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Keywords

legislative intent

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Saverio v. Carson, 22 Beeler 166, 186 Tenn. 166, 208 S.W.2d 1018

Facts

Mrs. E. G. Saverio operates a laundry and linen service in Nashville, Tennessee. Her business includes providing laundry services for customers who bring their own diapers, which is exempt from sales tax. However, she also rents out her own diapers to customers, and it is this aspect of her business that is in dispute regarding the applicability of the sales tax. The State contends that she is liable for sales tax on the rental of these diapers, while Saverio argues that the charges are primarily for the service of laundering and delivering the diapers.

Complainant operates a laundry in the city of Nashville. A laundry under the Sales Tax Act is classified as a service and is exempt from the 2 per cent sales tax. Complainant also operates a linen service where she owns diapers that she charges a rental service for, and it is the tax on the rental of these diapers that she furnishes or rents to her customers that the controversy is about.

Issue

Is Mrs. E. G. Saverio liable for sales tax on the rental of diapers provided as part of her laundry and linen service under the Tennessee Retailers' Sales Tax Act?

Is Mrs. E. G. Saverio liable for sales tax on the rental of diapers provided as part of her laundry and linen service under the Tennessee Retailers' Sales Tax Act?

Rule

Under the Tennessee Retailers' Sales Tax Act, every person engaging in the business of selling tangible personal property at retail or renting taxable items is exercising a taxable privilege.

Section 3 of the Act declares it to be the legislative intent that every person is exercising a taxable privilege who engages in the business of selling tangible personal property at retail in this State, or who rents or furnishes any of the things or services taxable under the Act.

Analysis

The court analyzed the nature of the charges made by Saverio for the rental of diapers and concluded that the charges could not be separated into service and rental components. The court emphasized that the tax must be applied to the total rental or selling price, which includes any service charges, and that the law does not allow for deductions based on the nature of the service provided.

We are of opinion that a construction of the Act which would permit an attempted division or separation of the charge for services rendered would result in confusion in the administration of the Act and render the law unworkable.

Conclusion

The court affirmed the chancellor's decree, concluding that Mrs. E. G. Saverio is liable for sales tax on the rental of diapers as part of her business operations.

It results that we find no error in the decree of the chancellor and it is affirmed.

Who won?

The State of Tennessee prevailed in the case, as the court upheld the application of the sales tax to the rental of diapers, finding that the charges made by Saverio were subject to taxation under the law.

The State insists that complainant is liable for the sales tax on that part of her business wherein the clean diapers furnished by her belong to complainant, and a specific charge for the entire service is made, including a rental charge.

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