ÿWPCþ# …# VU:a %› 0û¡w@œ 4Ü ð ÿ 0J 0?O 0DŽ 0TÒ 0^& 0h„ 0rì 0|^ 0†Ú 0` 1uð 0deU*ÉB)óDC AM_£¬¾O B k*v~•vÓ D3æ! 0@" AOY"ƨ" 0Dn# D/²# Bá#˜HP LaserJet 4SiHPPCL5MS,ü,,,,,ü0nLlÎ,c½¬AZ‹"Arial RegularX(ÓGƒ$¡¡Ñ  ÑÒH°ÒÒ°ÒÑTR[  AØ'ÿ Legal[  AØ'ÿ Legal AØ'ÿ Legal AØ'ÿ LegalTÑÔ€Xm²XXXÔÑ7€ÅXXdìXXdæ7Ñ D‘’D“D”D•P—˜D™ÊšÓ€R¦"3|x¥H2 ÿÿ0Indent1Ô2ÔÔ3  Ô(ï(3"$¤¤Ý ƒGƒ!ÝÑ  ÑÒH°ÒÒ°ÒÑTR[  AØ'ÿ Legal3Ø' AØ'ÿ Legalÿ3Ø'TÑÔ€Xš¥XXXÔÑ7€š¥XXdæXXdð7ÑÝ  Ýà ` àòòÚ  Ú0Ú  Úóó(#Ã$òòÚ  Ú0Ú  Úóó2" ÿÿ0Indent2à0 àÔ2ÔÔ3  Ô2, ÿÿ0Indent3à0 àà0 àÔ2ÔÔ3  Ô26 ÿÿ0Indent4à0 àà0 àà0 àÔ2ÔÔ3  Ô2@ ÿÿ0Indent5à0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2J ÿÿ0Indent6à0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2T ÿÿ0Indent7à0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2^ ÿÿ0Indent8à0 àà0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô  ÿÿ?AGMSYaioIndent0I.A.1.a.(1)(a)i)a)P ÿÿ8Mac DefaultMac DefaultÓ ` °šXÓ< Œ 9p`(Arial% Line 7 d7Border 1dd€- Cþÿ << Gÿÿ ™Ý ƒ!ÝÑ  ÑÑ#€d#ÑÔ€ÔÑ  ÑÒ  ÒÒ H ÒÑ\R AØ'\ÑÑ#€d#ÑÝ  ÝÔ€ÔÓ  ÓÔ YYY ÔFILEDÔ€XÔÌÌò òMayÏ13,Ï1997ÌÌCecilÏCrowson,ÏJr.ÌÔ€ôÔAppellateÏCourtÏClerkó ó ´Ý ƒ!ÝÑ#€d#ÑÔ€ÔÑ  ÑÒ  ÒÒ H ÒÑ\R AØ'\ÑÑ#€d#ÑÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  ÝThere€is€no€evidence€that€the€Commissioner€attempted€to€collect€the€sameÏTennessee€tax€from€both€the€agent€and€the€principal.€€Moreover,€òòRuleóó€96€requiresÏthe€Seller€to€òòcollectóó€the€tax,€indicating€one€very€practical€purpose€of€òòRuleóó€96:€theÏSeller€has€contact€with€the€out„of„State€Buyer,€and€is€therefore€in€a€better€position€toÏcollect€the€tax€than€the€Commissioner.Ì d aÝ ƒ!ÝÑ#€d#ÑÔ€ÔÑ  ÑÒ  ÒÒ H ÒÑ\R AØ'\ÑÑ#€d#ÑÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  ÝAs€argued€by€the€Commissioner,€ð ðThe€very€logical€and€legitimate€purpose€ofÏRule€96€makes€eminently€good€sense€and€is€necessary€for€the€enforcement€of€theÏsales€tax€law.€€It€is€carefully€and€specifically€directed€at€the€not„infrequent€efforts€ofÏsellers€to€avoid€the€tax€by€using€out„of„state€third€parties€as€intermediaries€in€aÏseries€of€transactions.ðð€€Although€no€bad€faith€is€alleged€in€this€case,€the€importanceÏof€this€courtððs€attention€to€the€regulations€of€the€Commissioner€designed€to€avoidÏsuch€ð ðnot„infrequentðð€scenarios€is€clear.€ÌPtPtHHÚ(ÿáÿâùFG(üHHÚ(d'hStyl{WP}01•ÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃà Ãà Ãà Ãà Ãà ÃÃÃÃÃÃÃÃÃÃÃÐ ÐÐHHÐÐ  ÐÐ2ÐÐÿÿ¸æ$ÿÐÐHHÐÐÐÐÐÐÐÐ  ÐÐ ÐÐ ÐÑÑÑGenevaÑÑ ÑÑ € ÑÑ<Px–ÈÑÒÒÒ443!#4ÒÒ$ *$ÒÒ$*$ÒÒ ÿKK ÒÒ  Geneva ÒÒ  Geneva ÒÓ.,ÓÓÓÓ6ÓÓ ÓßßßßßßßßßßßßßßßßßßÑGenevaÑÑ ÑÒ  h HD: Geneva ÒÒ  h HD: Geneva Ò$$$$'ÿÿdxd("ÿÿ$££Ò  ÒÒ  Ò€-‚ƒCþÿ<< CÿÿƒLevel 1Level 2Level 3Level 4Level 5($$””ò òÚ  Ú1Ú  Úó ó„„'÷ÿ dxdüÿP PdÝ ƒ!ÝÔ . ÔÔ€ÔÑ  ÑÒ  ÒÒ H ÒÑ\R AØ'\ÑÑ#€Xd#ÑÑ#€Xd#ÑÝ  ÝÓÓò òÙ€€ÙÓ  ÓßR€!" A1-j|` à. `€€@ÿRßÞ ÞÌIN€THE€COURT€OF€APPEALS€OF€TENNESSEEÌEASTERN€SECTION€AT€KNOXVILLEó óÌÓ  ÓÌÓÓUPPER€EAST€TENNESSEEà àà à)à àWASHINGTON€CHANCERYÌDISTRIBUTING,à àà àà àà à)à àÌà àà àà àà àà àà à)à àNO.€€03A01„9701„CH„00011Ìà àPlaintiff/Appelleeà àà àà à)à àÌà àà àà àà àà àà à)à àHON.€€LEWIS€W.€MAY,à àÌv.à àà àà àà àà àà à)à àCHANCELLOR,€By€InterchangeÌà àà àà àà àà àà à)ÌRUTH€E.€JOHNSON,à àà àà à)à àJUDGMENT€REVERSED;ÌCommissioner€of€Revenue,à àà à)à àMOTION€OF€THE€DEFENDANTÏState€of€Tennessee,à àà àà à)à àGRANTED;Ìà àà àà àà àà àà à)à àREMANDED€FOR€ENTRY€OFà àÌà àDefendant/Appellantà àà à)à àJUDGMENT€FOR€THE€STATE.Ìà àà àà àà àà àà à)Ìà àà àà àà àà àà à)ÌÌÌForrest€B.€Bigham,€Nashville,€for€Appellant.ÌWalter€Lee€Davis,€Jr.,€Johnson€City,€for€Appellee.ÌÌÌÌòòò òÓ  ÓO€P€I€N€I€O€NÌÓ  ÓÌó óóóà àà àà àà àà àà àà àINMAN,€Senior€JudgeÌÌÓÓÓ  Óà àThis€complaint€was€heard€by€the€Chancellor€upon€stipulated€facts,€trial€briefsÏand€oral€argument.€€Motions€for€Summary€Judgment€were€filed€by€both€parties;€theÏtrial€court€granted€Plaintiffððs€motion.€€Defendant€appeals€and€presents€the€followingÏissue,€reproduced€verbatim:ÌÓÓà8 à1.à8 àRule€96€of€the€Department€of€Revenue€is€a€valid€exampleÏof€the€express€statutory€authority€of€the€Commissioner€ofÏRevenue€to€implement€rules€and€regulations€concerningÏsales€for€resale.ÌÌà8 àà8 àà8 àA.€à0 à€Plaintiffððs€initial€sale€was€taxable€asÏa€retail€sale€because€it€failed€toÏqualify€as€a€tax„exempt€sale€forÏresale€under€Rule€96.ÌÌà8 àà8 àà8 àB.à0 àRule€96€is€valid€and€consistent€withÏTennessee€sales€and€use€taxÏstatutes€and€is€reasonable,€practicalÏand€necessary€to€effectuate€theÏpurposes€of€the€law.ÌÌÓÓà àPlaintiff€argues€that€òòRuleóó€96€does€not€apply€because€Plaintiffððs€sale€was€aÏsale€for€resale€and€not€a€retail€sale€under€the€undisputed€facts.€€In€the€alternative,€ifÏòòRuleóó€96€is€found€to€apply,€then€òòRuleóó€96€is€void€because€it€is€inconsistent€with€T.€C.€A.Ïðð€67„6„102(23)(A)€and€T.€C.€A.€ðð€67„6„313(a).ÌÌò òà@ àIÌà àó óThe€parties€stipulated€32€paragraphs€of€facts€for€trial.€€We€paraphrase€thoseÏmaterial€to€our€decision:Ìà àPlaintiff€[hereinafter€ð ðSellerðð]€is€a€manufacturer€and€dealer€of€coin„operatedÏamusement€game€machines€with€offices€and€facilities€in€Gray,€Tennessee.€ÏBetween€January€1991€and€December€1993,€Seller€sold€for€resale€various€coin„operated€amusement€machines€to€Coin€Concepts,€Inc.,€[hereinafter€ð ðBuyerðð]€a€NewÏJersey€corporation€with€no€physical€presence€in€Tennessee.€€Buyer€effected€theÏsale€by€sending€purchase€orders€to€Seller€in€Tennessee,€but€left€the€machines€atÏSellerððs€Tennessee€facility€and€subsequently€€re„sold€them€to€Buyerððs€customer,ÏAladdinððs€Castle,€Inc.,€a€Delaware€corporation€which€uses€the€machines€in€itsÏbusiness€operations€throughout€the€United€States.Ìà àSeller€agreed€to€act€as€Buyerððs€agent€to€deliver€the€machines€to€BuyerððsÏcustomer,€Aladdinððs€Castle.€Possession€of€the€machines€was€transferred€from€SellerÏdirectly€to€Buyerððs€customer,€Aladdinððs€Castle,€at€Sellerððs€facilities€in€Tennessee.Ìà àTwo€machines€were€used€by€Aladdinððs€Castle€facilities€in€Tennessee,€andÏAladdinððs€Castle€paid€Tennessee€use€tax€on€those€two€machines.Ìà àThe€remaining€[presumably€98]€machines€were€sent€to€other€states,€and€inÏeach€state€which€imposes€a€use€tax,€Aladdinððs€Castle€paid€the€tax.Ìà à€Seller€did€not€collect€any€Tennessee€sales€or€use€tax€or€pay€any€tax€inÏconnection€with€the€sales€of€the€machines€to€Buyer€or€the€deliveries€of€the€machinesÏto€Aladdinððs€Castle.€No€arrangements€were€made€between€Seller€and€theÏTennessee€Commissioner€of€Revenue€regarding€the€sales€to€Buyer€or€theÏdeliveries€to€Aladdinððs€Castle.€€Ìà àThe€Tennessee€Department€of€Revenue€assessed€Seller€$18,753.00€forÏsales€and€use€tax,€local€tax€and€interest.Ìà àThe€trial€court€found€the€Department€of€Revenueððs€assessment€to€beÏerroneous€and€not€due,€and€awarded€judgment€including€attorneyððs€fees€to€Seller.ÌÓ  ÓÌÌà àò òIIÌÓ  Óà àó óRetail€sales€in€Tennessee€are€subject€to€Sales€and€Use€Tax€under€T.€C.€A.€ððÏ67„6„101,€òòet€seq,€óó€Retailersðð€Sales€Tax€Act.ò ò€€ó óThe€Act€defines€taxable€retail€sales€asÏð ðtaxable€sale€of€tangible€personal€property€.€.€.€to€a€consumer€or€to€any€person€forÏany€purpose€òòother€than€for€resale€óó[emphasis€added]ððÌò òà àó óStipulation€of€Fact€#6€at€trial€in€this€case€provides:€ÌÓÓà8 àð ðBetween€January€1991€and€December€1993€Plaintiff€òòsold€for€resaleóóÏ[emphasis€added]€various€coin„operated€amusement€games€.€.€.€toÏCoin€Concepts,€Inc.€.€.€.€€€ð ð€ÌÌÓÓà àNotwithstanding€this€stipulation,€the€Commissioner€argues€that€Plaintiffððs€saleÏof€the€machines€to€Buyer,€although€a€sale€for€resale,€was€subject€to€taxation€ð ðas€aÏretail€saleðð€because€it€failed€to€qualify€as€a€tax„exempt€sale€for€resale€under€SalesÏand€Use€Tax€Rules€of€the€Tennessee€Department€of€Revenue,€Rule€1320„5„1.96:€€ÌÓÓà8 àòò1320„5„1.96€€Tangible€Personal€Property€Sold€By€Dealers€to€OtherÏVendors,€Where€delivery€is€Made€for€Use€and€Consumption:ÌÌà8 àóóExcept€in€cases€where€specific€and€satisfactory€arrangements€areÏmade€with€the€Commissioner€before€sales€and€deliveries€are€made,Ïsales€of€tangible€personal€property€.€.€.€by€a€dealer€to€an€out€of€stateÏvendor€who€directs€that€the€dealer€act€as€[the€vendorððs]€agent€toÏdeliver€or€ship€[to€the€vendorððs]€customer,€who€is€a€user€or€consumer,Ïare€subject€to€the€Sales€or€Use€Tax.€€The€dealer€so€acting€as€agent€forÏthe€out€of€state€vendor€must€collect€the€tax€involved€on€the€transactionÏunless€the€transaction€comes€within€the€conditions€indicated€herein.ÌÌà àÓÓIn€this€case,€the€dealer€(Seller)€sold€to€an€out€of€state€vendor€(Buyer),€whoÏdirected€that€Seller€act€as€his€agent€to€deliver€the€property€to€vendorððs€customer,ÏAladdin,€who€is€a€user€of€the€machines.€€Thus€òòRuleóó€96€requires€Seller€to€collectÏretail€tax€on€the€transaction€unless€specific€and€satisfactory€arrangements€wereÏmade€with€the€Commissioner€before€sale€and€delivery€were€made.€€The€partiesÏstipulated€that€no€such€arrangements€were€made.€€Therefore,according€to€theÏundisputed€facts,€the€sale€was€a€sale€for€resale€under€T.€C.€A.€€ðð€67„6„101€òòet€seqóó,Ïwhich€nevertheless€became€subject€to€retail€sales€tax€under€òòRuleóó€96€becauseÏSeller€made€delivery€for€Buyer€to€its€customer/user€without€the€requiredÏarrangements€having€been€made€with€the€Commissioner€prior€to€the€sale€or€transferÍof€possession.ÌÌà àÌà àò òà@ àIIIó óÌà àSeller€argues€that€òòRuleóó€1320„5„1„.96€is€only€applicable€to€sales€in€which€theÏprincipal€is€undisclosed,€citing€òòRuleóó€1320„5„1„.01.€€Ìòòà à1320„5„1„.01€Auctioneers„Agents„FactorsÌÓÓóóà8 àEvery€factor,€auctioneer,€or€agent€acting€for€any€unknown€orÏundisclosed€principal€entrusted€with€any€bill€of€lading,€customhouseÏpermit,€or€warehouse€receipt€for€delivery€of€tangible€personal€property,Ïor€entrusted€with€possession€of€any€such€personal€property€for€theÏpurpose€of€sale,€shall€be€deemed€the€owner€thereof,€and,€upon€theÏsale€at€retail€of€such€property,€shall€be€required€to€file€a€return€of€theÏreceipts€of€sales€and€pay€a€tax€thereon.€€A€sale€by€such€factor,Ïauctioneer€or€agent,€when€acting€for€a€known€or€disclosed€principalÏshall€be€taxable€to€the€principal.€€The€same€rule€applies€to€lienÏholders,€such€as€storage€men,€pawnbrokers€and€artisans.ÌÌÓÓà àSeller€cites€no€reference€for€his€assertion€that€òòRuleóó€96€is€limited€by€òòRuleóó€1,€orÏthat€a€sale€which€is€taxable€to€a€known€or€disclosed€principal€cannot€therefore€beÏtaxed€to€an€agent,€and€we€find€no€such€authority.× ƒ# ××  ×à àÌò òà@ àIVó óÌà àSeller€argues€that€in€the€event€we€find€òòRule€96óó€applicable,€thenòò€€Rule€96óó€isÏvoid€because€it€is€inconsistent€with€T.€C.€A.€ðð€67„6„102(23)(A)€and€T.€C.€A.€ðð€67„6„313(a).Ìà àT.€C.€A.€ðð€67„6„102(23)(A)€provides:ÌÓÓà8 àð ðRetail€salesðð€or€ð ðsale€at€retailðð€means€a€taxable€sale€of€tangibleÏpersonal€property€or€specifically€taxable€services€to€a€consumer€or€toÏany€person€for€any€purpose€other€than€for€resale.€€ð ðRetail€salesðð€orÏð ðsales€at€retailðð€means€and€includes€all€such€transactions€as€theÏcommissioner,€upon€investigation,€finds€to€be€in€lieu€of€sales.€€Any€saleÏfor€resale€must,€however,€be€in€strict€compliance€with€rules€andÏregulations€promulgated€by€the€commissioner.€€Any€dealer€making€aÏsale€for€resale€which€is€not€in€strict€compliance€with€rules€andÏregulations€shall€be€personally€liable€for€and€pay€the€tax;€ÌÌÓÓÓ  Óà àSeller€argues€that€the€cited€statute€indicates€the€legislature€did€not€intend€toÏtax€sales€for€resale.€€Therefore,€under€òòCovington€Pike€Toyota,€Inc.€v.€Caldwell,€óó829ÏS.W.2d€132€(Tenn.€1992),€ð ðit€is€fundamental€that€the€Commissioner€cannot€enlargeÏthe€scope€of€a€taxing€statute€by€regulation,€and€rules€contrary€to€the€expressÏdirectives€of€a€taxing€statute€are€void.ððÌÓ  Óà àOur€reading€of€T.€C.€A.€ðð€67„6„102(23)(A)€indicates,€however,€that€theÏlegislature€clearly€intended€to€limit€the€tax„exempt€status€of€sales€for€resale€to€thoseÏsales€which€were€in€strict€compliance€with€the€rules€and€regulations€promulgated€byÏthe€Commissioner.€€Therefore,€since€Seller€was€not€in€compliance€with€òòRuleóó€96,Ïhaving€failed€to€make€ð ðspecific€and€satisfactory€arrangementsðð€with€theÏCommissioner€before€sale€and€delivery,€the€Commissioner€was€specificallyÏauthorized€by€statute€to€tax€the€sale€as€if€it€were€a€retail€sale.Ìò òà@ àVó óÌà àThe€Seller€asserts€that€òòRuleóó€96€is€void€because€the€legislature€intended€toÏexempt€from€tax€all€Tennessee€products€manufactured€for€export.€€Ìà àT.€C.€A.€ðð€67„6„313(a)€provides:ÌÓÓà8 àIt€is€not€the€intention€of€this€chapter€to€levy€a€tax€upon€articles€ofÍtangible€personal€property€imported€into€this€state€or€produced€orÏmanufactured€in€this€state€for€export.ÌÌà àÓÓThere€is€no€proof€on€the€record€that€the€machines€sold€were€produced€forÏexport,€although€this€assertion€is€made€in€Sellerððs€appellate€brief.€€Therefore,€weÏdecline€to€address€this€issue.€Ìò òà@ àVIó ó€Ìà àThe€stipulated€facts€indicate€that€the€transaction€at€issue€was€one€anticipatedÏby€the€legislature€and€provided€for€in€T.€C.€A.€ðð€67„6„102(23)(A)€and€Sales€and€UseÏTax€òòRuleóó€96.€€We€find€òòRuleóó€96€to€be€in€harmony€with€the€statute,€and€that€it€supportsÔ% € ÔÏthe€Commissionerððs€assessment€of€sales€tax€in€this€case.× ƒ% ××  ×€€Therefore,€the€judgmentÏof€the€trial€court€is€reversed€and€the€case€is€remanded€for€entry€of€judgment€for€theÏCommissioner€of€Revenue€as€upon€Summary€Judgment.€€Costs€are€assessed€to€theÏAppellee.ÌÌÌÌÓÓÌÌÌà àà àà àà àà àà à__________________________________Ìà àà àà àà àà àà àWilliam€H.€Inman,€Senior€JudgeÌÌCONCUR:ÌÌÌÌ_______________________________ÌHouston€M.€Goddard,€Presiding€JudgeÌÌÌÌ_______________________________ÌCharles€D.€Susano,€Jr.,€JudgeÌÌÌÌà àÌÌÌ