Arizona State Tax Commission v. Frank Harmonson Company Metal Products, Civil 4739
| Decision Date | 09 November 1945 |
| Docket Number | Civil 4739 |
| Parties | ARIZONA STATE TAX COMMISSION, a Body Politic and Corporate; THAD M. MOORE, D. C. O'NEIL and JOE HUNT, as Members of the Arizona State Tax Commission, Appellants, v. FRANK HARMONSON COMPANY METAL PRODUCTS, a Corporation, Appellee |
| Court | Arizona Supreme Court |
APPEAL from a judgment of the Superior Court of the County of Maricopa. M. T. Phelps, Judge.
Judgment reversed except as to denial of injunctive relief.
Mr John L. Sullivan, Attorney General, Mr. Earl Anderson Assistant Attorney General, for Appellants.
Messrs Moeur & Moeur, Mr. Leslie C. Hardy, for Appellee.
Messrs. Bilby & Shoenhair, Messrs. Darnell & Robertson, Messrs. Cunningham & Carson, Messrs. Gust, Rosenfeld, Divelbess & Robinette, Messrs. Kramer, Morrison, Roche & Perry, Mr. Orme Lewis, Mr. Blaine B. Shimmel, Messrs. Sloan, Scott & Green, Messrs. Snell, Strouss & Wilmer, Messrs. Struckmeyer & Struckmeyer, Mr. Louis B. Whitney, of Counsel for Appellee.
Appellee, as plaintiff, brought this action against appellants (tax commission), as defendants, to enjoin them from collecting taxes from plaintiff arising from the construction of projects for the United States government, either as a prime or subcontractor, under the Excise Revenue Act, Sections 73-1301 to 73-1334, inclusive, Arizona Code Annotated 1939, and for a judgment declaratory of plaintiff's liability for such tax. Plaintiff was a licensed contractor and the tax sought to be collected was against it as such contractor. The defendants, on August 15, 1941, had adopted a regulation which, in effect, provided that the furnishing of materials or service to the federal government upon defense contracts shall be exempt from sales tax. This appears to have been rescinded in 1943. In September of that year, the tax commission made an audit, claiming certain excise taxes against plaintiff based upon the materials furnished by it in such defense contracts.
The facts were admitted, and the trial court entered judgment denying plaintiff injunctive relief, but adjudging that the commission was estopped from levying and collecting the taxes which accrued during the period the regulation was effective. Both parties appealed, the defendants on the ground that no estoppel resulted from their action, the plaintiff because of the failure of the court to allow injunctive relief.
Our determination of this case is largely controlled by our opinion in Crane Co. v. Tax Commission, 163 P.2d 657. We held in the Crane case that The rule announced is applicable to the regulation involved here, which apparently formed the basis of the lower court's decision finding against defendants, and in favor of plaintiff. Reference is made to the opinion in the Crane case for a discussion of estoppel as applied in cases of this character, and for reasons why it cannot be successfully invoked.
Plaintiff contends, however, that even if the court erred in holding that the tax commission was estopped, it was entitled to judgment and an injunction against the collection of the tax under the provisions of Section 73-1308, Arizona Code Annotated 1939. This section provides:
"The taxes herein levied shall not be construed to apply to transactions in interstate commerce . . . or upon any sales made to the United States government, its departments or agencies."
If the tax imposed upon plaintiff is a sales tax, its position would be sound. In the Crane case, we held that the furnishing and placement of tangible personal property by contractors under contracts with others constituted a sale of such material. The plaintiff, however, is being taxed under the provisions of 73-1303(h):
It will be observed that this section does not base the tax upon sales which may be made by the contractor, but upon the gross proceeds or gross income of his business.
Strictly speaking, the law under consideration is an Excise Revenue Act. It is something more than a sales tax measure. It is a tax on the right to engage in business. White v. Moore, 46 Ariz. 48, 46 P.2d 1077. In most cases, the tax may be measured by the gross amount of sales, but a sale is not a prerequisite to the tax. Thus, we find in 73-1302, the following:
"'Gross income' means the gross receipts of a taxpayer derived from trade, business, commerce or sales and the value proceeding or accruing from the sale of tangible personal property, or service, or both."
In 73-1303, we find this provision:
". . . there is hereby levied and shall be collected by the tax commission . . . annual privilege taxes measured by the amount or volume of business done by the persons on account of their business activities and in the amounts to be determined by the application of rates against values, gross proceeds of sales, or gross income, as the case may be, in accordance with the following schedule:"
(a) "At an amount equal to one-fourth of one per cent of the gross proceeds of sales or gross income" in manufacturing, etc.; (b) "One per cent of the gross proceeds of sale or gross income" in transportation for hire by motor vehicle; (c) "One per cent of the gross proceeds of sales or gross income" from mining, quarrying, "for sale" followed by seven other additional classifications; (d) "Two per cent of the gross proceeds of sales or gross income" for selling any tangible personal property at retail; (e) "One per cent of the gross proceeds of sales, or gross income" from restaurants, etc.; (f) "Two per cent of the gross proceeds of sales, or gross income" for operation of theatres, hotels, etc.; (g) "One-fourth of one per cent of the gross proceeds of sales, or the gross income" of those engaged in slaughtering, packing, etc.; (h) "One per cent of the gross proceeds or gross income" of those engaged in contracting; (i) "One-fourth of one per cent of the gross proceeds or gross income" of those engaged in the selling of poultry or stock feed.
It will be noticed that in every instance, except in the case of (h) and (i), the tax is fixed upon the "gross proceeds of sale or gross income." Apparently, in the enactment of (h) and (i), the legislature made an exception. Instead of resting the tax either on "the gross proceeds of sales or gross income" of the taxpayer's business, it rests the tax on "the gross proceeds or gross income" from the business, which obviously may or may not include sales. If one engaged in the classification of (h), that is, contracting, makes a sale, it is, as was stated in Material Service Corporation v McKibbin, 380 Ill. 226, 43 N.E.2d 939, an incident of his business. While the amount is reflected in his gross proceeds or gross income, the tax is in fact not a tax on the sales and would not come under the exception provided in 73-1308. That section applies only if the taxes are levied "upon any sales made to the United States government, its departments or agencies." This question was before the supreme court of Mississippi, in Stone v. Green Lumber Co., 191 Miss. 414, 1 So.2d 764, 765. The facts and the situation were not quite identical to what we have here, but the opinion sheds considerable light on the question before us. In the Mississippi case, the law provided for a privilege tax on the manufacturer-appellee of one-fourth of one per cent of the "'value of the . . . commodities manufactured . . . or prepared for sale, as shown by the gross proceeds derived from the sale thereof by the manufacturer . . . .'" The tax involved was computed...
To continue reading
Request your trial
-
In re West Coast Cabinet Works
...by unauthorized exemption made by administrative officers re applicability of excise tax; See also Arizona State Tax Commission v. Frank Harmonson, etc., 63 Ariz. 452, 163 P.2d 667, page 668, that administrative officers have no power to grant exemption not found in See People v. Universal ......
-
Pratt-Gilbert Hardware Co. v. O'Neil
... ... v. O'NEIL et al., State Tax Commission No. 4902 Supreme Court of Arizona ... plaintiff's products were delivered free on board cars at ... its ... Frank ... Harmonson Co. Metal Products, 1945, Ariz., ... In two ... instances the coal company made shipments f. o. b., one from ... its mines ... ...
-
BLACK HAWK CONSOL. MINES CO. v. GALLEGOS
...with the reasons stated for our conclusion, though its conclusion-based on different reasons-was the same. Arizona State Tax Comm. v. Frank Harmonson Co., 63 Ariz. 452, 163 P.2d 667. The price of gold is fixed under executive orders of the President and rules and regulations provided by the......
-
Duhame v. State Tax Commission
...P.2d 633, are in complete harmony with these views and we re-affirm the principles therein announced. Under the rule announced in the Harmonson case, supra, on a situation identical with that in the present dispute, a contractor was held not to be within the purview of the exemption statute......