The State Department of Revenue entered an assessment in the manner provided by law against appellee for sales tax which the appellant contended was due the State for the sale of fabricated steel to Rust Engineering Company of fabricated steel.
United States Pipe and Foundry Company at the time of the sale was desirous of erecting on its premises, and for its use and benefit, a blast furnace that required for its operation certain type boilers capable of generating steam vitally necessary to the operation of a blast furnace.
The Foundry Company employed Rust Engineering Company to erect the boilers according to engineering specifications. These specifications included the fabricated steel that was the subject of the sales tax for which assessment was entered.
Appellee, Ingalls Iron Works Company, with due recognition of statutory procedural requirements, appealed the assessment to the Circuit Court of Jefferson County. The trial court, after hearing the evidence, held that the sales tax assessment was invalid. The assessment was vacated and set aside, and the Comptroller of the State of Alabama was ordered to refund to appellee the amount of the assessment and interest which appellee had paid pending the appeal. From this judgment of the circuit court, the State of Alabama appealed and now brings the matter to this court for review.
A factual issue is presented by uncontradicted evidence given by experts as witnesses for appellee. Is the structural steel used for the purpose and in the manner hereafter stated "building materials" within the purview of Title 51, § 752(j), Code of Alabama 1940, as amended, reading as follows:
Appellee disclaims the application of this statute and contends that the structural steel, the subject matter of this suit, in its use, comes within the terms of Title 51, § 755(p), Pocket Parts, Code of Alabama 1940, which exempts gross proceeds derived from the sale of certain tangible items. Subsection (p) reads as follows:
We have carefully read the evidence of appellee, several of the witnesses being experts, and concur in the trial court's findings of fact. The appellant offered no witnesses. We quote the findings, pertinent at this point, as follows:
Appellant insists in an elaborate brief that the structural steel is building material within the purview of Title 51, § 752(j), Code of Alabama 1940, as amended, supra, and is not exempt under the provisions of Title 51, § 755(p), supra.
In support of his argument, counsel for appellant cites several Alabama cases, to several of which we make brief reference:
Lone Star Cement Corporation v. State Tax Commission, 234 Ala. 465, 175 So. 399. This case involved the status, under the Gross Sales Tax Act, adopted by the legislature of Alabama in 1937, of cement, which was thereafter used in the construction of highways, foundations, dams, etc. The court held that the tax applied. The item was building materials and not used in connection with exempt machines.
In Layne Central Company v. Curry, 243 Ala. 165, 8 So.2d 839, it appears the appellant purchased out of the state certain raw materials (not fabricated for a special purpose) to be used and was used by it in the construction of "* * * pump houses, well connections and pipe-lines to convey the water necessary to the compounding, processing and manufacturing of pulp and paper, and to the operation of the machines used in such compounding, processing and manufacturing, from wells to the site of the mill, * * *." where manufacturing operations took place. The court held that the use tax applied inasmuch as none of the purchases constituted a completed project. The court said the tax was "* * * upon the contractor as the user of the raw material which entered into the construction of those structures before they came into use as such." (Emphasis supplied.) Had these materials been prefabricated for special use they might have fallen within the purview of State v. Wilputte Coke Oven Corporation et al., infra.
Wood Preserving Corporation v. State Tax Commission, 235 Ala. 438, 179 So. 254. The court held that the sale in carload lots and large quantities of cross and switch ties, bridge timbers, etc., to consumers, contractors and landowners were building materials and not exempt from the gross sales tax. No question was decided as to their exemption as machinery and attachments therefor. They became part of the freehold.
Counsel for appellee likewise has submitted a comprehensive and helpful brief. Appellee cites the case of State v. Wilputte Coke Oven Corporation et al., 251 Ala. 271, 37 So.2d 197 (1948), as supporting its position that the steel is exempt pursuant to § 755(p), supra. We think this case is decisive of the issue of exemption. The opinion in this case was authored by the late Justice Foster, who likewise was the author of the opinion in Layne Central Company v. Curry, supra.
The Wilputte case involves the exemption vel non under § 789(q), Title 51, Code of Alabama 1940 (use tax law), of some items that were fabricated specially for use in a coke oven. The wording of the exemption provision, for all intents and purposes, was the same as § 755(p), supra. This court held that they were exempt from the use tax.
A pertinent paragraph of this decision reads as follows:
By way of illustration: Structural steel anchored to a concrete foundation embedded in the ground and supporting an elevated steel water tank, would, in our judgment, be a necessary attachment to the proper functioning of the tank and would not lose its character and become building material because it is fastened to the ground to support the weight of the tank. The structural connection would make the steel a part of the tank or a necessary attachment thereto.
The fact that the steel was sold to Rust Engineering Company, the contractor who erected the structure for the owners, would not impair the steel's character as a necessary attachment to the proper functioning of the vertical boilers. When the steel was fabricated according to engineering specifications for this special purpose, it then became a potential part of the boilers. This potential character was verified when it was used within a reasonable time after fabrication for the uses as designed. State v. Wilputte Coke Oven Corporation et al., supra.
The sales tax event here challenged could not have attached until the steel was fabricated and delivered. Prior to that time, the negotiations were contractual for the fabrication and delivery of the steel. When this delivery was made, the steel had ceased to be in a raw state. In the Layne case, supra, a use tax on raw items brought to Alabama was involved. Their subsequent fabrication by the taxpayer for special purposes did not create an exemption.
The views herein expressed are in accord with the judgment of the trial court, and the same is affirmed.
The foregoing opinion was prepared by B. W. Simmons, Supernumerary Circuit Judge, while serving on the Supreme Court at the request of the Chief Justice, and was adopted by the court as its opinion.
LIVINGSTON, C. J., and SIMPSON, GOODWYN, and COLEMAN, JJ., concur.