389 So. 2d 510 | Ala. Civ. App. | 1980
This is an appeal by the State Department of Revenue from a judgment declaring invalid a final assessment of sales tax against a taxpayer, Montgomery Woodworks, Inc., in the amount of $24,963.19.
The taxpayer is primarily engaged in the business of custom cabinet-making, although it also contracts other custom woodwork. The work is done in the taxpayer's shop according to job plans and specifications. The taxpayer performs a large volume of work in its shop and maintains a stock of material which is used to fabricate cabinets and woodwork. These materials are purchased at wholesale.
After cabinets and woodwork for a job are fabricated in the taxpayer's shop, the work is delivered to the jobsite by the taxpayer's employees when the contractor is ready for the items to be installed. Sometimes the taxpayer contracts to install the cabinets, and, at other times, the general contractor does the actual installation of the cabinets. However, when the contractor installs the cabinets, taxpayer assists in the installation should a problem arise. Even in those instances where the general contractor has the responsibility for installation of the cabinets, the taxpayer supervises the installation to assure that the cabinets are properly installed and that the cabinets conform to the plans and specifications for that particular job.
During the tax period involved in the present case, the taxpayer reported and paid sales tax based upon the cost of materials consumed by it in the fabrication of cabinets and other woodwork. Thereafter the State Department of Revenue imposed a sales tax assessment upon the taxpayer contending that a sales tax based upon the full charge for the cabinets and woodwork was due if the taxpayer did not actually install the completed product. The taxpayer argued that it should be liable for the sales tax based only upon the cost of materials used in the fabrication process regardless of who installed the work. The trial court found for the taxpayer and this appeal followed.
The only issue presented by this appeal is whether the taxpayer, as a custom fabricator of cabinets and woodwork, is liable for sales tax based upon the full amount received by it from the customer pursuant to §
The taxpayer contends that its withdrawal of building materials from inventory to fabricate cabinets and woodwork for a specific job is a "retail sale" under §
Sales of building materials to contractors, builders or landowners for resale or use in the form of real estate are retail sales in whatever quantity sold.
In Department of Revenue v. James A. Head Co.,
As for the first requirement, we have previously defined the term "contractor" as: (1) one who formally undertakes to do anything for another; (2) one who contracts *512
to furnish a product or service to another; or (3) one who undertakes to supply labor and materials for specific improvements under a contract with an owner or principal.Department of Revenue v. James A. Head Co., supra. In the instant case, the taxpayer is contracted by others to fabricate cabinets and woodwork. Sometimes the actual installation of the cabinets is not performed by the taxpayer but by the general contractor or someone employed by the general contractor. However, in these instances the installation of the cabinets is supervised by the taxpayer to assure that the cabinets are properly installed in order to conform to the particular location and building needs which the specifications required. Therefore the failure of the taxpayer to actually install the cabinets after they have been fabricated does not prevent the taxpayer from being a "contractor" within the meaning of §
The second requirement is that the raw materials used by the contractor be building materials. "Building material" has been defined as material used in construction work and is not limited to materials used in constructing a building with sides and covering. Department of Revenue v. James A. Head, supra. In the instant case we conclude that the wood products used by the taxpayer in the fabrication of cabinets and woodwork are "building materials" as defined in the statute.
The final requirement is that the cabinets and other woodwork must be so attached to the buildings as to become part of the real estate. The three criteria used to determine when an object becomes part of the realty are cited in Department ofRevenue v. James A. Head Co., supra:
". . . First, annexation to the realty, either actual or constructive; second, adaptation or application to the use or purpose to which that part of the realty to which it is connected is appropriated; and, third, intention to make the article a permanent accession to the freehold." Patterson v. Chaney,24 N.M. 156 ,173 P. 859 , 6 A.L.R. 90 [1918].
In the case at bar the cabinets and woodwork were annexed to the realty, they were used for the purpose installed, and they were intended to be permanently attached to the wall or place so attached. Therefore we find that the cabinets and woodwork became a part of the realty.
We conclude that the taxpayer in the instant case is to be taxed based upon the cost of materials purchased as provided by §
The Department argues that §
It is important to note that the application of a taxing statute must be bottomed upon and considered in the light of each particular situation. State v. Air Conditioning Engineers,Inc., supra.
We find that nowhere in §
The Department has also argued that the sales tax imposed upon the taxpayer should be based upon the amount the taxpayer receives from the customer for the cabinets and woodwork fabricated. The Department argues that §
AFFIRMED.
WRIGHT, P.J., and HOLMES, J., concur.
