Appeal by the Commissioner of the State Department of Revenue from a judgment of the circuit court of Montgomery County ordering repayment to Continental Gin Company (appellee-taxpayer) of sales taxes assessed against Continental and paid by it under protest. See: Code 1940, Tit. 51, §§ 890, 891, as amended by Act No. 402, appvd. July 10, 1943, Gen.Acts 1943, p. 369.
Continental manufactures cotton gins at its plant in Prattville, Alabama. The plant was formerly located in Birmingham. The cotton gin machinery here involved was manufactured at these plants. Delivery of the machinery was made at these plants, during the period January 1, 1958, through September 30, 1960, to out-of-state buyers who used their own equipment for transporting the machinery to points outside Alabama where it was used.
The question presented is whether, under the particular facts and circumstances of this case, the trial court erred in holding that these were interstate sales and not subject to the sales tax.
In rendering its judgment, the court made the following findings:
Our conclusion is that the judgment is due to be affirmed.
The evidence discloses that the custom and practice in the industry is that gin machinery is not accepted by the buyer, nor is payment due, until it is installed and operating satisfactorily at the buyer's gin site. In this case all the gin sites are out of the state.
Each gin is specially designed for and fitted and installed by Continental at the out-of-state gin site. For instance, a "lint cleaner" is described in the evidence as a piece of machinery manufactured to order, containing some 2,500 pieces and requiring a specially trained engineer to install.
In every case of damage to the machinery prior to installation, Continental paid for such loss. Also, Continental insured the machinery until it was operating and accepted by the buyer. There seems to be no question that title to the machinery in each instance remained in Continental until the buyer's acceptance.
Continental's position is that the sales tax statute (Act No. 100, § 1(1) (e), appvd. Aug. 18, 1959, Acts 1959, Vol. I, pp. 298, 299) levies the tax on closed transactions in this State, or intrastate sales; that the sales here involved were not closed transactions in this State, nor intrastate sales, but instead were interstate sales, and, accordingly, were not subject to the tax.
This rule was formally promulgated in 1959, but there is evidence that the Department of Revenue has enforced the sales tax law since its original enactment in 1937 in accordance with the principles embodied in the rule.
Section 1(1) (e) of Act No. 100, supra, is as follows:
Section 1(1) (e) originated in Act No. 126, § 1(d), appvd. Feb. 23, 1937, Gen. and Local Acts Ex.Sess.1936-37, p. 125. Each subsequent amendment or reenactment of the sales tax law has included this same definition. See: Act No. 18, § 1(e), appvd. Feb. 8, 1939, Gen.Acts 1939, p. 16, Code 1940, Tit. 51, § 752(e); Act No. 584, § 1, Gen.Acts 1943, pp. 585, 586, Act No. 305, § 1, appvd. Aug. 13, 1947, Gen.Acts 1947, pp. 160, 161; Act No. 282, § 1, effective Aug. 24, 1955, Acts 1955, Vol. 1, pp. 645, 646; Act No. 100, § 1(1) (e), appvd. Aug. 18, 1959, Acts 1959, Vol. 1, pp. 298, 299.
As we see it, the decisive question presented is whether the administrative construction of the sales tax law, as embodied in Rule I 114-012, has had the effect of including within the meaning of the term "closed transaction," as that term is used in § 1(1) (e) of Act No. 100 and in preceding sales tax laws, supra, transactions such as those here involved, where the only
The State, in insisting that the administrative construction has had such effect, relies on the statement appearing in the last paragraph of the opinion in State v. Southern Electric Generating Co., 274 Ala. 668, 671, 151 So.2d 216, to the effect that the State is "bound by the administrative construction of twenty-five years." This expression was considered in the recent case of International Union of Operating Engineers, Local Union No. 321 (AFL-CIO) v. The Water Works Board of the City of Birmingham, Ala.Sup., 163 So.2d 619, where it was said, viz:
Clearly, it seems to us, the delivery of the property in this State, in and of itself alone, did not constitute a "closed transaction" in this State within the meaning of the quoted term as used in § 1(1) (e) of Act No. 100 and preceding sales tax statutes, supra.
Code 1940, Tit. 57, § 7(1) (2), provides as follows:
A "contract to sell" is one where the seller merely agrees to transfer title to the buyer, whereas in the case of a "sale" the seller presently transfers title.
The intention of the parties determines when a contract to sell is executed (Code 1940, Tit. 57, § 24, infra), and such intention is a question of fact rather than one of law. American Automobile Ins. Co. v. English, 266 Ala. 80, 85, 94 So.2d 397, 400.
In McPhillips Mfg. Co. v. Curry, 241 Ala. 366, 371, 2 So.2d 600, it was held that certain sales were not "closed transactions," within the meaning of the sales tax definition of a sale, because title had not passed.
While actual delivery is of great importance in determining whether there was an intention to pass title, it is by no means conclusive. The intention of the parties, however disclosed, is conclusive on the question of the passing of title. See: State v. Mobile Stove & Pulley Mfg. Co., 255 Ala. 617, 623, 52 So.2d 693, 698.
Under the Uniform Sales Act (Code 1940, Tit. 57, § 1 et seq.) the passing of title between a seller and a buyer depends upon the intention of the parties. Hyatt v. Reynolds, 245 Ala. 411, 414, 17 So.2d 413,
We are of the opinion that title did not pass at the time of delivery. Title passed when the parties intended, and the facts indicate that this was not until installation and acceptance.
In determining coverage under a statute levying a tax, as is the situation here, the rule is that such statute is to be construed strictly against the taxing power and liberally in favor of the taxpayer. State v. T. R. Miller Mill Company, 272 Ala. 135, 139, 130 So.2d 185; State v. Birmingham Bolt Company, 271 Ala. 528, 530, 125 So.2d 520; State v. Grayson Lumber Company, 271 Ala. 35, 38, 122 So.2d 126; State v. Helburn Co., 269 Ala. 164, 167, 111 So.2d 912; Al Means, Inc. v. City of Montgomery, 268 Ala. 31, 36, 104 So.2d 816; State ex rel. Woodruff v. Centanne, 265 Ala. 35, 38, 89 So.2d 570; State v. Reynolds Metals Company, 263 Ala. 657, 661, 83 So.2d 709.
We are clear to the conclusion that the rule, as applied in this case, conflicts with the statutory definition of a sale, that is, a "closed transaction"; that the statute prevails over the rule; and that the trial court correctly held that the sales tax assessment against Continental was erroneous.
The judgment is affirmed.
LIVINGSTON, C. J., and COLEMAN and HARWOOD, JJ., concur.