Apache County v. Southwest Lumber Mills, Inc.

• Decision Date: 19 December 1962
• Docket Number: No. 6957,6957
• Citation: 376 P.2d 854,92 Ariz. 323
• Parties: COUNTY OF APACHE, State of Arizona, Appellants, v. SOUTHWEST LUMBER MILLS, INC., a Corporation, Appellee.
• Court: Arizona Supreme Court

Page 854

376 P.2d 854

92 Ariz. 323

COUNTY OF APACHE, State of Arizona, Appellants, v. SOUTHWEST LUMBER MILLS, INC., a Corporation, Appellee.

No. 6957.

Supreme Court of Arizona, In Banc.

Dec. 19, 1962.

Wade Church, Former Atty. Gen., Stanley Z. Goodfarb, Asst. Atty., Gen., Robert Pickrell, Rpesent Atty. Gen., and D. L. Greer, County Atty., for appellants.

Stevenson & Babbitt, Flagstaff, for appellee.

BERNSTEIN, Chief Justice.

This is an appeal by Apache County form a judgment of the Superior Court of that county which awarded to the appellee a refund of inventory taxes paid under protest. The taxes were levied on raw, unfinished lumber which was undergoing processing at appellee's mill. The sole question raised is whether this property was exempt from taxation under Article IX, § 13 of the Arizona Constitution, A.R.S., which states:

'No tax shall be levied on raw or unfinished materials, unassembled parts, work in process or finished products, constituting the inventory of a manufacturer or manufacturing establishment located within the state and principally engaged in the fabrication, production and manufacture of products, wares and articles for use, from raw or prepared materials, imparting thereto new forms, qualities, properties and combinations, which materials, parts, work in process or finished products are not consigned or billed to any other party.'

This provision was adopted by the voters at a referendum election on September 12, 1950. Its purpose, as stated in the official referendum publicity pamphlet issued by the Secretary of State is '* * * solely and simply to eliminate the inventory tax on raw materials, work in process, and finished products of Arizona manufacturers * * *' in order to encourage '* * * greater industrial development in our state and * * * provide more jobs for more Arizona people.'

The appellant, however, calls our attention to A.R.S. § 42-228 which states:

'Assessment of machinery and equipment of manufactories at less than full cash value A. In this section, unless the context otherwise requires:

1. 'Manufactory' means an establishment principally engaged in the fabrication, production and manufacture of products, wares and articles from raw or prepared materials, imparting to the materials new forms, qualities, properties and combinations, but shall not include the following businesses, * * * (a) * * * felling, producing or preparing timber or any product of the forest for sale, profit or commercial use.' (Emphasis added.)

This section was enacted by the legislature during a 1950 session (Ariz.Sess. Laws 1950, Second Special Session, ch. 9), and approved by the Governor on April 19, 1950. Thus, it was in effect at the time of the adoption of the constitutional amendment set out above. The appellant county argues that this was the only legislative definition of 'manufacturer or manufacturing establishment' existing in the state at the time Ariticle IX, § 13 was adopted, and therefore must be taken as demonstrating the 'legislative intent' embodied in this constitutional provision. In support of this argument the county cites cases which stand for the correct proposition that a nearly contemporaneous legislative act interpreting a new constitutional provision will, after acquiescence in this interpretation by the interested parties for a period of years, be highly persuasive as the correct interpretation, e. g. New Cornelia Copper Company v. Espinoza, 268 F. 742 (9th Cir.1920); cf. Alvord v. State Tax Commission, 69 Ariz. 287, 213 P.2d 363 (1950).

This principle does not apply in the present case, however. The constitutional provision refers to taxes on the inventory of a manufacturer; the statute to an ad valorem assessment upon the machinery and equipment of manufactories. The statute does not purport to interpret the constitutional provision. Rather, its definition is, by its terms, limited in application to the section in which it is given. There may be valid reasons for different treatment, of, for example, electronics manufacturers and lumber mills in assessing ad valorem taxes on plant machinery under A.R.S. § 42-228. Reason does not, however, suggest any basis for differential treatment under a constitutional exemption from inventory taxes which was designed to bring industries into the state. For similar reasons we find inapplicable the distinction between 'processing' and 'manufacturing' of lumber products contained in an administrative regulation of the Arizona State Tax Commission dealing with the Combined Privilege, Sales and Use Tax, ¹ another definition unrelated to the inventory tax.

Apache...