This is a statutory proceeding instituted under the provisions of Code, 11-13-13, as amended, wherein the state tax commissioner seeks to recover from Aracoma-Chief Logan No. 4523, Veterans of Foreign Wars of the United States, Incorporated, hereinafter sometimes referred to as appellant, certain taxes alleged to have been due and owing the State for the period from 1952 through 1960.
The appellant is a veterans’ organization, duly incorporated under the laws of the State of West Virginia as a nonprofit corporation, with its principal place of business in the City of Logan, Logan County. At this location the organization, among other activities, operates a restaurant for its members. In acсordance with the rules of the appellant, the members may invite, as a guest, one who does not hold membership therein, but such non-member may not avail himself of the restaurant facilities unless he is accompanied by a member.
By agreement this case was tried by the court in lieu of a jury upon facts as stipulated by the parties. Although stipulation ordinarily connotes agreement, we find, upon examination of the record, that Stipulation V is in conflict with Stipulation IV and with a letter made a part of the record by the parties. Stipulation V reads: “That it is agreed that the Defendant is a Fraternal organization operated
By reason of this restaurant operation, the tax commissioner demanded from the appellant payment of business and occupation taxes as required by Code, ll-13-2c, as amended. On the ground that it was exempted under the provisions of Code, 11-13-3 (d), as amended, the appellant refused to make such payment and this action was commenced. The trial court awarded judgment to the plaintiff and the appellant prosecutes this writ of error.
The tax, payment of which is demanded in this action, is known as the business and occuрation tax and is imposed for the privilege of doing business in this State. Imposition of such privilege tax is provided in Code, 11-13-2, as amended, as follows: “There is hereby levied and shall be collected annual privilege taxes against the persons, on account of the business and other activities, and in the amounts to be determined by the application of rates against values or gross income as set forth in sections two-a to two-j, inclusive, of this article * *
The specific statute under which the State seeks payment herein is Code, ll-13-2c, as amended, and reads: “Upon every person engaging or continuing within this State in the business of selling any tangible property whatsoever, real or personal, including the sale of food, and the services incident to the sale of food in hotels, restaurants, cafeterias, confectioneries, and other public eating houses, * * * there is likewise hereby levied, and shall be collected, a tax equivalent to one-half of one per cent of the gross income of the business, * *
The appellant contends that it is exempt from the payment of such tax by virtue of Code, 11-13-3, as amended, which provides: “* * * The provisions of the article shall not apply to: * * * (d) fraternal societies, organizations and associations organized and operated for the exclusive benefit of their members and not for profit; * *
The appellant is engaged in the business of selling food, a tangible item, and, unless granted immunity by the exеmption statute quoted above, is subject to the tax provided in Code, ll-13-2c, as amended. The state tax commissioner takes the position that the appellant has lost its exemption by its admitted practice of permitting guests of members to dine in its restaurant facility and by holding itself out to the public as a caterer of banquets and parties, from which it derives а profit. This, he asserts, is contrary to the language of the exemption statute which includes organizations “operated for the exclusive benefit of their members and not for profit.”
Let us now consider the first part of the above question. The record reveals, by stipulation and by the letter here-inbefore referred to and quoted in part, that the appellant’s restaurant facilities are not .available to a non-member guest unless accompanied by a member. The appellee asserts that by reason of the practice of permitting a guest, even though he must be accompanied by a member, to avail himself of the appellant’s restaurant facilities, the organization is no longer operated for the exclusive benefit of its members and not for profit. In support of that position several well established ■ principles of law are noted.
In resolving this issue it is well to set out and considеr these principles as they may apply to the facts and circumstances of this case. A statute granting an exemption from the payment of a particular tax is strictly construed. In Re Hillcrest Memorial Gardens, Inc.,
The foregoing principles of law doubtless reflect the prevailing view in relation to the general subject of exemption from the payment of taxes. However, the application of these principles is dependent upon the facts in each case. Here the appellant is engaged in an activity which is clearly taxable under the provisions of Code, ll-13-2c, as amended. On the other hand, it is admittedly within that class of organization which, if operated in accordance with the provisions of Code, 11-13-3 (d), as amended, is entitled to exemption from the payment of this privilege tax. It is therefore incumbent upon this Court to examine the facts as stipulated by the parties and, in relation thereto, to consider the above principles, together with any other accepted axioms of law which may be applicable.
The state tax commissioner relies upon the word “exclusive”, as used in the exеmption statute, to support his contention that such statute is clear and unambiguous and therefore not subject to interpretation. In the circumstances of this case, relating to guests accompanied by a member, we believe that the exemption statute is subject to interpretation. The word “benefit” is a generic word and is subject to many connotations. According to Webster’s New International Dictionary, 2d Edition, “benefit” means an act of kindness, benefaction, or
The appellee further relies upon the above stated and generally accepted rule of law that an exemption statute is strictly construed against the person claiming the exemption. This general rule is not disturbed by this opinion. However, we must not lose sight of the fact that the general rules of statutory construction, one of the cardinal principles of which is the determination of legislative intent, shall always prevail. The following statement is contained in
In the cаse before us the legislature granted an exemption to the appellant, so long as it operated for the exclusive benefit of its members and not for profit. This does not constitute a mandate that the club be operated for the exclusive use of the members. If this were intended the legislature would have so worded the statute. The distinction between usе and benefit is readily discernible in the cases cited by the appellee. These cases involved ad valorem taxes, but it is nonetheless clear that the Court distinguished the meaning of the words “use” and “benefit”.
In one of the leading cases wherein this Court ruled upon this matter, State v. McDowell Lodge,
Counsel for the parties, neither in thеir briefs nor arguments, have cited any cases which pertain to exemption from privilege taxes, nor has our research revealed the existence of any such authorities. However, this Court, in State v. Kittle, et al.,
The Supreme Court, in Trotter v. Tennessee,
A similar expression was contained in Mountain View Cemetery Company v. Massey,
Although regulations of the Internal Revenue Department are in no manner binding here, it is interesting to note that thereunder, a social club or organization, otherwise entitled to exemption from taxation, is not denied such exemption because it derives its principal income from the operation of a bar and restaurant, provided that only members and their guests are рermitted to use the club’s facilities. See ’63, Vol. 3, Standard Federal Tax Reporter — Commerce Clearing House, Inc., Par. 3041.028.
In view of the above discussion and the authorities cited, we do not believe that the legislature intended to deprive an organization, such as the appellant, of the exemption contained in Code, 11-13-3 (d), as amended, by reason of its рractice of permitting a member to invite a guest into its restaurant facilities. Likewise, we do not believe that any profit derived from a service rendered to such guest causes the appellant club to lose such exemption. It is inconceivable that the legislature would grant an organization an exemption which, if not reasonably construed, would be lost in the process of maintaining itself. Giving the exemption statute its narrowest meaning, if the appellant served only its own members and received therefrom a profit in an amount sufficient to pay only for its own needs, it would lose its exemption. Such a grant would be meaningless. As stated in Charleston & S. Bridge Co. v. Kanawha County Court,
Language relating to a tax exemption statute should be given a fair and reasonable interpretation in order to ascertain the true intent as to its scope. Upon mаking this determination it should then be strictly applied and enforced. In the instant case we believe that the practice of permitting a member to invite a guest does not defeat the intention, nor does it take it outside the scope, of the exemption statute. Certainly one of the benefits, if not the principal benefit, a member derives from belonging to an organization of this nature, is the privilege of inviting a guest to join him at his club. An interpretation of the exemption statute which would preclude this practice, or cause a loss of the exemption, would be unreasonably narrow.
It is necessary, however, before resolving the principal question presented in this case, to consider the second part thereof, as set out above. Has the appellant, under the facts and in the circumstances of this case, lost its exemption by its general practice of catering, in its restaurant, to organizations, business groups and persons, not members or guests of members, from which operation it admittedly has made a profit?
As hereinbefore noted, the record shows the following admission by an officer of the appellant: “We also cater to Banquet parties, of which some other organizations, companies or business group may want to have in our clubroom or dining hall with us serving and making the profit from such affair, * * To the same effect is Stipulation IV. These facts, as stipulated by the parties, unquestionably reveal that the appellant, by this phase of its operation, was in business for profit. It held itself out to the genеral public as a caterer of banquets or parties. It admittedly undertook this operation for profit and without regard to membership in its organization. In so conducting its affairs, the appellant was in competition with others in the vicinity in the restaurant or catering business.
The appellant contends that any profit it derived from serving dinners to non-member organizations and persons was used for the benefit of its members and, that by reason thereof, it should not lose its exemption. This position is untenable in this case. Any benefits which inure to the membership from this activity are, at best, indirect. Such benefits would be comparable to those derived by the fraternal association in Central Realty Co. v. Martin, supra, and, as in that case, do not here constitute a basis for exemption. In other words, this is not the type of benefit contemplated by the exemption statute. Considering fully this aspect of the appellant’s operation, we are of the opinion that it does not qualify for the exemption from taxation granted in Code, 11-13-3 (d), as amended.
In accordance with the reasons heretofore stated, the judgment of the Circuit Court of Logan County is affirmed.
Affirmed.