Indiana Department of State Revenue v. Food Marketing Corp.

403 N.E.2d 1093, 75 Ind. Dec. 483, 1980 Ind. App. LEXIS 1422

• Court: Indiana Court of Appeals
• Decided: April 28, 1980
• Docket: 3-1076A230
• Status: Published

Opinions

HOFFMAN, Judge.

Indiana Department of State Revenue (appellant) appeals from a judgment under the Indiana Gross Income Tax Act ordering a tax refund to Food Marketing Corporation, a wholesale grocer. As such, taxpayer is allowed to compute its tax under IC 1971, 6-2-1 — l(s) (Burns Code Ed.) which provides:

“[‘Gross income,’ defined — Wholesale grocers] In the case of wholesale grocers who are engaged in the business of selling stocks of groceries, tobacco products and expendable household supplies, gross income shall be deemed to mean the gross earnings, computed upon an annual basis, which are derived from wholesale sales of stocks of groceries, tobacco products and expendable household supplies to retail food establishments, and such wholesale grocers shall be subject to the rate of taxation as prescribed in section 3(g) [6-2-l-3(g)] of this chapter. For the purpose of this subsection only gross earnings shall be construed to mean the gross receipts derived from the sale at wholesale of stocks of groceries, tobacco products and expendable household supplies which are customarily sold through retail food establishments less the cost of the stock of groceries, tobacco products and expendable household supplies sold during such period, without any deductions of any other kind or character.” (Emphasis added.)

The underscored phrase in this statute gave rise to the controversy at trial, with appellant’s contention that “cost of the stock sold” entitled taxpayer to deduct only the expenses of initial acquisition and freight in expense. Taxpayer on the other hand comprehended the statute to entitle deductions for all expenses incurred to prepare products for sale to retail food establishments including warehousing costs, buying costs, turnover costs, and building expenses. Taxpayer was initially advised by the Revenue Department that no costs were allowable in determining gross earnings under Section l(s) of the Gross Income Tax Act on interstate sales. During a meeting of the financial officers from Indiana-based wholesale grocers held in February 1973 taxpayer was informed to the contrary, and subsequently filed for and received a refund of tax erroneously collected on its interstate sales. Because no action was taken as to a refund of tax paid for intrastate sales taxpayer initiated this suit. After trial was had the court found for taxpayer, and the following findings of fact and conclusions of law were entered on April 15, 1976:

“FINDINGS OF FACT

“1. Plaintiff is located in Allen County, Indiana; defendant is the proper party defendant and subject to suit for refund of taxes; all things necessary to be done as a prerequisite to such suit have been done; and the Court has jurisdiction over the parties and the subject matter of this action.

“2. Plaintiff is a wholesale grocer engaged in the business of selling and did sell during the period December, 1968 through February 24, 1973 stocks of groceries, tobacco products and expendable household supplies at wholesale to retail food establishments and is entitled to compute its gross income tax liability pursuant to Section l(s) of the Gross Income Tax' Act of 1933, as amended.

“3. Plaintiff is entitled to deduct its buying, warehousing, turnover and building expenses from its gross receipts for purposes of computing gross earnings under Section l(s) of the Gross Income Tax Act of 1933, as amended.

“4. Defendant has admitted that, if plaintiff is entitled to deduct its buying, warehousing, turnover and building expenses from its gross receipts in computing its gross income tax then the total refund due to the Plaintiff is:

1969 $49,839.70

1970 55,447.86

1971 63,514.94

YE 2/6/72 10,509.26

YE 2/24/73 69,982.54

$249,294.30

plus interest from the dates of overpayment to the date of payment of judgment and I find that such refund is due Plaintiff.

“5. The facts stated in Plaintiff’s complaint are true.

“6. Plaintiff is entitled to a judgment against defendant in the principal amount of $49,839.70, together with interest at six per cent per annum from the date of overpayment to the date of payment of judgment; in the principal amount of $55,447.86, together with interest at six per cent per annum from the date of overpayment to the date of payment of judgment; in the principal amount of $63,514.94, together with interest at six per cent per annum from the date of overpayment to the date of payment of judgment; in the principal amount of $10,509.26, together with interest at six per cent per annum from the date of .overpayment to the date of payment of judgment; and in the principal amount of $69,982.54, together with interest at six per cent per annum from the date of overpayment to the date of payment of judgment for a total principal amount of $249,-294.30, plus interest as stated.

“CONCLUSIONS OF LAW

“1. The law is with the Plaintiff and against the defendant.

“2. The Gross Income Tax levied and collected by the State of Indiana pursuant to the provisions of Section l(s) of the Gross Income Tax Act of 1933 as amended (on those certain sales which have been segregated and are the subject matter of this action) should have allowed Plaintiff’s buying, warehousing, turnover and building expenses as a part of its cost of stocks sold in computing gross earnings pursuant to Section l(s) of the Gross Income Tax Act of 1933, as amended.

“3. The Gross Income Tax levied and .collected upon those certain sales upon which Plaintiff’s claim, for refund was based was wrongful and illegal for the reason that it was contrary to Section l(s) of the Gross Income Tax Act of 1933, as amended.

“4. Plaintiff is entitled to a judgment against the defendant in the principal amount of $49,839.70, together with interest at six per cent per annum from the date of overpayment to the date of payment of judgment; in the principal amount of $55,447.86, together with interest at six per cent per annum from the date of overpayment to the date of payment of judgment; in the principal amount of $63,514.94, together with interest at six per cent per annum from the date of overpayment to the date of payment of judgment; in the principal amount of $10,509.26, together with interest at six per cent per annum from the date of overpayment to the date of ..payment of judgment; and in the principal amount of $69,982.54, together with interest at six per cent per annum from the date of overpayment to the date of payment of judgment for a total principal amount of $249,294.30, plus interest as stated.

IT IS THEREFORE CONSIDERED, ORDERED AND ADJUDGED, that: The Plaintiff have and recover from defendant the sum of $49,839.70 together with interest at the rate of six per cent per an-num from the date of overpayment to the date of payment of judgment, the sum of $55,447.86, together with interest at the rate of six per cent per annum from the date of overpayment to the date of payment of judgment, the sum of $63,514.94 together with interest at the rate of six per cent per annum from the date of overpayment to the date of payment of judgment, the sum of $10,509.26, together with interest at the rate of six per cent per annum from the date of overpayment to the date of payment of judgment the sum of $69,982.54, together with interest at the rate of six per cent per annum from the date of overpayment to the date of payment of judgment. Said interest is to be computed to the time this judgment is paid, all without relief from valuation or appraisement laws, together with the costs of this action.”

The sole issue raised upon appeal is whether or not the trial court erred in its interpretation of the statute involved so as to render the judgment contrary to law. Thus, it is undisputed that the large body of factual evidence which was before the trial court contains sufficient evidence to support the findings of fact reached by the trial court. The issue evolves into whether or not the legal conclusions drawn from the facts are correct in terms of the statute in question. See: Ind. Dept. Rev. v. Stark-Wetzel (1971), 150 Ind.App. 344, 276 N.E.2d 904. Our function as a reviewing court is to give effect to the intention of the Legislature which enacted the law. Gonser v. Bd. of Com’rs for Owen Cty. (1978), Ind. App., 378 N.E.2d 425.

In interpreting a statute it must first be determined whether or not ambiguous language is contained therein. If clear and unambiguous language has been employed then no further construction or interpretation is necessary or appropriate. Johnson v. Wabash Cty. (1979), Ind.App., 391 N.E.2d 1139. After assessing the statute herein, IC 1971, 6-2-1-1(s), supra, it must be deemed to be clear and unambiguous. Within the statute there are no words of limitation used in conjunction with the phrase “costs of the stock sold”, defining the term “cost” to mean the amount of original purchase plus transportation expenses only. If this was the legislative intent, use of a modifier such as “invoice cost,” “original acquisitional cost” or “purchase cost” could have served to clearly designate the limitation. Instead, the Legislature used the term “cost of the stock sold ” which logically includes those items necessary to prepare the products for resale as argued by Food Marketing.

There is no expression by the Legislature that the words employed in this statute are to be given a technical meaning. Absent such legislative intent words in a statute are to be given their plain,.ordinary and usual meaning. Johnson v. Wabash Cty., supra; Gonsor v. Bd. of Com’rs for Owen Cty., supra.

Moreover, to the extent that some doubt may be said to exist concerning the legislative intent, a statute imposing a tax is to be construed against the State and in favor of the taxpayer. Gross Income Tax Div. v. Colpaert Realty Corp. (1952), 231 Ind. 463, 109 N.E.2d 415; In re Est. of Cassner (1975), 163 Ind.App. 588, 325 N.E.2d 487.

Substantial evidence before the trial court indicates that “cost of stock sold” was generally understood within both the accounting profession and the food distributing industry to include those expenses directly related to the acquisition of goods, warehousing, and preparation for resale. These categories of expenses were used by taxpayer and other wholesale grocers in reporting to the New York Stock Exchange, the Securities and Exchange Commission and in preparing other financial reports when computing the “cost of sales.” There was additional testimony given that the phrases “cost of stocks sold” and “cost of sales” or “cost of goods sold” were all common terms and used interchangeably. Other wholesale grocers testified that their companies consistently deducted the expenses here in dispute when computing their tax liability under Section l(s) and were allowed to do so by the Indiana Department of State Revenue. This evidence amply demonstrates that, when taking the words at their usual meaning the expenses as categorized above by taxpayer would be considered “cost of stocks sold” encompassed by the statute, and that the Legislature intended to provide for a deduction in compliance with such general meaning.

Appellant has failed to demonstrate that the statute supports its position. Its narrow definition of the disputed phrase is not substantiated by any other language used in the Indiana Gross Income Tax Act. For example, Section l(r) of the act uses the term “purchase price.” Such language is consistent with the position taken by appel- ■ lant here. Yet, “purchase price” was not used in Section l(s). Also, testimony given by one of the Department’s witnesses supports the allowance rather than denial of those deductions urged by taxpayer. Under such circumstances it cannot be stated as a matter of law that the trial court incorrectly applied IC 1971, 6-2-l-l(s) by allowing the disputed expenses to be calculated as costs of stock sold.

There is also merit in taxpayer’s contention that to deny it these deductions for the years in question while allowing its competitors to take advantage of the same deductions during those years violates the princi-pie of uniformity. This contention was supported by ample evidence of record, however, there is no need to further discuss the issue here in light of the above decision.

The judgment below serves to properly effect the legislative intent. The judgment is therefore affirmed.

Affirmed.

GARRARD, P. J., concurs. STATON, J., dissents with opinion.