1. Under our law any ambiguity in an alleged exemption from taxation must be construed favorably to the State and against the taxpayer.
2. The collection of sales tax does not impair the obligation of a contract entered into prior to the tax act, where delivery and payment are made after the effective date of the act.
Cherokee Brick & Tile Company filed its action against Charles D. Redwine, as the duly qualified and acting State Revenue Commissioner, to recover $1801.50 with interest. The petition, as amended, alleged: On or about January 25, 1951, the plaintiff and General Electric Company, in Atlanta, entered into a bona fide written contract whereby General Electric Company agreed to ship the plaintiff two described locomotives at and for a contract price of $60,050. One was shipped on August 30, 1951, and a sales tax in the amount of $627 was remitted, under protest, by the plaintiff to General Electric Company. On or about October 8, 1951, the other locomotive was shipped to the plaintiff, and sales tax in the amount of $1174.50 was added to the invoice price and paid by the plaintiff, under protest, to General Electric Company. The amount of the sales taxes collected from the plaintiff has been actually paid to the State of Georgia. The collection of the tax was illegal and erroneous, in that the sale described is excluded from the tax levied by the Retailers' and Consumers' Sales and Use Tax Act of 1951 under section 2 (e) of that act (Ga. L. 1951, p. 366; Code, Ann. Supp., 92-3403a (C) (2) (e)). The plaintiff has filed a claim for refund, and his claim for refund has been denied. If the provision of the act as cited is not construed to exempt the aforesaid sale, then the act as to "goods contracted to be purchased and sold" prior to the act would be in violation of article 1, section 3, paragraph 2 of the Constitution of the State of Georgia (Code, Ann., 2-302), and in violation of article 1, section 10, paragraph 1 of the Constitution of the United States (Code, 1-134). The prayers were for process, service, and the recovery of the amount paid as sales tax.
The defendant's general demurrer to the petition, as amended, was sustained, and the exception is to that judgment.
Subsection (e) of section 2 of the "Retailers' and Consumers' Sales and Use Tax Act," approved February 20, 1951 (Ga. L. 1951, pp. 360-387; Code, Ann. Supp., 92-3403a (C) (2) (e)), provides: "The tax levied by this Act shall not apply to sales of goods made pursuant to bona fide written contracts entered into before the date of the approval of this Act, or the purchase price of any building supplies, fixtures or equipment that enter into or become a part of building or other kind of structure in this State, where plans, specifications and construction contract for a specific project has been entered into prior to the date of approval of this Act, provided delivery is made within ninety (90) days."
In the present case, however, the plaintiff is not relying upon the vagueness or uncertainty of a statute levying a tax. On the contrary, the plaintiff is seeking to claim the benefit of a proviso contained in the Retailers' and Consumers' Sales and Use Tax Act, which purports to grant an exemption from taxation. Under these facts, an entirely different rule is applicable. The exemption from taxation must be strictly construed, "and the exemption will not be held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention of the legislature." Mayor &c. of Macon v. Central Railroad & Banking Co., 50 Ga. 620; Atlanta Street Railroad City of Atlanta, 66 Ga. 104, 110; Athens City Water-Works Co. v. Mayor &c. of Athens, 74 Ga. 413; in the Mundy v. Van Hoose, 104 Ga. 292, 297 (30 S. E. 783); Tarver v. City of Albany, 160 Ga. 251, 257 (127 S. E. 8 56); Standard Oil Co. of Ky. v. State Revenue Commission, 179 Ga. 371, 372 (7) (176 S. E. 1); State Revenue Commission v. Brandon, 184 Ga. 225, 228 (190 S. E. 660); Campbell v. Red Bud Consolidated School District, 186 Ga. 541, 546 (3) (198 S. E. 225); Rayle Electric Membership Corp. v. Cook, 195 Ga. 734 (2) (25 S. E. 2d, 574); Thompson v. Atlantic Coast Line R. Co., 200 Ga. 856 (38 S. E. 2d, 774).
As a general rule, there is a presumption that a proviso in a statute will apply only to the preceding provision. This general rule, however, is subject to the rule that all parts of a statute, including provisos, are to be construed together, and that construction adopted which is consistent with, and not repugnant to, the purposes of the act. 50 Am. Jur. 459, 460, 438-440. The purpose of the act under consideration is, unquestionably, to levy a tax. The proviso as to delivery within ninety days relates by the punctuation used, and by the arrangement of the wording therein, to the entire subject matter preceding the limitation as to time of delivery.
It is clear from subsection (e) of section 2 of the act that the General Assembly did not exempt from taxation written contracts entered into before the time of the approval of the act. If the Assembly had wanted to make such exemption, all that was required was the placing of a period after the word "Act" in the third line. A period makes the end of a declarative sentence, and had a period been used after the word "Act," a different result might have been obtained. By the use of the comma after the word "Act," and after referring to building supplies, fixtures, equipment, plans, specifications, etc., in which the only punctuation used is a comma, it is clear that the final proviso is just as much a part of the language relating to written contracts as it is to that having reference to building supplies, fixtures, etc.
The rule stated in Crawford v. Burke, 195 U. S. 176, 177 (25 Sup. Ct. 9, 49 L. ed. 147), to the effect that courts will read statutes with such stops as will give effect to the whole, and with little regard to the punctuation thereof, if applied in the present case, can not benefit the plaintiff. If subsection (e) of section 2 of the act is read as written, with the commas therein, or with the commas omitted, the result is the same. For sales on written contracts and building supplies to be exempt from the taxing provisions of the act, delivery must have been made within ninety days.
2. The plaintiff strongly relies upon Murray v. Charleston, 96 U. S. 432 (24 L ed. 760). In the Charleston case the city had issued certificates bearing interest at 6 percent, payable in quarterly payments. Thereafter the city proposed to tax the certificates and withhold from the interest payments the amount of the tax. The plaintiff in that case was a resident of Bonn, Germany, and was the holder of a large amount of the certificates of indebtedness. The ruling of the Supreme Court, as stated by this court in Mayor &c. of Macon v. Jones, 67 Ga. 489, 493, was to the effect that the city must pay the interest due before the power to tax could be exercised. The construction placed on the Charleston case by this court is unquestionably correct, for in the Charleston case the court (at page 446) said: "A tax on income derived from contracts, if it does not prevent the receipt of the income, cannot be said to vary or lessen the debtor's obligation imposed by the contracts."
The above quotation from the Charleston case clearly demonstrates that only by withholding the income due from a contractual obligation to pay interest, and for the purpose of enforcing a tax, would the contract between the agency of government and the citizens be impaired. For Georgia cases relating to taxation of contractual obligations of the State, see City Council of Augusta v. Dunbar, 50 Ga. 387; Miller v. Wilson, 60 Ga. 505; Mayor &c. of Macon v. Jones, supra; Wells v. Mayor &c. of Savannah, 107 Ga. 1, 3 (32 S. E. 669).
In the present case, the State is not a party in any contract with the plaintiff. It has made no promise to pay which it now seeks to tax. On the contrary, the State is only exercising its constitutional power to tax. On the power of taxation generally, the Supreme Court of the United States in North Missouri Railroad Co. v. Maguire, 87 U. S. 46, 61 (22 L. ed. 287) stated the rule: "Authorities from numerous sources are cited by the plaintiffs, but none of them show that a lawful tax on a new subject, or an increased tax on an old one, interferes with a contract or impairs its obligation, within the meaning of the Constitution, even though such taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of another, or may impose additional burdens upon one class and release the burdens of another, still the tax must be paid unless prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing contract in its true legal sense.
Subsequently to the rule stated by the Supreme Court of the United States in the North Missouri Railroad Company case, it was said by the Supreme Court of Alabama in McPhillips Mfg. Co. v. Curry, 241 Ala. 366, 371 (2 So. 2d, 600), as follows: "The existence of an executory contract between or among two or more individuals presents no obstacle to the right or power of the State to levy or impose a tax which may adversely affect the financial interest of either or any of the parties which may have been acquired under or by reason of the mutual covenant of such parties to the contract. Increasing taxation or adding new taxes does not impair the obligation of a contract, although the law, as it existed at the time the contract was made, is a part of the contract. So, too, is the law with reference to the State's power of taxation, otherwise all contracts with reference to real estate would become void as to the tax upon the creation of an improvement district. The State has the power to tax, and the only contention here made by appellants is that the sales tax cannot apply to them because their contract antedates the law. The authorities are clearly opposed to such a theory."
Many authorities are cited by the Supreme Court of Alabama in support of the ruling made, including the case of Wiseman v. Gillioz, 192 Atk. 950, 958 (96 S. W. 2d, 459), wherein it was held: "Increasing taxation or adding a new tax does not impair the obligation of a contract. It is true that the law, as it existed at the time the contract was made, is a part of the contract, but so is the law with reference to the State's power of taxation. If this were not true, all contracts with reference to real estate world become void as to the tax upon the creation of an improvement district, or the provision for a road tax, or any other tax."
In Kehrer v. Stewart, 197 U. S. 60, 61 (25 Sup. Ct. 403, 49 L. ed. 663), in affirming the judgment of this court in Kehrer v. Stewart, 117 Ga. 969 (44 S. E. 854), it was held: "A State has the right to classify occupations and impose different taxes upon different occupations. The necessity for, and the amount of, the tax are exclusively within the control of the State legislature, an absence of discrimination against citizens of other States, its determination in regard thereto is not open to criticism in this court. Such a tax does not impair the obligation of, or affect, any contract previously made between the principal and the agent. The power of taxation overrides any agreement of an employee to serve for a specific sum." (Italics ours.)
In Lake Superior Consolidated Iron Mines v. Lord, 271 U. S. 577 (46 Sup. 627, 70 L. ed. 1093), it was held: "The obligation of an outstanding contract is not impaired, contrary to Const. Art. I, 10, by a later state statute taxing the proceeds of the contract."
The trial court properly sustained the general demurrer of the defendant and dismissed the petition seeking to recover the taxes paid.
Judgment affirmed. All the Justices concur, except Atkinson, P. J., not participating.