                          IN THE SUPREME COURT OF MISSISSIPPI
                                   NO. 97-CA-00954-SCT
MISSISSIPPI STATE TAX COMMISSION AND THE
STATE OF MISSISSIPPI
v.
OSCAR E. AUSTIN TRUST AND OSCAR E. AUSTIN,
TRUSTEE

DATE OF JUDGMENT:                               06/30/97
TRIAL JUDGE:                                    HON. PAT WISE
COURT FROM WHICH APPEALED:                      HINDS COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANTS:                       BRAD D. WILKERSON
                                                BOBBY R. LONG
ATTORNEY FOR APPELLEES:                         HARRIS H. BARNES
NATURE OF THE CASE:                             CIVIL - STATE BOARDS AND AGENCIES
DISPOSITION:                                    AFFIRMED - 08/13/98
MOTION FOR REHEARING FILED:
MANDATE ISSUED:                                 9/3/98




     BEFORE SULLIVAN, P.J., McRAE AND SMITH, JJ.


     McRAE, JUSTICE, FOR THE COURT:


¶1. The Mississippi State Tax Commission appeals a June 30, 1997 order of the Hinds County
Chancery Court, granting a motion for summary judgment in favor of Oscar E. Austin and the Oscar
E. Austin Revocable Trust and denying the Commission's cross-motion for summary judgment. The
chancellor found that the transfer of Austin's automobile into a revocable trust did not subject it to
sales tax pursuant to Miss. Code Ann. § 27-65-201 (1990). We agree.

                                                    I.

¶2. Oscar E. Austin established a revocable trust on December 18, 1993, as amended January 29,
1994, known as the Oscar E. Austin Revocable Trust. The trust was designed to provide for his
needs and those of his wife during his lifetime, and at his death, to pass assets to his wife through a
marital deduction trust pursuant to Section 2056 of the Internal Revenue Code, as well as to his
children and grandchildren, and to other named beneficiaries. Various assets were transferred from
Austin, as creator, to the trust with Austin as trustee during his lifetime.
¶3. Austin's 1988 Oldsmobile 98 was among those assets placed in the trust. Title was transferred
from Austin to the trust on May 4, 1994. At that time, he was assessed sales tax in the amount of
$139.00 pursuant to Miss. Code Ann. § 27-65-201, the casual tax imposed on the sale of
automobiles. He paid under protest.

¶4. The Board of Review of the State Tax Commission denied Austin's written Claim for Refund on
April 20, 1995. Austin appealed the decision. By order dated September 27, 1995, the Commission
denied Austin's request for a refund he sought in the amount of $139.00 he paid upon transferring his
automobile to the trust, stating:

     . . . Miss. Code Ann. § 27-65-201 (1972) provides that a three percent (3%) tax is imposed on
     every "person" purchasing any motor vehicle required to be registered in this state. This statute
     is commonly referred to as the casual sales tax on motor vehicles. In defining "person," the sales
     tax law, Miss. Code Ann. § 27-65-3(c) provides that trusts are included within said term.
     Therefore, the Commission is satisfied that the transaction in question is subject to the tax.

¶5. On October 12, 1995, the Oscar E. Austin Revocable Trust, by and through Oscar E. Austin,
Trustee, filed a complaint in the Chancery Court of the First Judicial District of Hinds County
appealing the Commission's ruling that the transfer of Austin's personal automobile into a revocable
trust, set up as an alternative to a will, was a transfer pursuant to Miss. Code Ann. § 27-65-201 and
subject to a casual sales tax.

¶6. Austin filed a motion for summary judgment on February 20, 1996, asserting that, as a matter of
law, he was not liable for sales tax on the transfer of his automobile to the trust since the transaction
was not a "purchase" as contemplated by Miss. Code Ann. § 27-65-201. The Commission filed a
cross-motion for summary judgment, asserting that transfer of title to a motor vehicle is a taxable
event, reflected by the transfer documents which showed Austin as the seller and the trust as the
purchaser. A hearing on the motions was held on March 7, 1997. Finding that the transfer of the
automobile title from Austin's name to the Trust was not subject to the tax on the sale of motor
vehicles, the chancellor entered an order on July 15, 1997, granting the Trust's motion for summary
judgment and denying the Commission's cross-motion for summary judgment. The Commission was
ordered to remit $139.00 plus interest to the Trust.

                                                    II.

¶7. This Court, like the chancery court, reviews decisions of the State Tax Commission under the
arbitrary and capricious standard. Kerr-McGee Chemical Corp. v. Buelow, 670 So. 2d 12, 16 (Miss.
1995); Mississippi State Tax Comm'n v. Jenkins, 624 So. 2d 91, 92 (Miss. 1993). However, the
Supreme Court will not defer to the Commission's interpretation of a taxation statute when the
interpretation is repugnant to the plain meaning thereof. Mississippi State Tax Comm'n v. Dyer Inv.
Co., Inc., 507 So. 2d 1287, 1289 (Miss. 1987). Further, this Court reviews the chancellor's findings
of fact under the manifest error/substantial evidence rule. Mississippi State Tax Comm'n v. Medical
Devices, Inc., 624 So. 2d 987, 989 (Miss. 1993). This Court reviews the application of the law de
novo and the scope of review is plenary. Id. at 989.

                                                   III.
¶8. A living trust is but one of many forms of will substitutes. See, Douglas H. Lefeve, Note, Will
Substitutes in Mississippi, 41 Miss. L. J. 177, 185-86 (1969). By definition, such a trust, when
revocable, as well as any title to property contained therein, "continue[s] and exist[s] only at the will
and pleasure of the settler." Hiserodt v. Hamlett, 74 Miss. 37, 47, 20 So. 143, 145 (1896).
Discussing the requisites of transferring property by means of a valid and enforceable trust, whether
revocable or not, this Court has stated that "'[i]t is not essential, however, that the donor should part
with the possession in cases where he thus creates or declares a trust.'" Ladner v. Ladner, 128 Miss.
75, 79, 90 So. 593, 595 (1922)(quoting 2 Pomeroy, Equity Jurisprudence, § 997). At issue, in a case
of first impression before this Court, is whether the transfer of title to an individual's automobile,
which is to remain in his use and possession, from his own name to that of a revocable trust, for
which he is both creator and trustee, is subject to state sales tax pursuant to Miss. Code Ann. § 27-
65-201 (1990).

¶9. Sales of motor vehicles in Mississippi are taxed pursuant to § 27-65-201, which provides in
relevant part:

     Tax upon sale or use of motor vehicles.

     (1) For the purposes of this section, unless the context otherwise requires, the term "motor
     vehicle" means a motor vehicle required to be registered or licensed by the county tax collectors
     pursuant to Section 27-19-43, Mississippi Code of 1972.

     (2) Upon every person, firm or corporation purchasing other than at wholesale within this state
     any motor vehicle required to be registered or licensed with the tax collector of any county in
     this state from any person, firm or corporation which is not a licensed dealer engaged in selling
     motor vehicles, there shall be levied and collected a sales tax at the rate of three percent (3%) of
     the true value of the motor vehicle as calculated by using the most current official motor vehicle
     assessment schedule supplied by the State Tax Commission.

                                                *****


     (7) The tax levied by this section shall not apply to the following:

     (a) Transfers of legal ownership of motor vehicles between husband and wife, parent and child,
     or grandparents and grandchildren, unless the transferor is a licensed dealer of motor vehicles
     and the transfer of the motor vehicle is made in the regular course of business.

     (b) Transfers of legal ownership of motor vehicles pursuant to a will or pursuant to any law
     providing for the distribution of the property of one dying intestate.

     (c) Transfers of legal ownership of motor vehicles ten (10) or more years after the date of the
     manufacture of such vehicle.

In ruling that Austin's transfer of his automobile title from his individual name to the revocable trust
was not a taxable event, the Chancellor found that the transaction was neither a "sale" as
contemplated by § 27-65-201 nor a "closed transaction" pursuant to the Miss. Code Ann. § 27-65-
3(f)(1990) definition of "sale," as the Commission now argues. She further rejected the Trust's
argument that the transaction fell under the statutory exemption for property transferring under a
will.

¶10. The parties agree that while no definition of "purchase" appears in the statutory definitions,
"purchase" is interchangeable with the term "sale," defined as follows in § 27-65-3(f):

     (f) "Sale" or "sales" includes the barter or exchange of property as well as the sale thereof for
     money or other consideration, and every closed transaction by which the title to taxable
     property passes shall constitute a taxable event.

They differ, however, as to whether the transfer of title to the vehicle from Austin, individually, to the
Austin Trust, is a "closed transaction," for which no statutory definition is provided. While each party
cites authority for its tenets of statutory interpretation, neither cites any to support its construction of
the statutory language.

¶11. The Commission relies on Tower Loan of Mississippi, Inc. v. Mississippi State Tax Comm'n,
662 So. 2d 1077 (Miss. 1995) for the proposition that where there is no statutory definition of a
word or phrase, "it must be given its common and ordinary meaning." Id. at 1083 (employing the
Black's Law Dictionary definition of "book value"). See also Lambert v. Ogden, 423 So. 2d 1319
(Miss. 1982)(using the popular definition of "truck" found in Webster's Third New International
Dictionary). Thus, the Commission turns to Webster's to define "closed transaction" as a "completed
business transaction."(1) It neglects to point out that Black's Law Dictionary defines "closed
transaction" as a

     Term used in tax law to describe a taxable event which has been consummated. For example,
     diminution in value of goodwill of business is not a closed transaction so as to permit deduction
     of the diminution of value as ordinary loss.

Black's Law Dictionary 255 (6th ed. 1990). Further, it condemns the chancellor's reliance on federal
tax law and Corpus Juris Secundum, asserting that income tax and sales tax must be analyzed
separately.

¶12. The Trust urges an interpretation of the statutory language which gives effect to every provision
of the statute, Brady v. John Hancock Mutual Life Insurance Co., 342 So. 2d 295 (Miss. 1977)
and which will achieve a rational result, citing Hunt v. Hunt, 629 So. 2d 548 (Miss. 1992), partially
overruled on other grounds, Powell v. Powell, 644 So. 2d 269 (Miss. 1994). Thus, the Trust argues
that the chancellor correctly considered the sales tax statute in light of estate tax law and sought to
achieve a rational result.

¶13. The chancellor noted that while Mississippi estate tax law, Miss. Code Ann. § 27-9-1 et seq.
(rev. 1991 and 1996), does not expressly address revocable trusts,(2) pursuant to § 27-9-59, terms of
the section are to be construed consistently with federal law. She found that under federal law, the
exchange of property between a trust and the person treated as "owner of the trust" is not recognized
as a sale. She further noted the general principle that:

     There can be no sale, exchange, or other disposition of property for tax purposes unless and
     until the transaction involved is completed and closed. In any given case, the test to be applied
     to determine whether a transaction is a closed one is a practical test. There are no hard and fast
     rules of thumb for determining when a sale is completed and closed for tax purposes. The
     intention of the parties is important, as is the transfer of title. Also significant is the transfer of
     possession, dominion, and control of the property. Retention of a right that has no practical or
     commercial value does not preclude a transfer from constituting a sale for tax purposes. A sale
     may be complete for tax purposes despite the existence of future contingencies. The issue may
     turn on whether there has been such substantial performance of conditions precedent as imposes
     on the purchaser an unconditional obligation to pay. No single factor is controlling, and the
     determination of whether a transaction is complete often becomes a question of fact for the trier
     of fact, to be resolved by a practical consideration of all surrounding facts and circumstances.

47A C.J.S. Internal Revenue § 100 (1996)(footnotes omitted). Considering these factors, the
chancellor found that Austin's continuing income and estate tax liability for the trust assets, his
ongoing beneficial interest in the assets and his power to re-vest title of the car in himself, either by
revoking the trust or by withdrawing the asset from the trust, favored a finding that the transaction
was not closed.

¶14. The chancellor's determination that transfer of the automobile title from Austin individually to
the revocable trust is not a closed transaction subject to the casual sales tax further is consistent with
federal law. In Estate of Sanford v. Commissioner of Internal Revenue, 308 U.S. 39, 43-45 (1939),
the United States Supreme Court held that a transfer to a revocable trust is not complete until the
right to revoke is extinguished by the settlor's death. Likewise, in Burnet v. Guggenheim, 288 U.S.
280, 284-286 (1933), the Court found that for gift tax purposes, the creation and funding of a
revocable trust is not a gift because when the settlor retains the power to revoke, the "gift" is
"inchoate and imperfect."

                                                    IV.

¶15. The Commission's interpretation of the statute is arbitrary and capricious as well as contrary to
the intent of the statute. We further are not persuaded by its argument that the Legislature expressly
intended "any completed transfer of title" to be subject to sales tax unless specifically exempt
pursuant to §§ 27-65-201(7)(a), (b) or (c), based on H.B. 1729, introduced in the 1997 Regular
Session of the Legislature to amend § 27-65-201 to provide further statutory exemptions for
transfers of legal ownership made into revocable trusts. According to the Commission, the fact that
the bill died substantiates its position that the Legislature intended that all "completed transfers" save
those already excepted should be exempt from sales tax. We decline to speculate.

¶16. The chancellor properly recognized that statutory sales tax provisions cannot be construed in a
vacuum and when applied must be read in light of the laws of trusts and estates. We therefore affirm
the decision of the court below.

¶17. JUDGMENT IS AFFIRMED.

PRATHER, C.J., SULLIVAN AND PITTMAN, P.JJ., BANKS, SMITH, MILLS AND
WALLER, JJ., CONCUR. ROBERTS, J., CONCURS IN RESULT ONLY.
1. According to the Commission's brief, Webster's defines "closed" as to end, conclude, finish or
complete, and "transaction" as a business deal.

2. The section's only reference to trusts appears to be Miss. Code Ann. § 27-9-7(d), which consistent
with federal law, provides that a transfer of assets into a trust within three years of death, is deemed
prima facie to have been made in contemplation of death.
