Halliburton Co. v. Property Appraisal Dept.

• Decision Date: 21 October 1975
• Docket Number: No. 1792,1792
• Citation: 542 P.2d 56,1975 NMCA 123,88 N.M. 476
• Parties: HALLIBURTON COMPANY, Petitioner-Appellant, v. PROPERTY APPRAISAL DEPARTMENT, State of New Mexico, Respondent-Appellee.
• Court: Court of Appeals of New Mexico

Page 56

542 P.2d 56

88 N.M. 476

HALLIBURTON COMPANY, Petitioner-Appellant, v. PROPERTY APPRAISAL DEPARTMENT, State of New Mexico Respondent-Appellee.

No. 1792.

Court of Appeals of New Mexico.

Oct. 21, 1975.

[88 NM 477] Joe R. G. Fulcher, Modrall, Sperling, Roehl, Harris & Sisk, John B. Tittmann, James P. Saunders, Jr., Keleher & McLeod, Albuquerque, for petitioner-appellant.

Toney Anaya, Atty. Gen., John C. Cook, Joseph T. Sprague, Property Tax Dept., Asst. Attys. Gen., Santa Fe, for respondent-appellee.

OPINION

WOOD, Chief Judge.

The PAD (Property Appraisal Department--See § 72--25--3, N.M.S.A.1953 (Repl. Vol. 10, pt. 2, Supp.1973)) valued, for property tax purposes, certain tangible personal property of the Halliburton Services Division and Welex Division of taxpayer, Halliburton (Halliburton Company). Halliburton protested the notices of value; the director of the PAD denied the protest after a hearing; the taxpayer appeals directly to this Court. Sections 72--25--10, 72--25--11, 72--25--12, N.M.S.A.1953 (Repl. Vol. 10, pt. 2, Supp.1973). Three of the issues are dispositive. They are: (1) PAD's jurisdiction to value the property, (2) exemption of vehicle mounted equipment from property taxation, and (3) exemption of sales inventories from property taxation.

PAD's Jurisdiction

Section 72--6--4(A)(1)(c), N.M.S.A.1953 (Repl. Vol. 10, pt. 2, Supp.1973) is the applicable statute. It provides for the PAD to determine the assessed value:

'of the machinery, equipment and other personal property in this state of all resident or nonresident contractors customarily engaged in contracting business which involves the movement and use of such machinery and equipment in more than one (1) county in the state, when such contractors, in the usual course of business, engage in work involving the use of, but not limited to, machinery and equipment commonly used in highway construction and maintenance, industrial building construction, engineering construction, pipeline construction, steel construction, utilities construction, and oil and gas well drilling.'

Halliburton does not contend that it is not a contractor. It asserts that to be a contractor within the meaning of the statute the contractor must be involved in constructing one of the items named in the statute. It argues that it does not drill oil or gas wells but only provides services for those wells. This contention is based on a misreading of the statute. The contractor's work must involve the use of, but is not limited to, machinery and equipment commonly used in oil and gas well drilling. The statute, by its terms, does not require Halliburton Company to be the drilling contractor.

There is evidence that the Halliburton Services Division cements surface casing to the depth required by state regulatory agencies, performs drill stem tests to help determine whether the well can be productive, cements the production casing and stimulates production either by fracturing or acidizing. There is evidence that Welex Division performs various logging services which are used in determining whether production casing should be set. The logging services are performed after reaching 'total depth' of the well. Welex also perforates the casing at the production level of the well.

All of the foregoing activities are performed prior to production from the well. These activities are performed in the usual course of business; the activities involve the use of machinery and equipment, and this machinery and equipment is commonly used in the course of drilling an oil and gas well.

Although there is conflicting evidence, it was for the director to choose between conflicting inferences. Rust Tractor Co. v. Bureau of Revenue, 82 N.M. 82, 475 P.2d 779 (Ct.App.1970). There being substantial evidence that Halliburton's activities came within § 72--6--4(A)(1)(c), supra, the decision of the director that Halliburton was within PAD's jurisdiction is affirmed. United Veterans Org. v. New Mexico Prop. App. Dept., 84 N.M. 114, 500 P.2d 199 (Ct.App.1972).

Exemption of Vehicle Mounted Equipment

Included within the value determined by the PAD for property taxation purposes was the value of 'vehicle mounted machinery and equipment' used in performing the activities previously described in this opinion. The contention is that this machinery and equipment should not have been valued for tax purposes because it is exempt from taxation under § 64--11--14, N.M.S.A.1953 (2d Repl. Vol. 9, pt. 2, Supp.1973) and § 72--1--23, N.M.S.A.1953 (Repl. Vol. 10, pt. 2, Supp.1973).

Section 64--11--14, supra, states:

'No vehicle upon which the registration fees provided for in the Motor Vehicle Code have been paid shall be assessed or taxed upon any property assessment rolls in this state for the period for which the fees are paid * * *.'

Section 72--1--23, supra, states:

'Motor vehicles registered under the provisions of the Motor Vehicle Code are exempt from property taxation except for mobile homes as defined in section 64--1--8 NMSA 1953.'

Halliburton purchases vehicular equipment produced by the manufacturer to Halliburton's specifications. This equipment is delivered to Halliburton in Duncan, Oklahoma. Halliburton then adds the specialized equipment necessary to perform the operations previously referred to in this opinion. The specialized equipment is bolted to the frame of the vehicle's chassis and, according to the evidence, is permanently mounted. The completed vehicle is then delivered to various locations of Halliburton. When delivered to a Halliburton location in New Mexico the vehicle is registered in New Mexico and registration fees are paid.

In denying Halliburton's claim of exemption, the director ruled that none of the property in question was a motor vehicle as that term is defined in the Motor Vehicle Code. The 'property in question' is not the cab and chassis of the trucks or the chassis of the trailers; the disagreement is over the equipment mounted on the chassis.

Defending the director's ruling, PAD asserts the equipment was special mobile equipment which was not subject to registration under § 64--3--2, N.M.S.A.1953 (2d Repl. Vol. 9, pt. 2). Special mobile equipment is defined in § 64--1--12, N.M.S.A.1953 (2d Repl. Vol. 9, pt. 2). Gibbons & Reed Company v. Bureau of Revenue, 80 N.M. 462, 457 P.2d 710 (1969). This definition reads in part: 'Every vehicle not designed or used primarily for the transportation of persons or property and incidentally operated or moved over the highways * * *.'

The evidence is undisputed that the equipment in question is added to the chassis for the purpose of carrying that equipment to and from drilling sites over the highways. 'Incidental' means subordinate, nonessential, as occurring merely by chance or without intention or calculation. Webster's Third New International Dictionary (1966). The evidence is that the equipment was not incidentally moved over the highways; the equipment is not special mobile equipment under § 64--1--12, supra.

PAD contends the equipment mounted on the chassis is not part of the vehicle and therefore not part of a motor vehicle entitled to the exemption. PAD would distinguish between the part of a vehicle necessary for its propulsion and the part unnecessary for propulsion. It states that 'vehicle', as used in our statute 'is not intended to include property * * * which is unnecessary to the function of the device in transporting or drawing the property upon a highway.' This contention finds no support in the statutory definitions of 'vehicle' and 'motor vehicle'. The definition of these terms in § 64--1--6, N.M.S.A.1953 (2d Repl. Vol. 9, pt. 2) does not distinguish between the propulsion and non-propulsion parts of a vehicle.

According to the certificates of registration in evidence, the equipment is mounted either on trucks or freight trailers. We need not determine whether the equipment mounted on the trucks was a part of the trucks for purposes of vehicle registration fees. The registration fees for trucks are determined by declared gross weight. Declared gross weight is defined to include maximum gross vehicle weight 'at which a vehicle * * * will be operated during the registration period, as declared by the registrant for registration and fee purposes * * *.' Sections 64--11--2 and 64--1--8.1, N.M.S.A.1953 (2d Repl. Vol. 9, pt. 2, Supp.1973). The evidence is undisputed that a gross weight was declared by Halliburton, that the declared gross weight included the mounted equipment and that registration fees were paid on that gross weight. Having paid the registration fees as provided in the Motor Vehicle Code, the equipment mounted on the trucks was exempt from property tax under § 64--11--14, supra.

The registration fee provisions for freight trailers differ from the provisions for trucks. Section 64--11--2, supra, provides for a permanent registration fee 'irrespective of their weight'. Accordingly we must determine whether the equipment mounted on the trailers is a part of the trailers. If so, once the permanent registration fee is paid, the trailer, including the equipment which is a part of the trailer, is exempt under § 64--11--14, supra. Although the equipment is bolted to the trailer, the evidence is that the trailer had no use apart from the equipment, that the equipment is an integral part of the trailer, that the trailer and equipment constitute a single unit and is used as such. See Crown Concrete Company v. Conkling, 247 Iowa 609, 75 N.W.2d 351 (1956). The evidence in this case shows the equipment was a part of the trailer.

The director erred in denying the exemption.

Exemption of Sales Inventories

Section 72--1--22, N.M.S.A.1953 (Repl. Vol. 10, pt. 2, Supp.1973) states:

'Personal property in the possession of a person, whether owned by him or not, and held as part of his inventory for sale or resale at wholesale, retail or on consignment is exempt from...