137 So. 2d 595 | Fla. Dist. Ct. App. | 1962
Lead Opinion
The Comptroller of Florida has appealed from an adverse decree holding that accounts receivable owned by Burroughs Corporation, a non-resident legally domiciled in the State of Michigan, were not subject to the imposition of an intangible tax under the statutes of this state. The facts are not in dispute and the controlling question is exclusively one of law.
In his decree the chancellor found the following facts pertinent to the issues in the case. Burroughs, a Michigan corporation, maintains branch and sub-offices in various cities of Florida. The company’s business conducted in Florida as well as in several other southeastern states, is supervised by and controlled from a regional office located in Georgia. Burroughs’ business consists of the sale and servicing of business machines, as well as supplies used in connection with their operation. Each branch office is directed by a manager who is subordinate to the regional manager located in Georgia, but who directs the salesmen and other employees of the company working in and out of the branch office. In connection with each branch office there is a warehouse in which is maintained an inventory of various machines sold in the trade area. The branch office also maintains repair facilities for the servicing of the business machines sold in the usual course of business. Cash received by the branch office from sales and servicing the machines represents only a small portion of the business conducted by Burroughs. The vast majority of sales are on credit, the unpaid balance of which is secured by unrecorded retain title contracts. Neither the manager nor any other employees of the branch office are authorized to extend credit to any prospective customers. Orders for the purchase of equipment on a credit basis are transmitted to the regional office for acceptance or rejection. Upon acceptance of an order, the customer is invoiced from the regional office, a copy of which is sent to the branch manager and constitutes his authority to deliver the equipment called for in the order. All billings are made from the regional office, including reminders on delinquent accounts. The second reminder that an account is delinquent is sent to the branch manager for his information, but there is no fixed procedure requiring action by the latter. He is expected to encourage the purchaser to cure the delinquency whenever possible.
All records of accounts receivable, including the retain title contracts, are physically maintained at the regional office in Georgia. In the event of default in payment of the purchase price, the equipment may be picked up by a representative of the branch office if this can be done agreeably to the purchaser. Only the regional office may authorize legal action to repossess equipment in the event of default in payment. Less than one per cent of the time of its employees is expended by the branch office in making collections on delinquent accounts. A portion of the company’s business of servicing and repairing machines is paid in cash by the customers. Where, however, credit for service charges is requested, it is extended only by the regional office, and all billings for such charges are made by that office. Accounts receivable for service and repair charges are likewise kept and maintained in the regional office, and collections are made from that source.
It is the comptroller’s contention that under the foregoing system of operation all accounts receivable owned by Burroughs for merchandise sold in Florida, and for the repair and servicing of equipment in this state, are subject to the imposition of an intangible tax pursuant to the provisions of F.S. Section 199.07, F.S.A., which is as follows:
“It is hereby made the duty of every person, firm or corporation in this state owning or having control, management, or custody of intangible personal prop*597 erty which is subject to taxation under the laws of Florida, including trustees, executors, administrators, receivers and all other fiduciaries, to file a sworn return of the same with the county assessor of taxes in the proper county on or before the first day of April of each and every year, giving the character, description, location and full cash value of same according to the best of the knowledge and belief of the person making the return. * * * ”
At the outset it should be clearly borne in mind that this controversy does not involve the obligation of Burroughs, a nonresident corporation, to pay the required occupational license tax for engaging in business in Florida. Nor does it involve the obligation of this corporation to pay all ad valorem real and personal property taxes assessed against the property owned by it and located in this state. Similarly, it does not involve the obligation of Burroughs to pay all sales and use taxes for which it is obligated under the applicable statutes of Florida. It is presumed that all such taxes so levied and assessed have been paid. The precise problem with which we are concerned relates only to the question of whether accounts receivable arising from sales and service in the State of Florida, under the system of operation employed by Burroughs for the conduct of its business in this state, are subject to the imposition of the intangible tax called for in the above quoted section of our statutes.
It is undisputed that Burroughs is a non-resident corporation legally domh ciled in Michigan. It is established in this jurisdiction that intangible personal property accompanies the person of the owner and is taxable at his domicile, unless it has acquired a business situs elsewhere for taxation purposes.
In Smith v. Lummus
The principles of law for determining whether intangible property owned by nonresidents of Florida has acquired a taxable situs in this state as pronounced in the decision of the Supreme Court abovemen-tioned were not modified nor receded from when that case made its second appearance in that Court. After the decree dismissing the complaint was reversed and the cause remanded, answer was filed by the taxing authorities and evidence adduced. Plaintiff failed to establish by competent proof that the domiciliary ownership of the accounts receivable was in the State of New York, a fact specifically alleged in the complaint. Upon the evidence contained in the record the chancellor found that the plaintiff partnership had failed to establish the allegations of its complaint, and therefore dismissed the case with prejudice. Upon appeal from that decree the Supreme Court agreed with the findings of the chancellor and rendered its decision of affirmance.
The principles pronounced by our Supreme Court in the first decision rendered by it in Smith v. Lummus appear to be consistent with the weight of authority represented by decisions of our sister states.
In Tax Commission v. Kelly-Springfield Tire Co., 38 Ohio App. 109, 175 N.E. 700, it was held by the Court of Appeals of Ohio that where a non-resident owner has divorced the credits or accounts receivable owned by him from his use, control and management, and vested them in another residing in a different state, where such credits are used by such other persons in the conduct of his business, then such receivables may be taxed as intangible personal property in the latter state. It was held in that case, however, that although the debt consisting of accounts receivable was created by the act of the branch office, the control and disposition of the debt was exercised exclusively by the home office of
In commenting upon the exception to the general rule that the taxable situs of personal property is at the domicile of the owner, the Supreme Court of California said:
“The authorities generally agree that where the owner is not a resident of the state in which the credits are situated, and the credits are in the possession and control of a local agent, who holds them for the purpose of transacting a permanent business, and of investing and reinvesting the proceeds from the principal or interest in such manner that the property or credits come in competition with the capital of the citizens of the state in which the agent resides, that the credits have a situs for the purpose of taxation in the place of residence of the local agent.”7
Several common elements are found in each of the decisions which adhere to the localization and integration concept of determining the business situs of intangible property for the purpose of taxation. These common elements consist of proof establishing a continuous course of business or series of transactions as distinguished from sporadic transactions and more or less permanency of location of the credits within the taxing state. Present also is proof establishing independent management and control of the credits as distinguished from custody and safekeeping. Proof is uniformly required to establish that the credits of the non-resident owner are in possession and control of a local agent who manages them in the transaction of a permanent business, and of investing and reinvesting the proceeds from the principal or interest under circumstances where the property is placed in competition with local capital in the area where the agent operates.
In support of his position the comptroller refers us to the United States Sugar Corporation case as authority for the proposition that the general rule which holds the taxable situs of intangible property to be at the domicile of the owner cannot be evoked to defeat the right of Florida to impose intangible personal property tax.
The comptroller urges that the preferable rule with respect to determining the business situs of intangible property for tax purpose is that followed by the State of Georgia. It is held in that jurisdiction that “When a nonresident corporation engaged in business in this State becomes the owner of accounts receivable arising out of the business conducted in this State, such credits or accounts receivable have a tax situs in the county wherein such business is conducted, notwithstanding the orders taken for merchandise sold in this State are filled the shipments thereof made, the credit of the customers passed upon, and the books of account kept, at a point without the State of Georgia.”
The evidence in this record establishes, and the chancellor found, that the documents evidencing the accounts receivable, together with all records pertaining thereto, are owned by a non-resident of Florida and are kept, maintained, managed and controlled outside of this state. None of the capital represented by this property is. utilized in the operation of Burroughs’ branch and suboffices in Florida, nor is it used in competition with local capital. The debts consisting of accounts receivable were created by and under the laws of Georgia where credit was extended, and not under the laws of Florida. No separation of the receivables from the foreign domicile of the owner, nor attachment to the branch offices in Florida, is shown by the evidence. There has been no integration of the capital' represented by the receivables into the business of the branch and suboffices of Burroughs in this state, but are a part of the corporation’s general assets located elsewhere. It therefore must be held that the accounts receivable here in question have not acquired a business situs in Florida, and are not subject to the intangible tax sought to be imposed.
The decree appealed is accordingly affirmed.
.State ex rel. Seaboard Air Line R. Co. v. Gay, 160 Fla. 445, 35 So.2d 403; Smith v. Lummus, 149 Fla. 660, 6 So.2d 625.
. State ex rel. Seaboard Air Line R. Co. v. Gay, supra note 1.
. Smith v. Lummus, supra note 1.
. Smith v. Lummus, 153 Fla. 415, 14 So.2d 897.
. See annotations contained in 143 A.L.R. 361 et seq., 76 A.L.R. 80G.
. Tax Commission et al v. Kelly-Springfield Tire Co., 38 Ohio App. 109, 175 N.E. 700.
. Westinghouse Electric & Mfg. Co. v. Los Angeles County, 188 Cal. 491, 205 P. 1070; see also In re Harris, Upham & Co., 194 Old. 155, 148 P.2d 191; Board of Tax Supervisors of Jefferson County v. Baldwin Piano Co., 296 Ky. 673, 178 S.W.2d 212.
.State ex rel. United States Sugar Corp. v. Gay, (Fla.1950) 46 So.2d 165.
. Colgate-Palmolive-Peet Co. v. Davis, (1943) 196 Ga. 681, 27 S.E.2d 326.
. General Electric Co. v. Board of Assessors, 121 La. 116, 46 So. 122.
Concurrence Opinion
(concurring specially).
I deem it advisable to state that in support of its position appellee cites General Electric Co. v. Board of Assessors, 121 La. 116, 46 So. 122, in which Mr. Justice Provosty, speaking for the Louisiana Supreme Court, cogently states the rationale for imposition of a tax of the character here involved. That case, however, is not of compelling weight upon the issue with which we are
“And all movable and immovable, corporeal and incorporeal articles or things of value, owned and held and controlled within the State of Louisiana by any person in any capacity whatsoever.”
Section 7 of said act made it the duty of the tax assessors to place upon the assessment roll all property subject to taxation and specified:
“Provided further, that in assessing mercantile firms the true intent and purpose of this act shall be held to mean, the placing of such value upon the stock in trade, all cash, whether borrowed or not, money at interest, open accounts, credits, etc., as will represent in their aggregate a fair average of the capital, both cash and credit, employed in the business of the party or parties to be assessed. And this shall apply with equal force to any person or persons representing in this State business interests that may claim a domicile elsewhere, the intent and purpose being that no nonresident, either by himself or through any agent shall transact business here without paying to the State a corresponding tax with that exacted of its own citizens; and all bills receivable, obligations or credits arising from the business done in this State are hereby declared assessable within this State, and at the business domicile of said non-resident, his agent or representative. It shall be the duty of the Assessor to examine into and to acquaint himself with the insurance carried upon the property, and in determining the value of said stock or assets the average amount of insurance carried by the assured during the twelve months preceding the date of valuation of same shall be by the assessor considered in determining the value of said property.
“Every insurance company doing business in this State shall, on or before the first day of March in each year, render to the Secretary of State a report, signed and sworn to by its president and secretary of its condition upon the preceding thirty-first day of December, which shall include a detailed statement of its assets and liabilities on that day; the amount and character of business transacted in this State, moneys received and expended during the year and such other information and in such form as he may require.”
Section 91 of the same act provided:
“The term ‘credit’ includes every claim and demand for money, labor, merchandise and other valuable things. The word ‘person’ or ‘persons,’ ‘taxpayer’ or ‘tax-payers,’ shall be held to include firms, companies, associations and corporations.”
I wish to emphasize that the Louisiana case points up the fact that Florida does not have a similar statute. It is for the legislature rather than the courts to provide revenue for the operation of state government.