the duty of making general regulations to carry out the legislative purpose. Its first regulation interpreted “ ‘readily obtainable in Iowa’ ” to mean “ ‘kept in Iowa for sale or manufactured in Iowa for sale .as distinguished from being obtainable by giving an order to an agent in Iowa for delivery of the same from some point outside the State of Iowa.’ ” See Dain Mfg. Co. v. Iowa State Tax Comm., 237 Iowa 531, at page 536, 22 N.W.2d 786. Here it *1036is apparent the commission was interpreting the law as requiring the time for determining obtainability as the time of the order. There were changes in the rule, in effect making property purchased from distributors, and agents of out-of-state sellers, obLam,oíble,, but there have been no changes in the commission’s rule that the time to determine obtainability is the time of the purchase.
The question of . readily obtainable, was, up until the enactment of chapter 193, supra, merely a fact question. There was no change in the law. It depended on a factual situation — the condition of the market place. Clearly it meant the situation at the time the purchase ivas made and the order placed with the out-of-state seller. If the same or similar property could then be purchased in Iowa, no exemption could be obtained on the ground it was not readily obtainable in Iowa. The commission narrowed the exemption by later rules to protect local distributors competing with out-of-state vendors, but always it was a question of whether the Iowa vendee could, at the time he bought, obtain the same or similar goods from Iowa retailers, manufacturers or distributors. This was .a reasonable application of the statute and it ivas never questioned. As was said in Peoples Gas & Electric Company case, supra, the principal purpose of the enactment of the use tax law was to protect the Iowa retailers whose sales were subject to sales tax. The appropriate time to determine when property is obtainable, is when the out-of-state order is placed. This law does not forbid buying from out-of-state vendors. It merely states the purchaser will gain no two per cent advantage over an Iowa retailer or manufacturer by buying from an out-of-state vendor, when the property he buys could be purchased here. The proper time 'to consult is the merchandising situation with respect to Iowa dealers and manufacturers at the time the order is placed with the out-of-state vendor.
The first basis for the majority conclusion seems to me unsound. The majority repeats many times that no tax results until the property is delivered into Iow.a, and much authority is cited for this conclusion. To me this is belaboring the obAÚous. No one contends there Avould ever be any use tax due until the property reaches Iowa — whether it be industrial material *1037or not, and whether the same or similar property would or would not be readily obtainable here. This is specified in the statute which only taxes use in Iowa. This is an exemption statute which has no application at all until an Iowa purchaser has made an out-of-state purchase of -,a piece of industrial material and is actually using it in Iowa. It is idle to- talk of purchase contracts, broken or canceled, and the “slips [that] may occur between the cup and lip.” The purchaser is seeking to have his actual use of property he purchased from an out-of-state vendor declared exempt. He should prevail if the first statutory condition precedent to the- exemption is established: that it was not readily obtainable in Iowa. It is perfectly obvious that this should be established as of the date he- sought to obtain the property — the date of the order. If at that time, when he ordered from the out-of-state vendor, the property could be bought here, it was obtainable in Iowa.
II. The second basis for the majority conclusion that rule 172A is unsound is that it is in derogation of chapter 193, 53d G-. A. The new law, chapter 193, explains by contrast the new rule of obtainability that was to be followed by stating: “as distinguished from being obtainable by giving an order to an agent in Iowa for delivery from some point outside the state of Iowa.”
Certainly this is a clear statement that the legislature regarded the “readily obtainable” law prior to chapter 193 to be and include giving an order to an agent in Iowa, and it is inescapable that it regarded the time of determining the “obtainable” question as being when the order was given and not at some later date when the property was delivered. There is nothing in chapter 193 which remotely indicates that the legislature intended the time of delivery in Iowa should be chosen as the time to investigate the activities of Iowa manufacturers or suppliers to see if they could then supply the- same or similar material.
I think the imputation of bad faith to the commission entirely unwarranted. As Judge Smith pointed out in the Dain case, the commission has a difficult task to apply the provisions of this exemption “to the varied transactions of present-day busi*1038ness.” Chapter 193, supra, was the first inkling the legislature ever gave the commission as to how it wished “readily obtainable” defined. It is clearly apparent the legislature knew the commission was determining readily obtainable as of the time of purchase and not delivery. The pertinent portion of chapter lOB is actually a copy of the commission’s first regulation (see Dain case) and the legislature did not in chapter 193 give the commission the slightest indication that it wished the “readily obtainable” issue decided as of the date of delivery. The majority says chapter 193 was an order to the commission to determine obtain-ability as of the date of the delivery, and the commission’s rule saying it would be determined as of date of purchase was in derogation of the law in chapter 193, supra. Indeed the majority holds the order to the commission to use the date of delivery to determine obtainability is so plain in the statute, the commission was probably in bad faith in continuing to determine obtain-ability as of the date of the purchase. This in spite of the fact that chapter 193, in discussing obtainability, speaks of “giving an order to an agent.” I see no basis at all for the majority’s conclusion or words of criticism of the commission.
There is no need to review the evidence. There was ample evidence to show that when most of the purchases were made prior to April 1, 1949, the material purchased could have been purchased from Iowa agents and jobbers regularly engaged in selling the same or comparable equipment. The legislature evidently thought these agents and jobbers no longer need protection, but their protection stopped beginning April 1, 1949.
One further comment should be made. The majority has today, entirely without basis I think, drawn a new regulation for the commission. It is: readily obtainable will be determined from now on as of the date the property purchased out of state is delivered into Iowa. As pointed out, obtainability is a factual situation. It depends on the condition of the market place which is subject to change. This will mean a purchaser might buy a carload of material that he could have bought in Iowa from a supplier, and his use will be exempt if before delivery the Iowa supplier goes out of business. So too it will mean a purchaser who is unable to buy his material from any Iowa supplier and buys outside the state will have to pay the tax on the ground his mate*1039rial was obtainable, if some supplier stocks tbe material before delivery into Iowa. I submit the rule the majority draws is far more unreal than the commission’s rule 172A.
While I would not disagree with all of the conclusions expressed in the other divisions of the majority opinion, I would not reach most of those questions because of the views expressed herein. I have said enough to show that in general I would reverse.
Hays, J., joins in this dissent.