O'Neil v. The Valley National Bank of Phoenix
| Decision Date | 02 February 1942 |
| Docket Number | Civil 4406 |
| Citation | 58 Ariz. 539,121 P.2d 646 |
| Parties | D. C. O'NEIL, THAD M. MOORE and C. W. PETERSON, as Members of and Constitutiong the State Tax Commission of the State of Arizona, and FRANK E. FRASER, Director of Sales Tax Division of the State of Arizona, Appellants, v. THE VALLEY NATIONAL BANK OF PHOENIX, a National Banking Association, Appellee |
| Court | Arizona Supreme Court |
APPEAL from a judgment of the Superior Court of the County of Maricopa. Howard C. Speakman, Judge. Judgment affirmed.
Mr. Joe Conway, Attorney General, and Mr. Edward P. Cline, Assistant Attorney General, for Appellants.
Messrs Gust, Rosenfeld, Divelbess, Robinette & Coolidge, for Appellee.
This action was brought by the Valley National Bank of Phoenix, a national banking association, against the State Tax Commission seeking a declaratory judgment as to whether it should pay a sales tax on rentals it has collected and proposes to collect from tenants of offices in the Security Building located in Phoenix. It acquired said building on December 23, 1938, in the ordinary course of its banking operations and, as an incident of ownership and possession leases space in the building and collects rent therefor. The federal statute, 12 U.S.C.A. § 29, permits a national bank to own and possess realty for a period of five years from the time of its acquisition.
The State Tax Commission feels that plaintiff should pay the tax since it is nondiscriminatory and is imposed by a general law to obtain revenue for the state to operate on. Sections 73-1301 to 73-1334, Arizona Code 1939. Section 73-1303 subdivision (f) 2, lays a 2% tax on the gross income or receipts of rentals. Plaintiff denies the right of the state to collect of it such tax on the ground that it was organized for and is used by the government in the operation of its governmental functions and is an instrumentality of the government. This contention was sustained by the trial court. The tax commission has appealed. We are asked to decide which is right.
We should state that the plaintiff is an agent or instrumentality of the United States. This has been settled ever since McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579.
The reason that the state may not tax an instrumentality of the United States, or the national government the instruments employed by the state in carrying on its functions, is that each may administer its own affairs within its own sphere and be left free from undue interference by the other. A discussion of the question as to whether the tax here demanded would interfere with the administration of the government is not necessary for the reason that it is controlled by statute (section 5219, Revised Statutes United States; 12 U.S.C.A. § 548) and the decisions construing such statute. The Congress by such section has provided that the states may tax the real estate and the shares of stock of national banks and, under the decisions, this permission is exclusive of all others. In Owensboro National Bank v. City of Owensboro, 173 U.S. 664, 19 S.Ct. 537, 539, 43 L.Ed. 850, the court said:
See, also, First National Bank of Albuquerque v. Albright, 208 U.S. 548, 28 S.Ct. 349, 52 L.Ed. 614; Chase National Bank v. Spokane County, 125 Wash. 1, 215 P. 374; Bank of California, N.A., v. King County, (D.C.) 16 F.Supp. 976.
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