This case involves the administration of the sales-tax laws of this State. The specific legal issue presented is whether § 40-23-36(b), Ala.Code 1975 ("Subsection (b)"), which delegates to the executive branch the authority to limit the sales-tax discount that Alabama retailers can claim for collecting sales taxes and remitting them to the state, violates the separation-of-powers principle embedded in § 43, Alabama Constitution, 1901.
This constitutional issue arose when Harco, Inc., and other large retailing chains, collectively referred to herein as "the retailers," sued H.E. Monroe, the commissioner of the Department of Revenue, and James D. Martin, the commissioner of the Department of Conservation, to permanently enjoin the enforcement of Administrative Regulation 810-6-4-.03, which set a $900 limit on the sales-tax discount that could be claimed by a retailer, regardless of the amount of sales taxes collected by the retailer.
The retailers claimed the Governor's issuance of an executive order, which led to the promulgation of a corresponding administrative regulation by the Department of Revenue, violated the separation-of-powers provisions of § 43 of the Constitution. The Circuit Court of Montgomery County agreed and entered a judgment holding that the executive order violated § 43. The commissioners of the Departments of Revenue and Conservation appealed. After carefully reviewing the briefs and thoughtfully considering the parties' oral arguments, we conclude that no constitutional violation occurred in regard to the Governor's issuance of that executive order; consequently, we reverse the judgment of the trial court and remand the cause for further proceedings consistent with this opinion.
Facts and Procedural History
Since 1939, when the Legislature originally enacted the sales-tax laws, those laws have allowed retailers, who collect and remit the sales taxes to the State, to claim a sales-tax discount. In fact, the Legislature, in 1939, gave the Governor the authority to issue an executive order directing the Department of Revenue to provide for a discount not to exceed 3% of the taxes levied by the Sales Tax Act.
Shortly after the sales-tax laws became effective, questions arose relating to the procedures for claiming the sales-tax discount. In 1943, the Attorney General issued an opinion to the commissioner of the Department of Revenue, advising him that the Department was not authorized to allow a discount for the remittance of collected sales taxes unless the beneficiary of the discount strictly complied with the statute. In 1951, the Legislature amended the statute by adjusting the amount of the discount, but nevertheless retained the language providing that no discount would be authorized or allowed regarding taxes not paid before they became delinquent. In 1959, the Legislature rewrote the salestax statutes, but retained the sales-tax discount. See Acts 1959, 2d Ex.Sess., Act No. 100, p. 298, § 34, which is now codified as § 40-23-36(a), Ala.Code 1975 ("Subsection (a)").
After the Legislature adopted the 1959 Act, Governor John Patterson, on January 8, 1960, issued Executive Order No. 2, which authorized the Department of Revenue to provide for a sales-tax discount. Pursuant to that order, the Department issued Regulation 810-6-4-.03, which allowed the sales-tax discount on taxes collected on sales made on or after October 1, 1959. This regulation was subsequently ratified pursuant to the Administrative Procedure Act (§§ 41-22-1 to 41-22-27, Ala. Code 1975), effective October 1, 1982. The administrative regulation closely mirrored the sales-tax discount allowed by the statute.
On May 7, 1996, Governor Fob James issued Executive Order No. 19, which authorized the Department to set a maximum discount of $900 per month, but the Revenue Department never promulgated any regulations to implement the provisions of that executive order. On May 20, 1996, the Legislature adopted Act No. 96-785. That Act amended the sales-tax statutes in their entirety, but what is now Subsection (a) of the sales-tax-discount statute remained unchanged, while Subsection (b) was added.
On May 31, 1996, Governor James issued Executive Order No. 20, which rescinded Executive Order No. 19 and authorized the Department of Revenue to promulgate regulations making the discount-cap effective. The Department issued the regulations, and this lawsuit by the retailers followed. The trial court held
Standard of Review
"In reviewing [a question regarding] the constitutionality of a statute, we `approach the question with every presumption and intendment in favor of its validity, and seek to sustain rather than strike down the enactment of a coordinate branch of the government.'" Moore v. Mobile Infirmary Ass'n, 592 So.2d 156, 159 (Ala.1991) (quoting Alabama State Fed'n of Labor v. McAdory, 246 Ala. 1, 9, 18 So.2d 810, 815 (1944)). Moreover, "[w]here the validity of a statute is assailed and there are two possible interpretations, by one of which the statute would be unconstitutional and by the other would be valid, the courts should adopt the construction [that] would uphold it." McAdory, 246 Ala. at 10, 18 So.2d at 815. In McAdory, this Court further stated:
246 Ala. at 9, 18 So.2d at 815 (citation omitted). We must afford the Legislature the highest degree of deference, and construe its acts as constitutional if their language so permits. Id.
The Constitutionality of § 40-23-36(b), Ala.Code 1975
Applying the standard of review set out in Part II, we must answer this question: Is § 40-23-36(b) an unconstitutional delegation of legislative power to the executive branch? We think not. Article III of the Alabama Constitution of 1901 creates the framework for the division of powers between the State's legislative, executive, and judicial branches. Each branch within our tripartite governmental structure has distinct powers and responsibilities, and our Constitution demands that these powers and responsibilities never be shared. But "the doctrine of separation of powers does not prohibit the Legislature's delegating the power to execute and administer the laws, so long as the delegation carries reasonably clear standards governing the execution and administration." Folsom v. Wynn, 631 So.2d 890, 894 (Ala. 1993); see also Porter Coal Co. v. Davis, 231 Ala. 359, 362, 165 So. 93, 96 (1935) (where this Court stated that "`[T]he legislature cannot delegate its power to make a law, but it can make a law to delegate a power to determine some fact or state of things upon which the law makes[,] or intends to make its own action depend'") (quoting United States v. Grimaud, 220 U.S. 506, 520, 31 S.Ct. 480, 55 L.Ed. 563 (1911), in turn quoting Field v. Clark, 143 U.S. 649, 694, 12 S.Ct. 495, 36 L.Ed. 294 (1892)). To deny the Legislature the power to make a law delegating a power to determine some fact or thing "`would be to stop the wheels of government.'" Porter Coal Co., 231 Ala. at 362, 165 So. at 96 (quoting Grimaud, 220 U.S. at 520, 31 S.Ct. 480). This Court has explained:
Sales-tax discounts are unique to taxing schemes involving the collection and remission of sales taxes.
This case is analogous to Folsom v. Wynn, supra, in which this Court considered whether § 40-4-90, Ala.Code 1975, sometimes referred to as the "proration statute," was constitutional.
In Folsom, this Court held that the proration statute had not been shown to be unconstitutional, basing its holding on the conclusion that the proration statute contained sufficient guidance to ensure that the Governor effectuated the Legislature's intent. 631 So.2d at 895. Consequently, § 40-4-90 was upheld because it would not apply in specific instances involving differing facts and circumstances. For example, the Court held that the proration statute did not apply to "constitutionally mandated appropriations or to appropriations otherwise excepted or specified by statute as being fully payable." Id. Furthermore, the Court noted that the statute forbade the Governor from restricting appropriations to coordinate branches "below what [was] adequate and reasonable for [those branches] to perform [their] constitutionally mandated duties." Id. at 896.
In this present case, the restrictions on the Governor's ability to determine the amount of sales-tax discounts to be allowed to licensed retailers throughout the State are no less general. Section 40-23-36, in its entirety, provides:
Section 40-23-36(b), when read in pari materia with § 40-23-36(a),
Based on the foregoing, we cannot say that the Legislature abdicated its legislative function by authorizing the executive branch to establish a maximum sales-tax discount for retailers. We conclude that the restrictions set out in the statute provide the Governor with sufficient guidelines and operable limits regarding the establishment of sales-tax discounts.
Having determined that the statute is constitutional and that the Governor had the power to issue the executive order, and having further concluded that the regulations promulgated by the Department of Revenue pursuant to that executive order were also validly issued, we reverse the judgment of the trial court and remand the case for further proceedings consistent with this opinion.
REVERSED AND REMANDED.
HOOPER, C.J., and HOUSTON, BROWN, JOHNSTONE, and ENGLAND, JJ., concur.
SEE and LYONS, JJ., dissent.
SEE, Justice (dissenting).
"It is settled law that the Legislature may not constitutionally delegate its powers, whether the general power to make law or the powers encompassed within that general power, including the `power of the purse'—the power to make appropriations." Folsom v. Wynn, 631 So.2d 890, 894 (Ala.1993). This doctrine of nondelegation is "rooted in the principle of separation of powers that underlies our tripartite system of Government." Mistretta v. United States, 488 U.S. 361, 371, 109 S.Ct. 647, 102 L.Ed.2d 714 (1989); see Ala. Const.1901, Art. III, § 43. "However, the doctrine of separation of powers does not prohibit the Legislature's delegating the power to execute and administer the laws, so long as the delegation carries reasonably clear standards governing the execution and administration."
In this case, the majority states that because the statute "does not vest the Governor with unlimited discretion to decide what amount retailers can claim as a sales-tax discount," the sales-tax discount statute, Ala.Code 1975, § 40-23-36, contains sufficient guidance for the Governor's exercise of his authority to set a maximum discount for each license holder. 762 So.2d at 833. A limitation on the Governor's discretion, however, is not the same as guidance for the Governor's exercise of authority. The maximum rates for the sales-tax discount prescribed in § 40-23-36(a) give the Governor no guidance as to the maximum discount he should set under § 40-23-36(b).
In interpreting a statute delegating power to the executive branch, we defer to the executive branch's own interpretation of the power delegated to it by the Legislature. See, e.g., QCC, Inc. v. Hall, 757 So.2d 1115, 1119 (Ala.2000) (citing Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)). Therefore, if the executive branch articulates a reasonable and permissible objective to be achieved by the exercise of delegated authority, and the actual exercise of that authority is reasonably calculated to achieve that objective and is not otherwise impermissible, then both the delegation of authority and the exercise of that authority are valid. See QCC, Inc. v. Hall, 757 So.2d at 1119. ("If the [executive's] reading [of a statute] fills a gap or defines a term in a way that is reasonable in light of the legislature's revealed design, we give the [executive's] judgment `controlling weight.'") (quoting NationsBank of North Carolina, N.A. v. Variable Annuity Life Ins. Co., 513 U.S. 251, 257, 115 S.Ct. 810, 130 L.Ed.2d 740 (1995), quoting in turn Chevron U.S.A., 467 U.S. at 844, 104 S.Ct. 2778). However, where, as here, the legislative grant of authority contains no explicit guidance for the executive branch, and the executive branch offers no explanation of the goal it seeks to achieve in its exercise of that authority, the exercise is void.
For the foregoing reasons, Executive Orders 19 and 20, by which the Governor purported to authorize the Department of Revenue to implement the $900-per-license-holder cap on the sales-tax discount, are void. Therefore, I must respectfully dissent.
LYONS, J., concurs.
LYONS, Justice (dissenting).
I join Justice See's dissenting opinion. I write specially to express my reluctance in doing so, because of the deference this Court owes to the presumption of constitutionality that accompanies acts of the Legislature. Moore v. Mobile Infirmary Ass'n, 592 So.2d 156, 159 (Ala.1991). If § 40-23-36(b), Ala.Code 1975, delegated to the Governor the authority to set a prompt-payment discount, in light of some