Court Opinion

ID: 9688458
Source: CourtListenerOpinion
Date Created: 2023-08-24 17:48:02.508718+00
Date Added: 2024-06-11T12:06:19.289671
License: Public Domain

Morris, C. J.
(dissenting) The plaintiff brings this action to recover the sum of $1,486.96 paid by it under protest as sales taxes exacted under the provisions of Chapter 341 Session Laws ND 1949 (Chapter 57-39,1949 Supp to RCND 1943). In its complaint the plaintiff alleges that it is engaged in the sale of merchandise in six cities in the State of North Dakota and has qual*790ified under the provisions of the sales tax law by obtaining for each of its stores permits to transact business as a retailer.
The plaintiff then alleges:
“That under the terms and provisions of said sales tax law, above referred to, the plaintiff, in the manner provided by law, made and returned to the Tax Commissioner, fhe defendant herein, for the period from July 1, 1949 up to and including the 30th day of September, 1949, a true and correct report of all sales of merchandise sold at its various stores in this state during said period, and did at the same time pay to said defendant the total amount of the tax collected on individual sales where the amount involved exceeded the sum of twenty-four cents.
“That under the terms and provisions of said Chapter 341, of the Session Laws of the State of North Dakota for the year 1949, no retailer is permitted to collect from the consumer a tax on individual sales of merchandise where the amount paid for such merchandise is less than twenty-five cents, and no retailer of merchandise is liable for the payment to the State of North Dakota of any tax on such individual sales of less than twenty-five cents.
“That under the terms and provisions of said law plaintiff was not permitted to and did not collect from any purchaser or consumer any tax on individual sales of. less than twenty-five cents. That, despite the terms and provisions of said law, the plaintiff, at the time of the payment of the full amount-of tax collected under and in accordance with the provisions- of said law, was required by the .defendant to pay the additional sum of $1486.96, being the amount claimed by the Tax Commissioner as necessary in order to equal two per cent on all gross sales within the State of North Dakota during said period including the individual sales of less than twenty-five cents.-
“That under the plain and specific terms and provisions of said Chapter 341 of the Session Laws for 1949, no tax was or is due on individual sales of-less than twenty-five cents, and the collection by the defendant of a tax on such sales from the retailer, or in fact the collection of a greater tax from the retailer than such retailer is lawfully permitted under said law to collect *791from the purchaser or consumer is invalid, illegal, unreasonable, discriminatory, contrary to the rights of the plaintiff, and wholly unlawful for the reason that the tax due and owing under said law is a tax solely and only against the consumer and not against the retailer.
“That this plaintiff at each store owned and operated by it in the State of North Dakota kept an acurate and correct record of all sales tax which under said law it was permitted to and did collect and, as hereinbefore alleged, remitted to the defendant the full amount of such tax so collected.
“That this plaintiff during said period was wholly unable under the so-called bracket system contained in said law, to collect or recoup any part or portion of the excess tax in the amount of $1486.96, which it was compelled by the defendant to pay and did pay under protest.”
The defendant demurred to the complaint on the ground that it did not state facts sufficient to constitute a cause of action. The district court sustained the demurrer, and from an order sustaining the demurrer, the plaintiff appeals to this court.
The sales tax law was originally enacted in this state as Chapter 276, Session Laws 1935, in substantially the same form in which it now appears, with the exception of Section 6 of the 1949 act, in which was inserted a bracket system specifying in detail the tax to be charged the consumer.
The 1937 Sales Tax Act (Chapter 249, Session Laws 1937) was held by this court to impose a tax upon the consumer and not upon the retailer, even though the retailer is required to add the tax or its average equivalent to the sales price, and to collect and remit the same to the tax commissioner. Jewel Tea Co. v. State Tax Commissioner, 70 ND 229, 293 NW 386; Voss v. Gray, 70 ND 727, 298 NW 1; Isakson v. State, 70 ND 505, 296 NW 192; and Federal Land Bank v. Bismarck Lumber Co., 70 ND 607, 297 NW 42, 61 S Ct 1105, 313 US 556, 85 L ed 1518.
The 1937 act expired according to its own terms on June 30, 1939. However, each subsequent biennial legislative assembly has reimposed the tax for a two year period, including the present tax which expires on the 30th day of June, 1951. The legis*792lature is presumed to have been familiar with the judicial construction that the 1937 sales tax was a tax upon the consumer and, by its repeated reenactment of the Sales Tax Act in substantially the same terms, to have intended that the same construction should be placed upon subsequent acts, including the one under consideration. State ex rel. Johnson v. Broderick, 75 ND 340, 27 NW2d 849; Eddy v. Krekow, 54 ND 220, 209 NW 225. In view of our former decisions and the subsequent acquiescence therein by the legislature, it can no longer be questioned that Chapter 341, Session Laws ND 1949, imposes a tax upon the consumer and not upon the retailer of tangible personal property.
Section 2, Chapter 341, Session Laws ND 1949 (Section 57-3902, 1949 Supp to BOND 1943) reads as follows:
“There is hereby imposed, beginning the first day of July, 1949 and ending the 30th day of June, 1951 a tax of two percent upon the gross receipts from all sales of tangible personal property, consisting of goods, wares, or merchandise, except as otherwise provided in this act, sold at retail in the state of North Dakota to consumers or users; a like rate of tax upon the gross receipts from the sales, furnishing or service of .steam, gas, electricity, water and communication service, including the gross receipts from such sales by any municipal corporation furnishing steam, gas, electricity, water and communication service to the public in its proprietary capacity, except as otherwise provided in this act, when sold at retail in the state of North Dakota to consumers or users; and a like rate of tax upon the gross receipts from all sales of tickets or admissions to places of amusement and athletic events and the playing of a record on a vending machine, in response to a coin placed in a slot, except as otherwise provided in this act. The tax herein levied shall be computed and collected as hereinafter provided.”
This section is identical with Section 2, Chapter 276, Session Laws 1935, except for the dates and the italicized portion. That portion was added in Section 2, Chapter 308, Session Laws N. D. 1945 and retained in subsequent enactments of the sales tax law.
Section 6 of Chapter 276, Session Laws N. D. 1935 provided:
*793“Retailers shall, as far as practicable, add the tax imposed under this act, or the average equivalent thereof, to .the sales price or charge and when added such tax shall constitute a part of such price or charge, shall be a debt from consumer or user to retailer until paid, and shall be recoverable at law in the same manner as other debts.
“Agreements between competing retailers,- or the adoption' of appropriate rules and regulations by organizations or associations of retailers to provide uniform methods for adding such tax or the average equivalent thereof, and which do not involve price fixing agreements otherwise unlawful, and which shall first have the approval of the Commissioner, are expressly authorized and shall be held not to be in violation of any anti-trust laws of this state.”
This provision, in substantially the same language, appears in all reenactments of the sales tax law until 1949. Section 6 of Chapter 341, Session Laws N. D. 1949 provides:
“Retailers shall add the tax imposed under this act, or the average equivalent thereof, to the sales price or charge and when added such taxes shall constitute a part of such price or charge, shall be a debt from the consumer or user to retailer until paid, and shall be recoverable at law in the same manner as other debts.
“In adding such tax to the price or charge, retailers shall adopt the following bracket system for the application of the tax:
$0.01 to $00.24 ........................ no tax
.25 to .74 ............................ l^S tax
.75 to 1.24 . ..'......................... 2‡ tax
9.75 to 10.24 . . .'......................... 20‡ tax
Each additional 50‡ .............. 1‡ additional tax”
The defendant, by demurring to the complaint, admits the truth of all issuable relevant material facts well pleaded. Stern v. Gray, 70 ND 549, 296 NW 419. The allegations of a complaint attacked by demurrer are to be liberally construed. Security State Bank v. Peterson, 49 ND 585, 192 NW 491. Applying *794these rules to the allegations of the complaint, it appears that the plaintiff has complied with the sales tax law and has collected the taxes therein prescribed from the consumer, according to the bracket system prescribed by Section 6 as above set forth, covering the period from July 1, 1949, up to and including September 30, 1949; that the amount collected in full compliance with the law is $1,486.96 less than two per cent of the plaintiff’s gross sales that were subject to the tax; that the plaintiff has been compelled to pay that sum and did pay it under protest.
Reference to the bracket system schedule discloses that the retailer is not permitted- to collect a tax from the consumer on the amount of sales from one cent to twenty-four cents. The plaintiff suggests that this item of the schedule amounts to an exemption of all sales of twenty-four cents or less. I cannot agree with this contention for reasons that will appear from my later discussion of various sections of the act. The plaintiff further contends that if these sales are not exempt and are not to be excluded in computing the gross taxable sales, that the law must be construed so as to require him to pay to the state only the tax that he is able to collect from the consumers by acting in full compliance with the statute, and that if he is required to pay more than the tax so collected, he will be required to pay a tax levied against the consumer which he is not allowed to collect under the statute by reason of the bracket system schedule, and that if the statute is so construed, it is discriminatory and confiscatory, and therefore, unconstitutional.
It is the contention of the defendant tax commissioner that under the language of the statute the gross amount of the plaintiff’s nonexempt retail sales are subject to the sales tax, including items of one cent to twenty-four cents, and that the insertion of the bracket system in the statute indicates an intention on the part of the legislature to replace with its own method for adding the average equivalent of the tax, the method which it had formerly permitted the retailers to formulate with the approval of the tax commissioner.
Portions of the statute are ambiguous and some sections of it are seemingly inconsistent with others. Under the issues here *795presented it is onr duty to construe the statute, and in doing so,to avoid, if possible, a construction that would render the statute of doubtful constitutionality and validity.
“it is the duty of courts to reconcile statutes with the constitution when that can be done without doing violence to the language of either,” Martin v. Tyler, 4 ND 278, 60 NW 392.
See also Union Stock Yards Co. v. Nebraska State Railway Commission, 103 Neb 224, 170 NW 908, 172 NW 528.
I start my analysis with the premise that the sales tax is levied upon the consumer.
“What the plaintiff is required to do is to collect the tax and remit. It has employees in the state whose duty it is to collect the price of the goods delivered. The state requires them, to assist in collecting revenue. It will be noted that our statute imposes the tax upon the goods sold, to be collected with the payment of the purchase price, and this becomes ‘a debt from consumer or user to retailer until paid, and shall be recoverable at law in the same manner as other debts.’ (Sec. 6.) The retailer must add the tax or its average equivalent to the price or charge. It is the consumer who pays' the tax, and under the provisions of Sec. 7, it is made ‘unlawful for any retailer to advertise or hold out or state to the public or to any consumer, directly or indirectly, that the tax or any part thereof imposed by this Act will be assumed or absorbed by the retailer or that it will not be considered as an element in the price to the consumer, or if added, that it or any part thereof will be refunded.’
“We must not lose sight of the fact that this tax is laid primarily on the consumer. The fact that the plaintiff failed to collect this tax for the state does not absolve it from its duty.' There is no discrimination between nonresident and resident retailers so as to place an unshared burden on the former. The tax is laid only on those who buy within the state; but in order to insure collection of this tax, resort is had to the records of the retailer. To obviate manifest difficulties in assessment and collection, the gross receipts of- the retailer are made the basis (Sec. 2) and he adds the tax to; his cost price. (Sec. 6.) To assure him that the liability • will not fall upon him, he cannot *796be compelled by pressure of competition or any other method to absorb the tax. He is not permitted to do so.. (Section 7 quoted above.)” Jewel Tea Co. v. State Tax Commissioner, 70 ND 229, 293 NW 386.
In the next case involving the sales tax, Voss v. Gray, 70 ND 727, 298 NW 1, after quoting a portion of the 1937 act, the majority of this court said:
“Without further reciting the provisions of the act it is enough now to say that the tax thus imposed is a tax on the consumer.”
And in his dissenting opinion, Judge Christianson said:
“The Sales Tax Act of- this state imposes a tax upon the purchaser or consumer, and makes it the duty of the seller to add the amount of the tax to the sales price or charge and to collect and remit the tax to the tax commissioner. Jewel Tea Co. v. State Tax Comr. ante, 229, 293 NW 386. The retailer may not assume or pay the tax, but is required to add the tax or its equivalent to the sales price or charge, and the tax so added constitutes a part of the price or charge. It is unlawful for the retailer to pay the tax or to hold out or state directly or indirectly that he will absorb the tax or any part thereof, or make a refund of any part of the tax.”
The statutory language referred to has been carried into the present act. It means the same now as it did then. Great Northern Ry. Co. v. Ward County, 54 ND 75, 208 NW 768; Gimble v. Montana-Dakota Utilities Co., ante 581, 44 NW2d 198.
“As an aid in the construction of a statute, it is to be assumed or presumed that the legislature was acquainted with, and had in mind, the judicial construction of former statutes on the subject, and that the statute was enacted in the light of the judicial construction that the prior enactment had received, or in the light of such existing judicial decisions as have a direct bearing* upon it.” 50 Am Jur, Statutes, Section 321, Page 312.
This court has spoken clearly to the effect that the sales tax is levied on the consumer and not on the retailer, thereby leaving no room for an alternative construction that it is a hybrid tax levied upon both. The strongest expressions appear in syllabi *797by tbe court. In paragraph 2 of the syllabus in Jewel Tea Oo. v. State Tax Commissioner, supra, we said:
“Chapter 249 of the Session Laws of 1937, known as the ‘Sales Tax Act,’ imposes the tax upon the consumer in this state, and not upon the retailer, even though the retailer is required to add the tax, or its average equivalent, to the sales price or charge, and to collect the same and remit the tax to the tax commissioner.”
In paragraph 1 of the syllabus in Federal Land Bank v. Bismarck Lumber Co., 70 ND 607, 297 NW 42, we said:
“The tax imposed by the State Sáles Tax Act (Sess Laws 1937, chap 249) is laid upon the buyer and not upon the seller.”
The correctness of these statements is emphasized in the dissenting opinion of Judge Christianson in Federal Land Bank v. Bismarck Lumber Co., wherein he said:
“The state sales tax is not a tax imposed upon the retailer for the privilege of engaging in business or for the privilege of making the sale. The law lays the burden of the tax upon the purchaser. Jewel Tea Co. v. State Tax Commissioner, ante, 229, 293 NW 386. It places upon the retailer the duty to collect the tax from the purchaser, and to account for and pay the tax collected over to the State Tax Commissioner (Monamotor Oil Co. v. Johnson, 292 US 86, 93, 78 L ed 1141, 1147, 54 S Ct 575), but the law does not contemplate that the retailer shall pay the tax. On the contrary, he is forbidden to assume the tax or to hold out to purchaser that the tax ‘will be assumed or absorbed by the retailer or that it will not be considered as an element in the price to the consumer, or if added, that it or any part thereof will be refunded.’ Sales Tax Act, Sec 7.
“The state sales tax is an enforced contribution exacted by the State in the exercise of its taxing power to provide for the support of the government. 61 CJ pp 68, 69. It is a substantial, direct and discernible tax imposed upon the purchaser of personal property, which the seller is required to collect from the purchaser and pay over to the State Tax Commissioner.”
*798In addition to Section 7 which now provides that:
• “No retailer shall advertise or hold out or state to the public or to any consumer, directly or indirectly, that the tax or any part thereof imposed by this act shall be assumed or absorbed by the retailer or that it will not be considered as an element in the price to the consumer, or if added, that it or any part thereof will be refunded.”
(which is identical in meaning with Section 7 of the 1935 act) there are other sections that indicate that it was not the intention of the legislature to require the retailer to assume or absorb the tax, but that he should pay only the tax that he was required to collect from the consumer.
Section 1 of the act is devoted primarily to definitions. But there are some provisions that indicate an intention to adhere strictly to the'collection of the tax from the-consumer and to exclude the retailer from bearing any portion of. the tax burden, other than that incident to collection and remittance. The definition of gross receipts provides:
“discounts for any purposes allowed and taken on sales shall not be included, nor shall the sale price of property returned by customers when the full sale price thereof is refunded ■ either in cash or by credit.”
It is further provided that where payment of the sale price is extended over a period longer than sixty days, the retailer is required to remit the sales tax only upon the actual cash received by him during each quarterly period.
It may also be noted that Section 2, which purports to impose the tax, qualifies that imposition by the statement “except as otherwise provided in this act” and by the further statement that “The tax herein levied shall be computed and collected as hereinafter provided.”
In Section 4 we find that “Taxes paid on gross receipts .represented by accounts found to be worthless and actually charged off, for income tax purposes may be credited upon subsequent payment of the tax herein provided;” Section 7, which we have quoted above, not only forbids the retailer to assume or absorb the tax, but if he does so, Section 16 provides that he “shall be *799guilty of a misdemeanor, punishment for which shall he a fine of not more than one thousand dollars or imprisonment for not more than one year, or both such fine and imprisonment, in the discretion of the court. . . The tenor of these sections clearly indicates that the retailer must collect and remit, but not pay the tax out of his own pocket.
The heart of this controversy is the failure of collections made pursuant to the bracket system schedule, to produce an amount equal to two per cent of the gross nonexempt sales made by the plaintiff. Under our prior sales tax statutes, Section 6 permitted a voluntary schedule to be adopted, by the retailers, subject to the approval of the tax commissioner. ■ The 1949 act contains an inflexible schedule. This schedule' must be considered in connection with the other portions of the act, and particularly with the first paragraph of Section 6 of which the schedule is .a part. This paragraph requires retailers to add the tax or “average equivalent” of the tax to the sale price. The adoption of the bracket system does not denote an intention on the part of the legislature to shift any part of the tax-burden from the consumer to the .retailer, but rather to fix a schedule that would in its judgment cause the consumer to pay a tax of two per cent in the aggregate on all nonexempt sales. In this case, under the facts as pleaded in the complaint, the application of the schedule has failed to produce that intended result and the collections are $1,486.96 less than the desired two per cent. But this discrepancy between the intended and the actual result does not create a new taxpayer and require the retailer to make up the difference from his own funds. It is clear that our statute does not levy separate taxes on the consumer and the retailer, as did the Wyoming statute under consideration in Walgreen Co. v. State Board of Equalization, 62 Wyo 288, 166 Pac2d 960, which levied a sales tax of the equivalent of two per cent on sales amounting to twenty-five cents or over to be paid by the consumer and a tax of one per cent on sales of twenty-four cents or less which the purchaser was not required to pay, but which was assumed and paid by the retailer. Neither is ours an exercise tax on the privilege of operating a retail mercantile busi*800ness, as was the California tax considered in Roth Drugs v. Johnson, 13 Cal App2d 720, 57 Pac2d 1022.
Under our statute the retailer is made the medium of collection and not the source of the tax. It covers all nonexempt sales of tangible personal property. Various exemptions are set forth in the act in sections other than the one providing for the bracket system. They are based upon the nature of the transaction, the kind of property involved, or the classification of the buyer or seller. It is suggested that the 1949 act extends exemption to sales of twenty-four cents or less because the first item of the bracket system schedule governing the collection of the tax from the consumer provides that no tax shall be collected on those sales. But this schedule is clearly not intended as a statement of levy or exemption. The units of our monetary system do not make possible collection of a tax from the consumer of exactly two per cent on all sales. If only the .monetary units are to be used with reference to small amounts, the choice must be made between collecting from the consumer an exaction up to 100 per cent or making no collection at all. To avoid both horns of this dilemma, the legislature devised the inexact but substantially just method of collecting the “average equivalent.” The purpose of this device was to reach an average in the process of collection that would bring to bear upon the consumer generally a tax of two per cent. In former acts the “average equivalent” was left to the determination of the retailers and the tax commissioner. The 1949 act reduced the “average equivalent” to a statutory schedule which, in the judgment of the legislature, would produce on the average the equivalent of two per cent of the gross nonexempt sales. Sales from one cent to twenty-four cents were included in the schedule, not excepted from it. They are a part of the basis for the “average equivalent” as determined by the legislature and not an exemption from the tax. On the other hand, it cannot be said that the adoption of the schedule imposes on the retailer liability for any deficiency resulting from the failure of the application, of the schedule to produce the actual and exact equivalent of two per cent of the retailers gross nonexempt sales. When I consider the entire act and reconcile and *801give effect to its various provisions, I reach the conclusion that all of the tax collected under the bracket, system belongs to the state, even though it exceeds two per cent of the retailers gross, taxable sales, and that only the tax collected by the retailer,- acting in full compliance with the law, belongs to the state and must be remitted to the tax commissioner.
“The ultimate burden of the tax, both in form and in substance* is thus laid upon the buyer, for consumption, of tangible personal property, and measured by the sales price. Only in event that the seller fails to pay. over to the city the tax collected or-to charge and collect it as the statute requires, is the burden cast on him.” McGoldrick v. Berwind-White Coal Min. Co., 309 US 33, 84 L Ed 565, 60 S Ct 388, 128 ALR 876.
My conclusion in this respect is further buttressed-by the fact that a construction of the act which would require the retailer to pay out of his own pocket the difference between the tax that he is allowed to collect from the consumer according to the bracket system schedule and two per cent of the gross taxable sales would compel him, -under, the facts as pleaded in this complaint, to pay a part of the consumers tax and'would result in doubt as to the constitutionality of the statute. See Winslow-Spacarb Inc. v. Evatt, 144 Ohio St 471, 59 NE2d 924; National Ice and Cold Storage Co. v. Pacific Fruit Express Co., 11 Cal2d 283,79 Pac2d 380.
Inherent in my construction of the statute is the question of the burden of proof. It is a general rule that tax statutes are-construed most strictly against the government and in favor of’ the citizen. Goldberg v. Gray, 70 ND 663, 297 NW 124. On the other hand, laws which exempt property from taxation will receive a strict construction as against the claimant. In re McKee’s Estate, 71 ND 545, 3 NW2d 797; Engstad v. Grand Forks County, 10 ND 54, 84 NW 577; American Bridge Co. v. Smith, 352 Mo 616, 179 SW2d 12, 157 ALR 798 and annotation. The purpose of the act under consideration .is to levy a tax of two per cent on sales of nonexempt tangible personal property to be collected from the consumer. In order, to facilitate the collection, the retailer is required to report his .taxable sales to» *802the tax commissioner and two per cent of this amount is, prima facie, .the sum he has collected. The bracket system schedule represents the judgment of the legislature as to consumer payments that will yield that amount on the basis of an “average equivalent.” The plaintiff alleges that the application of the schedule has not produced the full two per cent. It (the plaintiff) is not the taxpayer and the excess of two per cent of its taxable sales over collections under the schedule is not an exemption. But the situation is somewhat analogous to that presented by a tax exemption claim. A retailer’s presumptive liability is two per cent of his taxable sales. If he claims that his liability is actually less than that amount, he has the burden of proving the lesser liability to the extent of a substantial amount. Mathematical exactness is not a requirement of uniformity. Blauaer’s, Inc. v. Philadelphia, 330 Pa 340, 198 Atl 889. The law disregards trifles. Baird v. Zahl, 58 ND 388, 226 NW 549; Robert v. Western Land Ass’n, 43 Minn 3, 44 NW 668; Western Land Ass’n v. McComber, 41 Minn 20, 42 NW 543.
The complaint states a cause of action and the case should go back to the district court for a trial on the merits.