Ealey v. Bureau of Revenue

• Decision Date: 09 December 1975
• Docket Number: No. 2040,2040
• Citation: 89 N.M. 174,548 P.2d 454,1975 NMCA 146
• Parties: Lucille EALEY, d/b/a T & L Ceramics, Appellant, v. BUREAU OF REVENUE of the State of New Mexico, Appellee.
• Court: Court of Appeals of New Mexico

Page 454

548 P.2d 454

89 N.M. 174

Lucille EALEY, d/b/a T & L Ceramics, Appellant, v. BUREAU OF REVENUE of the State of New Mexico, Appellee.

No. 2040.

Court of Appeals of New Mexico.

Dec. 9, 1975.

Certiorari Granted Jan. 12, 1976.

Byron Caton, Caton & Hynes, Farmington, for appellant.

Toney Anaya, Atty. Gen., Vernon O. Henning, Bureau of Revenue, Asst. Atty. Gen., Santa Fe, for appellee.

OPINION

HERNANDEZ, Judge.

This case represents an appeal from the order of the Commissioner of the Bureau of Revenue, pursuant to § 72--13--39, N.M.S.A.1953 (Supp.1973). This appeal followed a formal hearing held on March 14, 1975, at which time appellant-taxpayer challenged the Bureau's denial of her request for a refund of gross receipts taxes paid to the State of New Mexico.

The taxpayer operates a telegraph office in Farmington, New Mexico as agent for Western Union. Her duties under the contract with Western Union include the acceptance and transmission of telegraph messages, the destination of which is outside Farmington, and the receipt and delivery of incoming messages to addresses in Farmington. In the latter case, the taxpayer mails or phones the message. Very few messages and hand-delivered. Approximately eighty-five per cent (85%) of the telegraph messages are transmitted interstate; fifteen per cent (15%) of the business is intrastate. Western Union owns the equipment and pays for the Farmington city license which authorizes the operation of the office in Farmington.

For her services, the taxpayer is compensated at the rate of seventy cents (70cents) per message, regardless of origin, destination, length of message, or method of delivery. Western Union pays no operating expenses. The taxpayer testified she paid individual income tax on the total amount of commissions paid to her by Western Union for her services throughout the year.

The Bureau of Revenue in its Decision and Order found that the taxpayer is obligated to pay New Mexico's gross receipts tax insofar as she performs services in New Mexico; accordingly, her activities fall within the definition of 'gross receipts' in § 72--16A--3(F), N.M.S.A.1953 (Supp.1973). The Bureau denied the applicability of § 72--16A--14.10, N.M.S.A.1953 (Supp.1973), to taxpayer's case.

Appellant-taxpayer claims the refund on the grounds that she is exempt from paying New Mexico's gross receipts tax under both provisions of § 72--16A--14.10, supra. This section provides:

'Receipts from transactions in interstate commerce may be deducted from gross receipts to the extent that the imposition of the gross receipts tax would be unlawful under the United States Constitution.

'Receipts from transmitting messages or conversations by telegraph, telephone or radio other than from one point in this state to another point in this state may be deducted from gross receipts.'

It is my opinion that the deduction provided for in the second part of the statute is dispositive of this appeal on two grounds.

The first ground is statutory construction. The rule of statutory construction laid down by the Supreme Court in In re Cox' Estate, 57 N.M. 543, 260 P.2d 909 (1953) is followed here. The court in that case stated: 'We must assume that the legislature means just what the words it uses mean, and that it chose its words advisedly to express its meaning until the contrary clearly appears.' See also Valley Country Club, Inc. v. Mender, 64 N.M. 59, 323 P.2d 1099 (1958).

Clearly, the second provision of § 72--16A--14.10, supra, encompasses receipts from the taxpayer's activities. I assume the legislature said what it meant to say.

The second ground centers on the taxpayer's status as an agent of Western Union. The Commissioner found in his Decision and Order that:

'1) The taxpayer is a telegraph operator working under contract with Western Union Telegraph Company . . .. The taxpayer is an agent of Western Union.

'5) As agent for Western Union, the taxpayer initiates the transmittal of messages (including money orders) interstate for customers who wish to utilize Western Union telegraph services.

'8) All moneys received by the taxpayer from customers are received by taxpayer as agent for Western Union and all such moneys are delivered to Western Union by depositing such money in a Western Union bank account. The taxpayer does not withhold or retain any portion of such moneys.'

The telegraph equipment is owned by Western Union. The taxpayer is under contract with Western Union which is clearly designated an 'Agency Agreement' for the services she performs for this company. Her business, in this context, is inseparable from that of Western Union's. The Commissioner agrees that Western Union is entitled to the deduction provided for by § 72--16A--14.10 supra.

The case heavily relied upon by the Bureau to support its position is readily distinguishable from the case at hand. In Spillers v. Commissioner of Revenue, 82 N.M. 41, 475 P.2d 41 (Ct.App.1970), the equivalent of the first section of § 72--16A--14.10, supra, applying to the unconstitutional taxation of interstate commerce by the states was argued by the appellant-taxpayer. This case involved the transportation of goods in interstate commerce. This court stated:

'. . . (I)t is our conclusion that the receipts to be deductible must result from an act or acts of transportation as distinguished from receipts derived from the negotiation of an agreement under which transportation may result. This statute is not sufficiently broad in language when considered under the rule of strict construction to authorize a deduction of receipts from the initiation of an agreement for transportation.'

This court in that case found a separate, local activity, to-wit: the 'booking' of interstate contracts.

The taxpayer in the instant case not only 'books' interstate contracts, she executes the contract by pushing the button that results in the transmission of interstate messages. She receives messages from out-of-state which are transmitted to Farmington. The Albuquerque control center is a relay station in the process of the transmission of telegraph messages. Once a telegram is transmitted bound for an interstate destination it becomes part of the national network of telegraph communications. Each separate mode of relay or transmission cannot be isolated and taxed as a local incident. There is no separate, local activity for which the taxpayer is responsible.

We reverse.

IT IS SO ORDERED.

WOOD, C.J., dissenting.

SUTIN, J., specially concurring.

SUTIN, Judge (specially concurring).

I concur in the result only.

The Commissioner decided and ordered that:

4) The taxpayer's only place of business is in Gallup, New Mexico, and all of her activities take place in Gallup.

The Commissioner has no authority to transplant the taxpayer from Farmington to Gallup, New Mexico.

The Commissioner decided and ordered that:

2) The taxpayer is a telegraph operator working under contract with Western Union Telegraph Company, . . .. The taxpayer is an agent of Western Union.

A. An agent of Western Union is not taxable.

The issue to decide is: Can the Commissioner transform the services of an agent for Western Union, by way of transmogrify, into a business engaged in by her, when Western Union transmits and receives interstate messages via an Albuquerque control office? The answer is 'No.'

As an agent, the taxpayer agreed: (1) to operate a Western Union teleprinter in her office in Farmington, (2) to accept messages from the public in Farmington for transmission out-of-state through an Albuquerque control office of Western Union, (3) to accept out-of-state messages from the Albuquerque control office and deliver them to the public in Farmington, (4) to provide adequate area and appropriate counter and display space for conduct of Western Union business. For these services, the taxpayer received seventy cents per message sent or received.

The teleprinter acts as the transmitter. The electrically controlled typewriters in Farmington and Albuquerque are connected by an electrical circuit. When a key is struck on one of the typewriters, an electrical connection causes the corresponding key to be struck on the distant machine. The message then comes in typewritten form on a printed tape.

When messages are sent to the Albuquerque control office for interstate transmission, the tape is taken off the Farmington-Albuquerque typewriter and placed on another teleprinter connected with an out-of-state point. The same procedure occurs for messages transmitted from out-of-state points of Farmington.

What is the legal relationship between a principal and agent in the conduct of business?

'Agency' is defined in 3 Am.Jur.2d Agency, § 1, as follows:

The term 'agency,' as it is understood in the law and as used in this article, may be defined as a fiduciary relationship by which a party confides to another the management of some business to be transacted in the former's name or on his account, and by which such other assumes to do the business and render an account of it. Thus, the term 'agency,' in its legal sense, always imports commercial or contractual dealings between two parties by and through the medium of another.

'Unquestionably, insofar as an agent's acts are within his authority they are in legal contemplation the acts of the principal.' Ronald A. Coco, Inc. v. St. Paul's Methodist Church, 78 N.M. 97, 99, 428 P.2d 636, 638 (1967). 'He is the servant or employee of the principal'. Comer v. State Tax Commission of New Mexico, 41 N.M. at 408, 69 P.2d at 939, infra. 'Fundamentally, and according to both the Restatement and the American courts, there is no distinction to be drawn between the liability of a principal for the tortious act of his agent and the liability of a master for the tortious act of his servant.' 3 Am.Jur.2d Agency, § 267.

The taxpayer owned and operated T & L Ceramics as a ceramics shop which made greenware and sold paints for the...