Bradbury & Stamm Const. Co. v. Bureau of Revenue

• Citation: 372 P.2d 808,1962 NMSC 78,70 N.M. 226
• Decision Date: 11 June 1962
• Docket Number: No. 7105,7105
• Parties: BRADBURY & STAMM CONSTRUCTION Co., Inc.; Goodyear Aircraft Corporation, a corporation; Telecomputing Services, Inc., a corporation; General Dynamics Corporation, a corporation; Hughes Aircraft Company, a corporation; and The Ryan Aeronautical Co., a corporation, Plaintiffs-Appellants and Cross-Appellees, v. BUREAU OF REVENUE of the State of New Mexico; Robert Valdez, Commissioner of Revenue; Carl Folkner, Director, School Tax Division, Bureau of Revenue, Defendants-Appellees and Cross-Appellants.
• Court: Supreme Court of New Mexico

Page 808

372 P.2d 808

70 N.M. 226

BRADBURY & STAMM CONSTRUCTION Co., Inc.; Goodyear Aircraft Corporation, a corporation; Telecomputing Services, Inc., a corporation; General Dynamics Corporation, a corporation Hughes Aircraft Company, a corporation; and The Ryan Aeronautical Co., a corporation, Plaintiffs-Appellants and Cross-Appellees, v. BUREAU OF REVENUE of the State of New Mexico; Robert Valdez Commissioner of Revenue; Carl Folkner, Director School Tax Division, Bureau of Revenue Defendants-Appellees and Cross-Appellants.

No. 7105.

Supreme Court of New Mexico.

June 11, 1962.

Rodey, Dickason, Sloan Akin & Robb, William C. Schaab, Albuquerque, for appellants and cross-appellees.

John W. Chapman, F. Harlan Flint, Sp. Asst. Attys. Gen., for appellees and cross-appellants.

NOBLE, Justice.

This appeal challenges the constitutionality of Section 1, Chapter 195, Laws of 1961, providing exemption of certain sales to the United States, the State of New Mexico and non-profit organizations from payment of the Emergency School Taxes.

Chapter 73, Laws of 1935, the Emergency School Tax Act, imposed a privilege tax (the so-called Sales Tax) upon gross sales and services, earmarked for the public schools. The appellants, Bradbury and Stamm Construction Company, Inc., Good-year Aircraft Corporation, Telecomputing Services, Inc., General Dynamics Corporation, Hughes Aircraft Company and The Ryan Aeronautical Company, were contractors each having contracts to perform services for the federal government or some of its agencies or departments. Each of the appellants claimed that subsection D of Chapter 195, Sec. 1, Laws of 1961 (Sec. 72-16-5, N.M.S.A. 1953) was unconstitutional as creating an arbitrary, unreasonable and discriminatory classification of contractors exempt from payment of the tax; that the remaining provisions of Section 1 are not severable from subsection D and are, therefore, invalid. Each of the appellants paid, under protest, Emergency School Taxes subsequent to the effective date of the 1961 statute, and brought separate suits against the Bureau of Revenue for recovery of such taxes.

The questioned legislation is that which provides exemptions from the so-called sales tax to the government of the United States, its agencies and departments; the state and its political subdivisions; and to certain charitable organizations. The attempt to tax sales of property and services to the United States has had a long and stormy history as shown by the many amendments to the sales tax law providing exemptions to the United States and New Mexico. The Emergency School Tax Law, enacted in 1935, originally exempted from the tax sales made to the United States; the state and its political subdivisions; and, to any business or transaction exempted from taxation by the Constitutions of the United States or New Mexico. Amendments to this section (Sec. 72-16-5, N.M.S.A. 1953) were enacted in 1941 and 1947 which are not pertinent to the issue now presented. Exemptions from sales to the United States and its agencies were completely removed by Chapter 187, Laws 1957, but the exemptions to the state and its political subdivisions were retained. In 1959, sales of tangible personal property to the United States and sales of tangible personal property and services to the state were exempted from the tax.

Chapter 195, Section 1, Laws of 1961 (Sec. 72-16-5, N.M.S.A. 1953) was enacted by the legislature providing certain exemptions from payment of the tax. The statute became effective March 31, 1961, and reads:

'72-16-5. Exemption of sales to United States, state agencies, societies, hospitals, fraternal and religious organizations not for profit.--None of the taxes levied by the Emergency School Tax Act, as amended * * *, shall be construed to apply to:

'A. Sales of tangible personal property, other than metaliferous [sic] mineral ores, whether refined or unrefined, made to the government of the United States, its departments or agencies;

'B. Sales of tangible personal property, other than metaliferous [sic] mineral ores, whether refined or unrefined, made to the state of New Mexico or any of its political subdivisions;

'C. Sales of tangible personal property, other than metaliferous [sic] mineral ores, whether refined or unrefined, made to non-profit hospitals, religious or charitable organizations in the conduct of their regular hospital, religous or charitable functions.

'D. The gross receipts from any lump sum or unit price contract for a particular project entered into prior to the effective date of this act, if the contract would not by its terms allow the contractor to increase his price to cover any additional privilege tax which were to be levied against him.'

No dispute exists as to the facts. None of the taxes involved here were paid by reason of the sale of any tangible personal property directly to the United States or any of its agencies or departments. The protested taxes involved arose out of contracts by appellants with agencies of the United States for services. The protested payments, with the exception of Bradbury & Stamm Construction Co., Inc., were all made after the effective date of the 1961 law. Separate judgments were entered, each holding that subsection D of the 1961 act violates the equal protection provision of the Fourteenth Amendment to the Constitution of the United States and of Article II, Section 18 of the Constitution of New Mexico, and declaring the remaining portion of the statute severable and valid. The result was that recovery of the protested taxes was denied in the judgments in the cases of all the appellants except Bradbury and Stamm. Bradbury & Stamm was allowed recovery for those taxes paid under protest by it before enactment of the 1961 statute. Each of the judgments were appealed, and by stipulation and order of court were consolidated for purpose of appeal to this court. The appeal presents no issue as to the correctness of the ruling of the trial court in declaring subsection D invalid, and we express no opinion respecting such ruling.

The questions presented by the appeal are (1) assuming subsection D to be invalid, are the remaining portions of section 1, Chapter 195, Laws 1961, severable and enforceable? And, (2) does the imposition of the tax upon one rendering services to the United States constitute a prohibited tax to the United States?

It is well established in this jurisdiction that a part of a law may be invalid and the remainder valid, where the invalid part may be separated from the other portions, without impairing the force and effect of the remaining parts, and if the legislative purpose as expressed in the valid portion can be given force and effect, without the invalid part, and, when considering the entire act it cannot be said that the legislature would not have passed the remaining part if it had known that the objectionable part was invalid. State v. Brooken, 19 N.M. 404, 143 P. 479, L.R.A.1915B, 213, Ann.Cas.1916D, 136; Schwartz v. Town of Gallup, 22 N.M. 521, 165 P. 345; State v. Walker, 34 N.M. 405, 281 P. 481; In re Santillanes, 47 N.M. 140, 138 P.2d 503; State v. Klantchnek, 59 N.M. 284, 283 P.2d 619.

Chapter 195, Laws 1961, does not contain a severability clause, and appellants strongly urge that its absence creates a presumption that the legislature intended the entire section to fail if any of its provisions be invalid. In approaching the question of the constitutionality of a statute, we do so bearing in mind that every presumption is to be indulged in favor of the validity and regularity of the legislative act. State v. Armstrong, 31 N.M. 220, 243 P. 333; State v. Thompson, 57 N.M. 459, 260 P.2d 370; State v. Mechem, 63 N.M. 250, 316 P.2d 1069; Dickson v. Saiz, 62 N.M. 227, 308 P.2d 205.

The fact that the 1959 amendment to Sec. 72-16-5 contained a severability clause while the 1961 amendment did not is urged by appellants as a strong reason for presuming that the legislature did not intend the 1961 statute to be separable. While the fact that in previous enactments providing exemptions to the federal government and state the severability clause was enacted and was omitted from the last enactment, may be considered along with other rules as an aid in determining the legislative intent, it is nevertheless only an aid and is not compelling. The presence or absence of a severability clause merely provides one rule of construction which may be considered and may sometimes aid in determining legislative intent, 'but it is an aid merely; not an inexorable command.' Dorchy v. Kansas, 264 U.S. 286, 290, 44 S.Ct. 323, 325, 68 L.Ed. 686, 689; Hill v. Wallace, 259 U.S. 44, 71, 42 S.Ct. 453, 459, 66 L.Ed. 822, 831; Safeway Stores, Inc. v. Vigil, 40 N.M. 190, 57 P.2d 287.

This court is committed to the proposition that all rules of statutory construction are but aids in arriving at the true legislative intent. In re Vigil's Estate, 38 N.M. 383, 34 P.2d 667, 93 A.L.R. 1506; A. T. & S. F. Ry. Co. v. Town of Silver City, 40 N.M. 305, 59 P.2d 351, '* * * and should never be used to override same where it otherwise plainly appears * * *.' Janney v. Fullroe, 47 N.M. 423, 144 P.2d 145.

Appellants assert that Safeway Stores, Inc. v. Vigil, supra, is controlling and compels a determination that subsection D is not separable from the remainder of the section. We do not so construe that decision. In Safeway, the statute required retail dealers to obtain a permit to engage in business and imposed a tax measured by the annual gross sales. In substance, retail dealers were defined to be those dealing in merchandise by selling to the ultimate consumer for use and not resale, 'and who sells in small parcels, packages, bales, boxes or other containers * * *.' Laws 1934, Sp.Sess., c. 33, Sec. 1.

The 'and who sells' clause was held to create an improper classification of retailers and to make the definition of retail dealers invalid. Because the act...