Moore v. Arizona Box Co.

• Decision Date: 01 June 1942
• Docket Number: Civil 4450
• Citation: 59 Ariz. 262,126 P.2d 305
• Parties: THAD M. MOORE, as Chairman, D. C. O'NEIL and WARREN PETERSON, as Members of the STATE TAX COMMISSION OF THE STATE OF ARIZONA; and STATE TAX COMMISSION OF THE STATE OF ARIZONA, Appellants, v. ARIZONA BOX COMPANY, a Corporation, Appellee
• Court: Arizona Supreme Court

126 P.2d 305

59 Ariz. 262

THAD M. MOORE, as Chairman, D. C. O'NEIL and WARREN PETERSON, as Members of the STATE TAX COMMISSION OF THE STATE OF ARIZONA; and STATE TAX COMMISSION OF THE STATE OF ARIZONA, Appellants, v. ARIZONA BOX COMPANY, a Corporation, Appellee

Civil No. 4450

Supreme Court of Arizona

June 1, 1942

APPEAL from a judgment of the Superior Court of the County of Maricopa. Howard C. Speakman, Judge. Judgment reversed and case remanded with instructions.

Mr. Joe Conway, Attorney General, and Mr. W. E. Polley, Assistant Attorney General, for Appellants.

Messrs Lewkowitz & Wein, for Appellee.

OPINION

LOCKWOOD, C.J.

Arizona Box Company, a corporation, plaintiff, brought suit against the State Tax Commission, defendant, praying that it recover from defendant certain sales taxes paid by it under protest and that it be declared exempt from the provisions of the excise revenue act of 1935, being chapter 77 of the regular session, as amended by chapter 2, First Special Session 1937, or, if it is not entirely exempt therefrom, that its classification thereunder be declared. Judgment was rendered holding that plaintiff was wholly exempt from sales taxes under the revenue act aforesaid, and that it was entitled to recover some thirty-three thousand dollars of taxes paid, whereupon defendant appealed.

The facts necessary for a determination of the case are not in dispute, and may be stated thus: Plaintiff conducts its business as follows: It purchases materials already cut to proper size for the making of wooden containers for lettuce, cantaloupes, and the like, in order to prepare them for shipment. It then sells this material as received, or as made up by it in containers suitable for packing, to its customers. These customers are engaged in the growing, packing and selling of agricultural products, principally lettuce and cantaloupes. These products, when prepared and packed, are distributed in all parts of the United States, through brokers and commission agents, until they finally reach the tables of the ultimate consumers. The crates pass with the products along the line of distribution until they reach the point at which their contents are to be sold in less than crate lots, and are then disposed of by the last seller as junk.

From the adoption of the act up to June, 1940, plaintiff was required by defendant to pay, and did pay, a sales tax of one-fourth of one per cent. on the gross sales made by it. Its books were audited in April, 1936, and approved as of that time and rate by defendant. In June, 1940, a second audit being made, defendant insisted that plaintiff was obliged to pay an amount equal to two per cent. on its gross sales, instead of one-fourth of one per cent. Plaintiff did pay under protest the amount so demanded, and has brought suit to recover these taxes, its theory being that all of the taxes paid under protest are void.

The matter must be determined by the meaning of the excise act of 1935, as amended, the portions of which material to this case read as follows:

"Sec. 1. Definitions. In this article, unless the context otherwise requires:

"'retail sale' or 'sale at retail' means a sale for any purpose other than for resale in the form of tangible personal property,

"'tangible personal property' means personal property which may be seen, weighed, measured, felt, touched, or is in any other manner perceptible to the senses;...

"Sec. 2. Imposition of the Tax. From and after the effective date of this act, there is hereby levied and shall be collected by the tax commission,... annual privilege taxes...

"(a) At an amount equal to one-fourth of one per cent of the gross proceeds of sales or gross income from the business upon every person engaged or continuing within this state in the following businesses:

"1. Manufacturing, baling, crating, boxing,... or otherwise preparing for sale, profit, or commercial use, agricultural and horticultural products,... or any product or products, article or articles, substance or substances, commodity or commodities not classified in paragraph 1, subsection (c) or in subsection (g).

"(c) At an amount equal to one per cent of the gross proceeds of sales or gross income from the business upon every person engaging or continuing within this state in the following businesses:

"1. ... or felling, producing or preparing timber or any product of the forest for sale, profit or commercial use.

"(d) At an amount equal to two per cent of the gross proceeds of sales or gross income from the business upon every person engaging or continuing within this state in the following businesses:

"1. Selling any tangible personal property whatsoever at retail, except bonds and stocks."

For some reason, while the act of 1935 provided for a tax on wholesale merchants, that provision was omitted from the amended act of 1937, and it is plaintiff's contention that it is solely a wholesaler and, therefore, not subject to any tax.

It is the position of defendant that plaintiff is engaged in the business either of "manufacturing" or "crating" agricultural products, paying one-fourth of one per cent. tax, or "preparing" a "product of the forest for sale," paying one per cent., or "selling any tangible personal property whatsoever at retail," paying two per cent.

The question is one of first impression in this state, but a similar one has arisen in a number of other states having sales taxes, and there is a great conflict of authority not only in the different states but even in the same states under varying conditions of fact. The principal difficulty seems to...