Centric-Jones Co. v. Town of Marana
| Decision Date | 26 September 1996 |
| Docket Number | CENTRIC-JONES,CA-TX,No. 1,1 |
| Citation | 188 Ariz. 464,937 P.2d 654 |
| Parties | COMPANY, Plaintiff-Appellant, v. TOWN OF MARANA, Defendant-Appellee. 94-0025. |
| Court | Arizona Court of Appeals |
The Board of Tax Appeals sustained a final assessment of Town of Marana ("Marana") transaction privilege taxes on Centric-Jones Company's ("Centric") contracting income for the period October 1, 1986, through September 30, 1990. Centric brought this action in the Arizona Tax Court for de novo review of the Board's decision. The tax court granted summary judgment for Marana. Centric now appeals, raising these issues:
1. Whether Arizona Revised Statutes Annotated ("A.R.S.") section 9-240(B)(18) authorizes an Arizona town government to impose a transaction privilege tax;
2. Whether the Due Process Clause of the United States Constitution invalidates the Marana tax;
3. Whether the Commerce Clause of the United States Constitution invalidates the Marana tax;
4. Assuming the validity of the tax, whether Centric's business activities in Marana constituted exempt "casual activity" within Marana's taxing ordinance; and
5. Assuming the validity of the tax, whether Centric was entitled to a substantially reduced assessment pursuant to exemptions provided by Marana's former taxing ordinance.
We have jurisdiction pursuant to A.R.S. section 12-2101(B) (1994).
Marana is an Arizona town incorporated pursuant to A.R.S. section 9-101, et seq. Before August 31, 1987, a transaction privilege tax pursuant to Marana Ordinance No. 79.03 was in effect. Effective August 31, 1987, Marana adopted new transaction privilege tax provisions in Marana Ordinance No. 87-10. Both ordinances required transaction privilege permits or licenses as a condition of engaging within the town in any business subject to the transaction privilege tax. Both imposed a 2% transaction privilege tax on a tax base of 65% of the gross income from the business of acting as a prime contractor within the town limits. Both taxes were the usual type of transaction privilege tax, namely one which is measured and paid at defined intervals on the volume of business already completed by the taxpayer.
Centric is a Colorado partnership that was formed to engage in the construction business throughout the Rocky Mountain region. In December 1986, it entered into a contract with the United States Bureau of Reclamation to build the Twin Peaks and Sandario Pumping Plants and Switch Yards for the Central Arizona Project ("CAP"). The site for the Twin Peaks Pumping Station was within the town limits of Marana, ten to eleven miles from the town center. While Centric was constructing the Twin Peaks Pumping Station, neither it nor its representatives were aware that the site was inside the town limits.
Centric's principal place of business is in Denver, Colorado. All acquisition, requisition and accounting tasks in connection with the Twin Peaks project were accomplished in Colorado. Centric had a trailer on the project site for supervision and management and received its project mail in the Town of Rillito. Other than the Twin Peaks project, it did no business in Marana, had no office in the town, and did not hold itself out as being engaged in the construction business in Marana.
Centric employed about sixty-five people on the CAP contract. Ten to twelve of them came from Colorado and the remainder were hired locally. In addition, Centric's subcontractors hired about fifty employees to work on the project.
In the tax court, Marana filed an affidavit from its town manager, Hurvie E. Davis. Davis averred that Marana had performed numerous municipal services for Centric's benefit, including traffic control, road maintenance, police surveillance and investigation, and police emergency responses. Attached to Davis's affidavit were two letters from Centric to the town, thanking the town for its cooperation in Centric's closing of Twin Peaks Road for excavation in mid-1988.
Centric countered with an affidavit from its project supervisor, Wilburt Hinton. Hinton confirmed Centric's lack of knowledge of the location of the project within town limits and averred that Centric representatives had not seen town personnel perform daily traffic control or frequent, routine road maintenance. Hinton denied that Centric had ever called the Marana Police Department and stated that the only call Centric made for law enforcement assistance during the project was to the Pima County Sheriff's Department. He also stated that Centric's emergency procedures had called for it to seek emergency fire or medical services from the Picture Rocks Fire Department. Hinton lastly stated that Centric's 1988 correspondence with Marana, to which town manager Hurvie Davis referred, arose out of a cooperative effort to reroute Marana school buses during the closure of Twin Peaks Road.
During the project, Centric purchased tangible personal property at a total cost of $5.437 million and used it in performing the CAP contract. This property included pipes and valves of four inches in diameter or larger valued at $1.787 million. Centric's total compensation under the CAP contract was $13.161 million. Although Centric purchased and used tangible personal property in performing the CAP contract, it does not engage in any retail business.
The 1986 CAP contract was Centric's first construction project in Arizona. In late 1988 or early 1989, Centric began to enter into contracts for other construction work in Mesa, Tucson, Phoenix, and Scottsdale. In March 1987, Centric obtained an Arizona transaction privilege tax license in the prime contracting classification. It filed Arizona sales, use, and severance tax returns, and paid prime contracting taxes to the state from March 1987 through September 1990.
Marana audited Centric for the period October 1, 1986, through September 30, 1990. The town assessed unpaid transaction privilege taxes against Centric totalling $190,769.67, including interest through November 30, 1990. By agreement between Centric and Marana, Centric paid $100,000 of this total in return for Marana's waiver of penalties and a stipulation that no additional tax need be paid until the dispute was litigated to conclusion.
An Arizona town has only those powers that the Arizona Constitution and statutes confer on it expressly or by necessary implication. City of Scottsdale v. Superior Court, 103 Ariz. 204, 439 P.2d 290 (1968); Maricopa County v. Maricopa County Mun. Water Conservation Dist. No. 1, 171 Ariz. 325, 830 P.2d 846 (App.1991). Both Centric and Marana identify A.R.S. section 9-240(B)(18) as the only statute that expressly authorizes Arizona towns to impose a tax relating to the privilege of engaging in business within their boundaries. This statute provides in pertinent part:
The common council shall ... have power within the limits of the town:
....
(18) To fix the amount of license taxes to be paid by any person, firm, corporation or association for carrying on any business, game or amusement, calling, profession or occupation, and prescribe the method of collection or payment of the same, for a stated period in advance, and fix penalties for failure to comply by fine or imprisonment, or both.
Centric contends that if section 9-240(B)(18) is properly construed in favor of town taxpayers, it does not confer on an Arizona town the power to enact a transaction privilege tax of the type imposed by Marana. Centric concedes, citing McCarthy v. City of Tucson, 26 Ariz. 311, 225 P. 329 (1924), that a "license tax" as used in this statute is not a regulatory tax under the police power but an excise tax for revenue purposes. Centric further concedes that a transaction privilege tax is also an excise tax for revenue purposes. Centric argues, however, that while "license tax" as used in the statute should be construed as a revenue tax, the balance of the statutory language shows that the term does not contemplate a "transaction privilege" type of revenue tax. Specifically, Centric asserts that a transaction privilege tax generally is a "backward looking" tax; that is, one which, at defined intervals, is measured and paid after the volume of business done in the immediate past is ascertained. According to Centric, section 9-240(B)(18) clearly precludes such a tax since the statutory language permits only a "forward looking" tax; that is, one which is both ascertained and paid "in advance" of any business being conducted. Therefore, Centric concludes, Marana's transaction privilege tax exceeds its statutory power.
We undertake our analysis guided, as always, by the principle that the goal of statutory interpretation is to determine and give effect to the legislative intent behind the statute. Calvert v. Farmers Ins. Co. of Arizona, 144 Ariz. 291, 294, 697 P.2d 684, 687 (1985). We look first at the words of the statute itself, and if their meaning is clear, we accord the statute that plain meaning. Mail Boxes v. Industrial Comm'n of Arizona, 181 Ariz. 119, 121, 888 P.2d 777, 779 (1995). If, however, an ambiguity exists such that the legislative intent cannot be ascertained from the statute, we resort to the rules of statutory construction. Id.
For ease of reference, we will restate the text of section 9-240(B)(18), broken into its logical grammatical units:
The common council shall ... have power within the limits of the town:
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