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Rent-A-Car Co. v. Lynch

Filed: November 6, 1979.

RENT-A-CAR COMPANY, INC.
v.
MARK G. LYNCH, SECRETARY OF REVENUE OF THE STATE OF NORTH CAROLINA



Heard on discretionary review under G.S. 7A-31 of an opinion and judgment of the Court of Appeals reported at Brock, Justice. Justice Carlton took no part in the consideration or decision of this case.

Brock

We disagree with the opinion of the Court of Appeals and therefore reverse its judgment, and remand this cause to the Court of Appeals for further remand to the Superior Court, Wake County, with directions that the judgment for plaintiff be vacated, and for entry of judgment for defendant and dismissal of this action with costs to plaintiff.

In its argument to this Court plaintiff appellee contends it is entitled to a full refund of sales tax paid on the ultimate sale of its lease and rental motor vehicles. It claims an exemption from such tax based on its prior payment of sales tax on the lease and rental of the same automobiles during the period August 1968 through June 1971. The sales tax exemption relied on by plaintiff is contained within N.C.G.S. 105-164.4 and provides as follows:

"The [sales] tax levied under this subdivision shall not apply to the owner of a motor vehicle who purchases or acquires

said motor vehicle from some person, firm or corporation, who or which is not a dealer in a new and/or used motor vehicles if the tax levied under this Article has been paid with respect to said motor vehicle."*fn1 (Emphasis added.)

Plaintiff contends the tax paid on the renting of the automobiles is the tax under G.S. 105-164.4, and upon its payment it comes within the above exemption and is required to pay no further tax.

In reading this exemption in the context of the remainder of G.S. 105-164.4, it is clear that the purpose of the exemption is to prevent the levying of a second 2% sales tax on a sale by a nondealer where the same tax has already been imposed on the original retail sale. Here even though sales tax was collected on the lease and rental of the motor vehicles, the ultimate sale of the rental car is nevertheless a separate taxable transaction. Paying a sales tax on the ultimate sale of these automobiles to individuals not for resale does not duplicate the prior tax paid on the renting and leasing, and it is from the duplication of a tax paid earlier which the exemption provides protection.

Plaintiff relies on N.C.G.S. 105-164.3(15) which defines "sale" as follows:

"any transfer of title or possession or both, exchange, barter, lease or rental of tangible personal property . . . ." (Emphasis added.)

On the basis of this language which makes a lease a taxable transaction under the Sales and Use Tax Act, plaintiff argues its payment of a tax on the leasing and rental of the cars, constituted the sales tax due under N.C.G.S. 105-164.4, and it is therefore within the statutory exemption noted above. G.S. 105-164.2 in defining the purpose of the North Carolina Sales and Use Tax Act notes that, "[t]he taxes herein imposed shall be in addition to all other license, privilege or excise taxes . . . ." In making these sales and use taxes additional taxes, the intent of our legislature was to levy a tax on the full sale price of tangible personal property. In allowing plaintiff to exempt itself from taxation by the prior payment of a sales tax on the leases and rentals, the intent of the legislature is clearly thwarted. "A part of a statute may

not be interpreted out of context so as to render it inharmonious to the intent of the act, but must be construed as a part of the whole." Canteen Service v. Johnson Comm. of Revenue, 256 N.C. 155, 160, 123 S.E.2d 582, 585 (1961). See also Watson Industries v. Shaw, 235 N.C. 203, 69 S.E.2d 505 (1952); State v. Barksdale, 181 N.C. 621, 107 S.E. 505 (1921). If we were to interpret the language of 105-164.4 as requested by the plaintiff, the following result is possible: Plaintiff could purchase an entire fleet of automobiles and rent these automobiles for one week paying the sales tax due on the money received from the week's rentals. After renting these vehicles for one week, plaintiff could then proceed to sell these cars to individuals not for ...


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