Besser Co. v. Bureau of Revenue

• Decision Date: 20 July 1964
• Docket Number: No. 7425,7425
• Citation: 394 P.2d 141,1964 NMSC 169,74 N.M. 377
• Parties: BESSER COMPANY, a corporation, Plaintiff-Appellant v. The BUREAU OF REVENUE of the State of New Mexico and Robert Valdez, Commissioner thereof, Defendants-Appellees.
• Court: New Mexico Supreme Court

Page 141

394 P.2d 141

74 N.M. 377

BESSER COMPANY, a corporation, Plaintiff-Appellant v. The BUREAU OF REVENUE of the State of New Mexico and Robert Valdez, Commissioner thereof, Defendants-Appellees.

No. 7425.

Supreme Court of New Mexico.

July 20, 1964.

Jethro S. Vaught, Jr., Joseph R. McNeany, Albuquerque, for appellant.

Earl E. Hartley, Atty. Gen., Norman S. Thayer, Asst. Atty. Gen., for appellees.

MOISE, Justice.

Plaintiff-appellant, having paid taxes claimed by defendant-appellee under New Mexico Emergency School Tax Act (Secs. 72-16-1 to 72-16-47, N.M.S.A.1953), under protest, brought this action to recover the amounts paid.

The parties stipulated as follows:

'1. That Plaintiff is a corporation organized under the laws of the State of Michigan with its principal place of business situate at Alpena, Michigan;

'2. That Plaintiff-Corporation is qualified as a foreign corporation to do business in the State of New Mexico under the statutes and rules of the New Mexico State Corporation Commission;

'3. That Plaintiff at no time material hereto has maintained an office for regular employees located or resident within the State of New Mexico;

'4. That Plaintiff does not maintain nor has it at any time maintained any traveling agents or salesmen regularly devoted to the solicitation of any business in the Sate of New Mexico;

'5. That Plaintiff does not manufacture any of its products within the State of New Mexico;

'6. That Plaintiff at its principal place of business in Alpena, Michigan, manufactures certain machinery and equipment which it sells or leases to producers of concrete products, in all the states of the union and in foreign countries;

'7. That all contracts for the use or sale of Plaintiff's products are made and accepted only at its offices within the State of Michigan;

'8. Plaintiff, at its home in the State of Michigan, has heretofore entered into the rental and use agreements, true and correct copies of which are attached to the complaint herein as exhibits A and B;

'9. That in addition to the aforesaid agreements, exhibits A and B, Plaintiff has only two other like agreements effective with persons located within the State of New Mexico, which agreements are not sale agreements but only rental or use agreements;

'10. That under and by virtue of the aforesaid agreements, the title to all machinery and equipment remains at all times vested in Plaintiff, and no provision is included for transfer of title from Plaintiff;

'11. That all receipts by Plaintiff under said agreements for the rental or use of said equipment are specifically designated in said agreements as payments for the use only of such equipment which payments are regularly remitted monthly by such contractuser in New Mexico, to the Plaintiff at its principal office in the State of Michigan;

'12. That by provision of said agreement, upon the termination thereof, the machinery and equipment is returnable to Plaintiff freight prepaid to its principal office in the State of Michigan;

'13. That the basis for monthly rental of said machinery and equipment is a fixed rate per unit produced by such machinery fixed upon a fiscal year basis for production beginning April 1st of each year and ending March 31st of the succeeding year;

'14. That on or about July 13, 1959, Defendant served notice upon Plaintiff that it had determined that Plaintiff's receipts from New Mexico users of its machinery and equipment were subject to the school tax statutes of the State of New Mexico and Defendant has not asserted that said receipts are subject to any New Mexico statute other than the New Mexico School Tax Statutes;

'15. That on or about March 9, 1960, under receipt No. 97306, Plaintiff paid to Defendant the sum of $1,205.09 for the period November, 1958, through February, 1960, specifically as 'school tax' under protest that

'(a) Plaintiff is not subject to the provisions of the New Mexico School Tax Law, Sections 72-16-1 to 72-16-47, inclusive, N.M.S.A., 1953;

'(b) That Plaintiff is not and was not engaged in business in the State of New Mexico within the provisions of the aforesaid statutory sections;

'(c) That the business relationship established by said contracts or agreements is not a sale or other type of contract or agreement, the proceeds of which result in any tax due the State of New Mexico under the provisions of the aforesaid statutes;

'(d) That said business relationship, contracts and agreements are made, consummated and arise in the State of Michigan;

'(e) That Plaintiff is engaged solely in interstate commerce and is not engaged in intrastate commerce and, hence, the State of New Mexico is without authority to impose the claimed tax in violation of Article I, Section 8 of the Constitution of the United States;

'16. That Plaintiff has filed this action in the manner and within the time allowed by statute of the State of New Mexico and rules and regulations of the New Mexico Bureau of Revenue.'

Thereafter, the court entered its decision, concluding that under the facts the tax paid under protest was properly assessed and was due and payable; whereupon, a judgmet was entered dismissing plaintiff's complaint.

This appeal has been perfected, and by its brief filed in this court, although stated in somewhat different terms, the plaintiff presents argument generally in support of its grounds of protest specified in stipulation 15, quoted above.

Inasmuch as defendant states that the tax was imposed pursuant to Sec. 72-16-4.5, N.M.S.A.1953, and under no other provision of our law, it is not necessary for us to consider plaintiff's arguments that taxes imposed by other sections would not apply to it. Our task is to ascertain if plaintiff's operations are included within Sec. 72-16-4.5, supra, and the definitions of Sec. 72-16-2(F), (G), (H) and (I), and not exempt under Sec. 72-16-12. If it is concluded that the tax was properly imposed pursuant to the provisions mentioned, we must also consider plaintiff's claim that the tax would constitute an undue burden on interstate commerce in violation of Art. I, Sec. 8, U. S. Constitution, and a violation of the due process clause of the 14th Amendment to the U. S. Constitution.

For convenience, we here set forth the pertinent parts of the sections mentioned above:

'72-16-4.5. The tax shall be computed at an amount equal to two per cent [2%] of the gross receipts of the business of every person engaging or continuing in the business of selling at retail of goods, wares, materials, equipment, machinery and commodities, including airplane parts and equipment, alcohol and all alcoholic liquors and beverages for consumption and not for resale and including receipts from rentals or leasing of tangible personal property * * *.' (Emphasis supplied.)

'72-16-2. When used in the Emergency School Tax [Act] as amended [72-16-1 to 72-16-47] * * *

'F. 'Business' includes all activities or acts engaged in, personal, professional, and corporate, or caused to be engaged in with the object of gain, benefit or advantage either direct or indirect;

'G. 'Engaging,' when used with reference to engaging or continuing in a business or profession, includes the exercise of corporate or franchise power, but it does not include occasional and isolated sales, or transactions by a person who does not hold himself out as engaged in business; (Emphasis supplied.)

'H. 'Retail' means, except as herein otherwise provided, the sale of tangible personal property for consumption and not for resale in the form of tangible personal property, and 'retailer' means every person engaged in the business of making sales at retail;

'I. 'Consumption' means any use of tangible personal property, goods, wares and merchandise in such a manner that the same shall never again enter trade channels as a commodity or article of merchandise; and 'consumer' means any person buying tangible personal property, goods, wares and merchandise for use in such a manner that the same shall not thereafter enter trade channels as a commodity or article of merchandise for sale, and shall include persons, firms and corporations engaged in the business of contracting as contemplated by section 7 (72-16-4.7) of this 1959 act.'

We do not copy Sec. 72-16-12, N.M.S.A.1953, because a casual reading of it discloses that it provides an additional tax and exemption therefrom as against persons taxable under sections other than Sec. 72-16-4.5, supra. In view of defendant's statement that taxes are being claimed under Sec. 72-16-4.5, supra, and no other provision, this section is not applicable.

Concerning the correct rule to be applied by us in construing taxing or revenue acts, there can be little question. They should be strictly construed to the extent that they provide that a citizen's property is being taken in a summary proceeding, or penalties or forfeitures imposed on him, but in other respects should be given a fair, unbiased and reasonable construction, without favor either to the taxpayer or the state, to the end that the legislative intent is effectuated and the public interests to be subserved thereby furthered. Southern Pac. Ry. Co. v. State, 34 N.M. 479, 284 P. 117; Amarillo-Pecos Valley Truck Lines, Inc. v. Gallegos, 44 N.M. 120, 99 P.2d 447; Beatty v. City of Santa Fe, 57 N.M. 759, 263 P.2d 697.

It is apparent that plaintiff's principal complaint under its first point results from the fact that Sec. 72-16-4.5, supra, is entitled 'Privilege Taxes--Retailers,' and then states that the tax shall be computed on the basis of 2% of the gross receipts of the business of selling goods, wares, etc., at retail and for consumption and not for resale. It is asserted that plaintiff is in no sense a retailer.

We would first point out that the heading or head notes contribute nothing so far as an effective legislative enactment is concerned. See State v. Mares, 61 N.M. 46, 294 P.2d 284.

Also, it must be conceded, we believe, that plaintiff is not a 'reta...