{
  "id": 1869689,
  "name": "Charles D. RAGLAND, Commissioner of Revenues v. ALLEN TRANSFORMER COMPANY",
  "name_abbreviation": "Ragland v. Allen Transformer Co.",
  "decision_date": "1987-11-23",
  "docket_number": "87-175",
  "first_page": "601",
  "last_page": "607",
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  "last_updated": "2023-07-14T18:33:58.592079+00:00",
  "provenance": {
    "date_added": "2019-08-29",
    "source": "Harvard",
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  "casebody": {
    "judges": [],
    "parties": [
      "Charles D. RAGLAND, Commissioner of Revenues v. ALLEN TRANSFORMER COMPANY"
    ],
    "opinions": [
      {
        "text": "Tom Glaze, Justice.\nThis appeal involves the appellant\u2019s assessment of a sales tax on repair services performed on electrical transformers by the appellee at its business location in Fort Smith, Arkansas. After exhausting its administrative remedies, appellee filed suit in chancery court, alleging the appellant\u2019s assessment was an illegal exaction. The chancellor upheld the appellant\u2019s sales tax assessment on the repairs performed for Arkansas customers, but disallowed as an illegal exaction the assessment on repair services performed within the state on transformers owned by out-of-state customers. The chancellor also awarded appellee attorney\u2019s fees. Both parties appeal from the chancellor\u2019s decree.\nThe facts are undisputed. Appellee is in the business of repairing, rewinding and remanufacturing electrical transformers, and while all its repair services are performed in Arkansas, appellee\u2019s customers are both within and outside the state. In either case, appellee sends its own truck to pick up the customer\u2019s burned out transformer, takes the unit to appellee\u2019s business location in Fort Smith for the required repairs and, again by truck, returns the transformer to the customer. As a result of appellant\u2019s sales tax audit of appellee\u2019s records during the period of April 1977 through March 1983, appellee was assessed an additional tax, interest and penalty of $39,361.18.\nAppellant first argues the chancellor erred in determining that no taxable sale occurred on services appellee rendered in the state for its out-of-state customers. In reaching his decision, the chancellor reasoned that before a taxable service can exist, Ark. Stat. Ann. \u00a7 84-1902(c) (Repl. 1980) requires that the transfer of title or possession of the customer\u2019s transformer must occur within Arkansas. Based upon this same reasoning, the chancellor upheld appellant\u2019s assessment of sales tax upon the repairs appellee performed for its Arkansas customers. Thus, the question posed by appellant\u2019s argument is whether the sales tax can be imposed on services performed on electrical devices when the repairs are performed in the state, but the transfer of possession of the device to appellee actually takes place outside the state. We hold it can, and, therefore, must reverse the trial court\u2019s holding to the contrary.\nArkansas imposes a three percent tax upon the gross proceeds or receipts derived from all sales listed in Ark. Stat. Ann. \u00a7 84-1903 (Repl. 1980 and Supp. 1985), and, under subsection (c)(3) of that statute, the tax is levied on, among other things, the service of alteration and repair of electrical appliances and devices. Under Ark. Stat. Ann. \u00a7 84-1902(c), the term \u201csale\u201d, in pertinent part, is defined to mean the transfer of either title or possession for a valuable consideration of tangible personal property, regardless of the manner, method, instrumentality, or device by which such transfer is accomplished. Appellee\u2019s argument, adopted by the chancellor below, is that because appellee picked up and delivered the transformers owned by out-of-state customers at the customers\u2019 business locations, no sale, i.e. transfer of possession, occurred within the state pursuant to \u00a7\u00a7 84-1902(c) and -1903(c) to make those transactions taxable. To support its argument, appellee cites the case of Gaddy v. DLM, Inc., 271 Ark. 311, 609 S.W.2d 6 (1980), a case we find unpersuasive because it involved the sale of tangible personal property and did not concern a service, as is the situation here.\nIn considering the proper construction to be given \u00a7 \u00a7 844902(c) and -1903(c), as those provisions pertain to the assessment of taxes on services, it is this court\u2019s duty to look to the whole act and, as far as practicable, to reconcile the different provisions to make them consistent, harmonious and sensible. Ragland v. Alpha Aviation, Inc., 285 Ark. 182, 686 S.W.2d 391 (1985). We must also decline an interpretation that results in absurdity or injustice, leads to contradiction or defeats the plain purpose of the law. Id., 285 Ark. at 185; 686 S.W.2d at 392. Towards these ends, we first look at \u00a7 84-1902(c), the provision which defines \u201csale.\u201d In doing so, we find the last sentence of that subsection excludes the furnishing or rendering of services from the definition of sale. As a result, the general assembly obviously intended, under these provisions, that the transfer of title or possession requirement must occur in the sale of tangible personal property before the tax is imposed; it provided no such requirement when imposing the tax on services. Other reasons support this interpretation, as well.\nFor example, the general assembly, in three instances, has deemed it necessary to exempt from the gross receipts tax certain services performed in-state on out-of-state property. In 1981, it excluded from the tax the repair or maintenance of railroad parts, railroad cars and equipment brought into the state for such repair. See Ark. Stat. Ann. \u00a7 84-1903(c)(3) (Supp. 1985), as amended by Act 983 of 1981. That same year, the general assembly also provided that the gross receipts tax would not apply to in-state services performed on watches and clocks which are received by mail or common carrier from outside the state and which, after the service is performed, are returned in the same manner, or in the repairman\u2019s own conveyance, to points outside the state. See Ark. Stat. Ann. \u00a7 84-1903.4 (Supp. 1985). And, finally, the general assembly in 1985, provided an exemption (until July 1, 1987) for in-state repair or refurbishing services performed on telephone instruments that are sent into this state, and, after such repairs or refurbishing, are shipped back to the state of origin. See Ark. Stat. Ann. \u00a7 84-1903.6 (Supp. 1985). Unquestionably, the general assembly, in providing for these special exemptions on specified equipment or devices brought into state for repairs, obviously understood and intended Arkansas\u2019s sales tax, levied under \u00a7 84-1903(c)(3), to cover services performed within the state for both in-state and out-of-state customers.\nAppellant underscores another compelling reason why Arkansas\u2019s gross receipts law must be construed in this fashion by pointing to the absurdities that could result if that law were read to allow the imposition of tax on services only when a transfer of possession occurs within the state. To illustrate, under appellee\u2019s rationale and the trial court\u2019s holding, the repair of a television could be taxable only if the owner surrendered title to or possession of his set. Thus, if the repairman picks up the set and repairs it at the shop, the sales tax would apply; if he repaired it at the customer\u2019s house, no transfer would occur, so no tax would attach. The same rationale would extend to other type services or repairs, as well. In the same vein, we need only look to this court\u2019s decision in Department of Finance and Administration v. Otis Elevator Co., 271 Ark. 442, 609 S.W.2d 41 (1980) wherein we upheld the state\u2019s assessment of sales tax on services performed on elevators, when, clearly, no transfer of title or possession occurred. We conclude, in harmonizing and reconciling our sales tax provisions dealing with services and repairs performed within the state, the appellant\u2019s assessment of a sales tax on services performed for both in-state and out-of-state customers of appellees was correct.\nNext, we turn to appellee\u2019s arguments that Arkansas\u2019s Gross Receipts Act is ambiguous, vague and violates appellee\u2019s rights to due process and equal protection. Appellee, consistent with its earlier contention, argues that, at best, uncertainty exists under the act as to whether a sales tax should be assessed on transactions involving its out-of-state customers. Referring to Wiseman v. Arkansas Utility Co., 191 Ark. 854, 88 S.W.2d 81 (1935), it urges that a tax cannot be imposed except by express words indicating that purpose, and that any ambiguity in the act must be resolved in appellee\u2019s favor. Appellee further argues an earlier audit performed on its records in 1971 reflects no assessment on out-of-state transactions and it was provided no notice of appellant\u2019s later position to assess such transactions although the tax laws were the same at the time the 1971 audit and the one in issue here were performed.\nIn response to appellee\u2019s concerns, we simply cannot agree that \u00a7 84-1903 (c)(3) is in any way vague in its levy of taxes upon the services provided by appellee. Even appellee concedes that the transformers are electrical devices covered under \u00a7 84-1903(c)(3) and, as such, the repairs of the transformers are subject to the sales tax. Contrary to appellee\u2019s assertion, we simply disagree that the tax law is vague in its levy of taxes on appellee\u2019s out-of-state customers. Nor do we agree that the appellant\u2019s prior audit could have reasonably misled appellee into the belief that its out-of-state transactions would not be assessed. We have carefully reviewed appellee\u2019s exhibit #5, which it argues reflects a tax was not assessed on five out-of-state customers; we find the five transactions to which appellee refers bear changes in each instance to reflect Arkansas addresses. In short, the exhibit provides no real insight concerning whether the transactions occurred in state or out.\nFinally, appellee attacks the assessment as a violation of the interstate commerce clause, saying all the sales occurred outside the State of Arkansas, and to tax those transactions would have a chilling effect on its ability to do business with out-of-state customers. We find no merit in appellee\u2019s argument. In Evco v. Jones, 409 U.S. 91 (1972), the Supreme Court, citing its earlier holding in Department of Treasury v. Ingram-Richardson Mfg. Co., 313 U.S. 252 (1941), reiterated the rule that a state may tax the proceeds from services performed in the taxing state, even though they are sold to purchasers in another state. The Evco decision was relied on by the Tennessee Supreme Court in its recent decision in Le Tourneau Sales and Service, Inc. v. Olsen, 691 S.E.2d 531 (Tenn. 1985). In rejecting there the same interstate commerce clause argument as is now made here, the Tennessee court upheld the imposition of sales taxes on services performed within the state when motors were shipped into Tennessee, where they were rebuilt and then returned to the out-of-state customer. As was the situation in Olsen, the taxable event involved here is the rendering of services within the state, and a substantial connection with this state exists to justify the imposition of the sales tax on repair work performed by the appellee in Arkansas.\nConsistent with the foregoing reasons, we reverse and remand this cause. In doing so, we need not reach appellant\u2019s challenge of the trial court\u2019s award of attorney\u2019s fees to the appellee as the prevailing party below, except to state that award, too, is reversed upon remand of this cause.",
        "type": "majority",
        "author": "Tom Glaze, Justice."
      }
    ],
    "attorneys": [
      "Timothy J. Leathers, Wayne Zakrzewski, Kelly S. Jennings, Ann Kell, Joe Morphew, Philip Raia, and Robert Jones, by: John H. Theis, for appellant.",
      "Pryor, Barry, Smith & Karber, by: John D. Alford, for appellee."
    ],
    "corrections": "",
    "head_matter": "Charles D. RAGLAND, Commissioner of Revenues v. ALLEN TRANSFORMER COMPANY\n87-175\n740 S.W.2d 133\nSupreme Court of Arkansas\nOpinion delivered November 23, 1987\n[Rehearing denied December 21, 1987.]\nTimothy J. Leathers, Wayne Zakrzewski, Kelly S. Jennings, Ann Kell, Joe Morphew, Philip Raia, and Robert Jones, by: John H. Theis, for appellant.\nPryor, Barry, Smith & Karber, by: John D. Alford, for appellee."
  },
  "file_name": "0601-01",
  "first_page_order": 639,
  "last_page_order": 645
}