Campbell v. Currie , 251 N.C. 329 ( 1959 )

111 S.E.2d 319 (1959) 251 N.C. 329

Lee CAMPBELL
v.
James S. CURRIE, Commissioner of Revenue of the State of North Carolina.

No. 377.

Supreme Court of North Carolina.

December 2, 1959.

Royster & Royster, Oxford, for plaintiff.

Atty. Gen. Malcolm B. Seawell, Asst. Attys. Gen. Peyton B. Abbott and Lucius W. Pullen, for defendant.

DENNY, Justice.

The defendant's assignment of error No. 1 is based on finding of fact No. 1 as set forth in the judgment herein. It is clear that this finding of fact is supported by the facts stipulated by the parties and, therefore, this assignment of error is overruled.

Assignment of error No. 2 is based on finding of fact No. 2 to the effect that the lumber involved shall be considered tangible personal property and by reason of the use made of it by Tungsten Mining Corporation it is considered and found to be embraced within the term sales of mill machinery, mill machinery parts and accessories and subject to the wholesale rate of tax of 1/20 of one per cent.

The Legislature in the enactment of our Revenue laws has recognized the necessity of authorizing the Commissioner of Revenue to promulgate regulations implementing and clarifying the meaning of our Revenue statutes not inconsistent with existing laws.

G.S. § 105-262 authorizes the Commissioner of Revenue to "initiate and prepare such regulations, not inconsistent with law, as may be useful and necessary to implement the provisions of all the articles of subchapter I (except article 8B) and article 36 of subchapter V * * *."

The Sales and Use Tax Regulation No. 4 upon which the plaintiff is relying, was promulgated on 15 July 1944 by the Commissioner of Revenue of North Carolina, pursuant to the authority granted in §§ 423 and 931 of the Revenue Act of 1939, as amended, and in compliance with Chapter 754 of the Session Laws of North Carolina of 1943.

The regulation under consideration deals with "sales and purchases of tangible personal property for use in connection with manufacturing and other industrial processing," and the pertinent part with respect to Mining and Quarrying in Section VII thereof reads as follows: "Sales of articles of tangible personal property used in direct production or extractive processes inside the mine shall be considered sales of mill machinery, mill machinery parts and accessories, and subject to the wholesale tax of one-twentieth of one per cent. However, sales or purchases of items such as caps, lights, gloves or other belongings or devices paid for and owned by employees but which are used in connection with their work are taxable at the rate of three per cent."

Regulation No. 4 in a preceding section reads as follows: "Materials going into buildings and structures are subject to tax of three per cent."

The appellant contends that the lumber sold by the plaintiff to Tungsten Mining Corporation was used to make stopes; that the lumber became floors, walls and ceilings within which the miners worked and was equivalent to housing placed under, around and above a manufacturing plant and therefore taxable at three per cent.

The appellant further contends that regulation No. 4 goes beyond the authority granted by the Legislature to the Commissioner of Revenue in classifying mill machinery, mill machinery parts and accessories.

There is no disagreement about the fact that 98.6 per cent of the lumber purchased by the Tungsten Mining Corporation from the plaintiff was used and became obsolescent in connection with the removal or extraction of ore from beneath the earth's surface. The stipulated facts compel this conclusion; and in our opinion the right to implement the provisions of all articles of subchapter I (except article 8B) and article 36 of subchapter V, as provided in G.S. § 105-262, gave the Commissioner of Revenue the right to construe, classify and determine that under the provisions of the Revenue Act sales of articles of tangible personal property used in direct production or extractive processes inside a mine may be classified or considered as sales of mill machinery, mill machinery parts and accessories, and subject only to the wholesale tax. Moreover, such interpretation has been in effect and promulgated in a regulation pursuant to the provisions of G.S. § 105-262 for more than fifteen years. In light of the stipulated facts, we do not construe the use made of this lumber to constitute a building or structure within the meaning of our tax laws.

Moreover, G.S. § 105-264 reads in part as follows: "It shall be the duty of the Commissioner of Revenue to construe all sections of this subchapter (except article 8B) and all sections of article 36 of subchapter V; provided, such construction shall not be inconsistent with applicable regulations duly promulgated under the provisions of G.S. § 105-262 * * *. Such decisions by the Commissioner of Revenue shall be prima facie correct, and a protection to the officers and taxpayers affected thereby. * * *"

The construction placed upon the Revenue Act by the Commissioner of Revenue will be given due consideration by the courts, although we have repeatedly held that such construction is not controlling. Cannon v. Maxwell, 205 N.C. 420, 171 S.E. 624; Powell v. Maxwell, 210 N.C. 211, 186 S.E. 326; Valentine v. Gill, 223 N.C. 396, 27 S.E.2d 2; Charlotte Coca-Cola Bottling Co. v. Shaw, 232 N.C. 307, 59 S.E. 2d 819; Dayton Rubber Co. v. Shaw, 244 N.C. 170, 92 S.E.2d 799. Therefore, our courts are not restricted with respect to the interpretation of the provisions of the Revenue Act by reason of any decision made or regulation promulgated by the Commissioner of Revenue. If there should be a conflict between the interpretation placed upon any of the provisions of the Revenue Act by the Commissioner of Revenue and the interpretation of the courts, the interpretation or construction by the latter will prevail.

The cases of States' Rights Democratic Party v. State Bd. of Elections, 229 N.C. 179, 49 S.E.2d 379; State v. Curtis, 230 N.C. 169, 52 S.E.2d 364, and similar cases cited by the appellant, are not controlling on the facts presented on this record.

In the case of Field v. Clark, 143 U.S. 649, 12 S.Ct. 495, 36 L.Ed. 294, the Court said: "The Legislature cannot delegate its power to make a law; but it can make a law to delegate a power to determine some fact or state of things upon which the law makes, or intends to make, its own action depend. To deny this would be to stop the wheels of government. There are many things upon which wise and useful legislation must depend which cannot be known to the lawmaking power, and must, therefore, be a subject of inquiry and determination outside of the halls of legislation." The foregoing was cited with approval by this Court in the case of Durham Provision Co. v. Daves, 190 N.C. 7, 128 S.E. 593, 595. See also United States v. Grimaud, 220 U.S. 506, 31 S.Ct. 480, 55 L.Ed. 563 and Bailey v. Evatt, 142 Ohio St. 616, 53 N.E.2d 812.

Since the interpretation placed upon the statute was promulgated in a regulation more than fifteen years ago and has not been changed by legislative act or otherwise modified, and the regulation is made prima facie correct by G.S. § 105-264, we are constrained to uphold the decision of the court below.

The General Assembly of 1957, Session Laws of North Carolina, Chapter 1340, amended G.S. § 105-264 by adding at the end thereof the following: "Whenever the Commissioner of Revenue shall construe any provisions of the revenue laws administered by him and shall issue or publish to taxpayers in writing any regulation or ruling so construing the effect or operation of any such laws, such ruling or regulation shall be a protection to the officers and taxpayers affected thereby and taxpayers shall be entitled to rely upon such regulation or ruling. In the event the Commissioner of Revenue shall change, modify, repeal, abrogate, or alter any such regulation or ruling any taxpayer who has relied upon the construction or interpretation contained in the Commissioner's previous ruling or regulation shall not be liable for any additional assessment on account of any tax not paid by reason of reliance upon such ruling or regulation and which might have accrued prior to the date of the change, modification, repeal, abrogation, or alteration by the Commissioner, and during the effective period of such prior ruling or regulation."

In view of the conclusion we have reached, it is not necessary to decide whether or not the above amendment was intended to be retrospective as well as prospective. 1957 Session Laws of North Carolina, Chapter 1340, section 16. However, in any event, it became effective on 1 July 1957 and, in our opinion, expressly shows an intent on the part of the Legislature to protect a taxpayer from an additional assessment where such taxpayer has made his returns and paid the taxes in accord with the terms of a regulation promulgated by the Commissioner of Revenue and in reliance thereon.

The remaining assignments of error are based on exceptions to the conclusion that the plaintiff is entitled to recover of the defendant the sum of $3,361.86 with interest, and to the signing of the judgment. These assignments of error are overruled.

The judgment below is

Affirmed.

HIGGINS, J., not sitting.