Rigby v. StateRigby v. State
Thе above-captioned cases were tried upon stipulated facts. In the Rigby case, No. 33588, the trial сourt gave judgment for the plaintiffs. In the Century Builders, Inc., case, No. 33749, the trial court gave judgment for the defendants. The casеs were consolidated on appeal because they involved the same question of law. Only the lаtter case will, therefore, be discussed.
Plaintiff Century Builders, Inc., is in the business of acquiring tracts of land, improving them by clearing, grading, constructing roads, installing water mains, platting them into lots, and constructing homes thereon. It offers the houses for sale to the general public.
It had proceeded up to the point of actually commencing construction on the three homes in question when the negotiations leading to their sales were entered into. Plans of the houses were shown to their respective purchasers and referred to in earnest-money agreements. The houses were then completed according to the plans, under the supervision of the veterans’ administration. The credit of the purchasers was approved by the veterans’ administration in order to secure “G. I. Loans.” The transactions were closed by the simultaneous execution and delivery of mortgages
The tax commission assessed a three per cent sales tax under the provisions of
The Century Builders, Inc., brought its action to recover these taxes. The trial court denied it the relief sought, and the plаintiff appeals.
The appellant assigns as error the court’s finding (1) that the closing transactions are subjеct to the retail sales tax, and (2) that the purchasers of the houses were consumers under the purview оf the retail sales tax statute.
Reference must be made to
“The term ‘sale at retail’ or ‘retail sale’ shall include the sale of or chargе made for tangible personal property consumed and/or for labor and services rendered in rеspect to the following: . . . (2) the constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for consumers, . . . ” (Italics ours.)
The definition of a consumer is found in
“ ‘Consumer’ means the following: . . .
“(4) Any person who . . . has the right of possession to . . . real . . . property which is being constructed, ...” (Italics ours.)
The state, however, contends that the clause in the earnest-money agreements, which gave the purchasers the right of possession upon closing the transactions, brings them under the language of the statute, which defines a consumer as: “Any person who . . . has the right of possession to . . . real . . . property whiсh is being constructed.” It then contends that as consumers the purchasers are subject to the retail sales tax in aсcordance with the assessments heretofore set out.
Since the state does not contend that thе retail sales tax applies to the sale of real estate, it takes the position the purchаsers were entitled to immediate possession of the lots under the earnest-money agreements, and wеre, therefore, liable for the retail sales tax accruing on the houses while they were being constructed.
This theory is not sound. The earnest-money agreements are only the first of a number of instruments comprising the terms of the transactions which defined the rights of the parties thereto. They give no right of possession to either land or houses until the transactions are closed. This entails three additional rеquirements subsequent to the earnest-money agreements: (1) the approval of credits, (2) the delivery of mоrtgages, and (3) the delivery of deeds. When all of these steps have occurred and the transactions are closed, the right to possession follows as a matter of law. The earnest-money agreements do not give any rights of possession before that time. The purchasers were, therefore, not entitled to рossession of the land during the construction of the houses and are not consumers under the statute.
By the time the transactions were closed, the construction of the houses had been completed, the retail sales tax due on the building materials had been paid by appellant,
Accordingly, appellant owed the one per cent real-estate excise tax upon the full purchase price of the properties. It did not owe any additional retail sales tax thereon.
The. judgment is modified in Century Builders, Inc. v. State, No. 33749, in accordance with this opinion, and is affirmed in Rigby v. State, No. 33588.
Hill, C. J., Donworth, Weaver, and Ott, JJ., concur.