Field Enterprises Educational Corp. v. Commissioner of Revenue

• Decision Date: 04 September 1970
• Docket Number: No. 473,473
• Citation: 474 P.2d 510,82 N.M. 24,1970 NMCA 103
• Parties: FIELD ENTERPRISES EDUCATIONAL CORPORTION, a Delaware corporation, Appellant, v. COMMISSIONER OF REVENUE, State of New Mexico, Appellee.
• Court: Court of Appeals of New Mexico

Page 510

474 P.2d 510

82 N.M. 24

FIELD ENTERPRISES EDUCATIONAL CORPORTION, a Delaware

corporation, Appellant, v. COMMISSIONER OF REVENUE, State of New Mexico, Appellee.

No. 473.

Court of Appeals of New Mexico.

Sept. 4, 1970.

John A. Mitchell, Mitchell, Mitchell & Alley, Santa Fe, for appellant

James A. Maloney, Atty. Gen., Richard J. Smith, Asst. Atty. Gen., Santa Fe, for appellee.

OPINION

OMAN, Judge.

The taxpayer has appealed from the following portion of a Decision and Order of the Commissioner entered January 16, 1970:

'The protest as to the $5,102.20 portion of Assessment Number 89254 is hereby denied. This assessment is to be enforced insofar as it reflects amounts of tax due on finance service charges applied on unpaid balances due from sales to residents of the State of New Mexico. Under this assessment the compensating tax applies for period prior to July 1, 1967, and either the compensating tax or the gross receipts tax applies for the period subsequent to July 1, 1967. Such charges constitute 'time-price differential' within the meaning of the Compensating Tax Act of 1939, as amended, and the Gross Receipts and Compensating Tax Act.'

The taxpayer takes the position that under the facts of this case the service charges are not taxable under either of the stated Acts. We agree and reverse the foregoing quoted portion of the Decision and Order.

We quote the following material portions of the Stipulation of Facts:

'1. Taxpayer is, and at all times material hereto has been, engaged in the business of publishing educational books and related products, orders for which are received and accepted by Taxpayer in its office at Merchandise Mart Plaza, Chicago, Illinois. The purchasers of such books and products are situated throughout the various states of the United States, including New Mexico.

'2. Taxpayer at all times material hereto did not own any property or maintain any office or other place of business in the State of New Mexico.

'3. Taxpayer at all times material hereto was not qualified to do business in the State of New Mexico.

'4. During the Reporting Period and to date, salesmen in New Mexico operating on a commission basis have solicited orders on behalf of the Taxpayer for the Educational Materials from persons in New Mexico. Every such order has been forwarded to the Taxpayer in Chicago, Illinois, where it has been reviewed and then either accepted or rejected. If the order is rejected, the Taxpayer notifies the person making the order of its rejection and no further action is taken on it. Accepted orders are shipped directly to the purchaser, F.O.B. from Taxpayer's binderies in Crawfordsville, Indiana, Chicago, Illinois, Willard, Ohio, or Kingsport, Tennessee.

'* * *

'10. The educational books and related products published by Taxpayer are typically sold to customers in installment sales transactions. The sales price in a given transaction does not include interest, or any other time price differential, and at the time property enters New Mexico no service fee is due. Taxpayer does collect a service charge of 1 per cent per month on the actual outstanding balance due from the sales to residents of New Mexico, who may, at any time, pay all or any portion of the balance due and thereby prevent application of future service charges on the amount paid.

'11. The aforementioned service charge is under no circumstance pre-computed, but rather is computed each month determined by the unpaid balance of each customer's account.'

Under his first point, the taxpayer urges that the service charges are not part of the 'sales price' of property within the meaning and definition thereof under the Compensating Tax Act of 1939, as amended, which was repealed effective July 1 1967. The material portions of this Act were as follows:

'72--17--1. Title of act--Purpose.--This act (72--17--1 to 72--17--30) may be cited as the Compensating Tax Act of 1939. The primary purpose of this act is declared to be to protect, so far as is practicable, the merchants, dealers and manufacturers of New Mexico who operate under the excise tax laws of this state, and who meet the requirements of such laws, against the unfair competitions of importations into New Mexico, without the payment of a sales tax, of goods, wares and merchandise.'

'72--17--3. (Supp.1963). Tax on tangible personal property stored, used or consumed in state.--An excise tax is hereby imposed on the storage, use or other consumption in this state of tangible personal property purchased from a reatailer on or after July 1, 1939, and stored, used or consumed in this state at the rate of three per cent (3%) of the sales price of such property; * * *.' (Emphasis added.)

'72--17--2. Definitions.--The following words, terms and phrases, when used in this act (72--17--1 to 72--17--30), have the following meaning, except where the context clearly indicates a different meaning:

'* * *

'(d) 'Sales price' means the total amount for which tangible personal property is sold, including any services that are a part of the sale, valued in money, whether paid in money or otherwise, and includes any amount for which credit is given to the purchaser by the seller, without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service cost, interest charged, losses or any other expenses whatsoever, * * *.' (Emphasis added.)

As shown by the written contract between the taxpayer and purchasers, and as conceded by the Commissioner, the sale of the tangible personal property here involved was consummated at the foregoing named points outside New Mexico, when and where the property was delivered, F.O.B. for shipment directly to the purchasers. See in accord §§ 50A--2--319 and 50A--2--401, N.M.S.A.1953 (Repl. 8, pt. 1). The sales price was evidenced by a written contract entered into prior thereto. This contract showed the amount, or price, to be paid for each item of tangible personal property purchased, the amount of the tax (if any) thereon, the total of these prices and taxes, the amount of any down payment, and the 'balance to pay.' The contract also provided: '* * * A service charge of 1% per month on the outstanding balance shall be added to my (purchaser's) account at each monthly billing date. * * *'

The sole issue is whether this service charge of 1% per month was a part of the 'sales price.' This charge was not pre-computed, no portion thereof was due when the sale was completed, and no portion thereof ever became due, unless the purchaser elected to pay the balance owing in installments. If payments were made in installments, then the service charge was computed each month on the basis of the then unpaid balance.

The Compensating Tax Act of 1939, as amended, made no express reference to a 'time-price differential,' which the Commissioner decided and ordered was the nature of the service charge. If a 'time-price differential' is implicit within the contemplation of the Act, and particularly within the definition of 'sales price,' we are still not concerned therewith in this case. It is expressly stipulated: '* * * The sales price in a given transaction does not include interest, or any other time price differential, * * *.'

Regardless of this apparent inconsistency between the Commissioner's Decision and Order and the stipulated facts, we are of the opinion the service charge was not a part of the 'sales price.' The sales price of the property in question was not determined by the subsequently rendered services, or changed by the charges therefor. The contractual right of purchasers to make payments in installments may have induced many of them to enter into contracts with the...