New Mexico Newspapers, Inc. v. Bureau of Revenue

• Decision Date: 05 March 1971
• Docket Number: No. 516,516
• Parties: NEW MEXICO NEWPAPERS, INC., a New Mexico corporation, Appellant, v. BUREAU OF REVENUE, State of New Mexico and Franklin Jones, Commissioner of Revenue, Appellees.
• Court: Court of Appeals of New Mexico

Page 317

483 P.2d 317

82 N.M. 436

NEW MEXICO NEWPAPERS, INC., a New Mexico corporation Appellant, v. BUREAU OF REVENUE, State of New Mexico and Franklin Jones Commissioner of Revenue, Appellees.

No. 516.

Court of Appeals of New Mexico.

March 5, 1971.

Jeff Bingaman, Stephenson, Campbell & Olmsted, Santa Fe, for appellant

James A. Maloney, Atty. Gen., Santa Fe, Mark B. Thompson III, Asst. Atty. Gen., for appellees.

OPINION

SPIESS, Chief Judge.

This appeal challenges an administrative decision and order of the Commissioner of Revenue assessing gross receipts tax (§§ 72--16A--1 through 72--16A--19, N.M.S.A.1953 (Rpl. Vol. 10, pt. 2) (Supp. 1969)), against certain receipts of appellant-taxpayer which are derived from out-of-state advertising published in its newspaper.

Taxpayer bases its contention of nontaxability upon two alternative grounds:

I. The receipts in question are immune because taxation of them would be violative of the Commerce Clause of the United States Constitution.

II. Application of the tax to these receipts would be violative of the equal protection provisions of both state and federal Constitutions, as broadcasters similarly situated are tax exempt.

We affirm the decision and order of the Commissioner.

I.

VIOLATION OF COMMERCE CLAUSE

Stipulated facts relevant to taxpayer's first argument are:

(1) Taxpayer is a New Mexico corporation engaged in the publication of a newspaper in Farmington, New Mexico.

(2) Taxpayer maintains no office or other place of business outside New Mexico.

(3) Part of taxpayer's income is derived from printing advertisements which are part of national advertising campaigns by foreign marketers of goods and services.

(4) Taxpayer's receipts from advertisements as in (3) are received pursuant to contracts made outside New Mexico, between advertisers and solicitation representatives of taxpayer, neither of which are engaged in business in New Mexico.

(5) Receipts in (3) are for printing and publication only. All preparation of mats is done outside New Mexico by the advertising agency.

(6) Taxpayer receives payment in the following manner:

(a) Taxpayer prints the advertisement.

(b) Taxpayer presents a bill and proof of printing to Representative.

(c) Representative presents same to Agency.

(d) Agency presents bill to Advertiser, who pays Agency.

(e) Agency remits to Representative, retaining a percentage for its services.

(f) Representative remits to Taxpayer, retaining a percentage for its services. Thus, Taxpayer receives less than face value of its original bill.

Both parties to this appeal rely on Western Live Stock v. Bureau of Revenue, 303 U.S. 250, 58 S.Ct. 546, 82 L.Ed. 823 (1939), affirming Western Live Stock v. Bureau of Revenue, 41 N.M. 288, 67 P.2d 505 (1937). There are three cases bearing the name 'Western Live Stock v. Bureau of Revenue.' (1) that found at 41 N.M. 141, 65 P.2d 863 (1937), hereinafter referred to as 'Western I', (2) that found at 41 N.M. 288, 67 P.2d 505 (1937), hereinafter referred to as 'Western II', (3) that found at 303 U.S. 250, 58 S.Ct. 546, 82 L.Ed. 823 (1939), hereinafter referred to as 'Western III.'

The facts upon which the Western Cases were based are:

'Appellants publish a monthly livestock trade journal which they wholly prepare, edit, and publish within the state of New Mexico, where their only office and place of business is located. The journal has a circulation in New Mexico and other states, being distributed to paid subscribers through the mails or by other means of transportation. It carries advertisements, some of which are obtained from advertisers in other states through appellants' solicitation there. Where such contracts are entered into, payment is made by remittance to appellants sent interstate; and the contracts contemplate and provide for the interstate shipment by the advertisers to appellants of advertising cuts, mats, information, and copy. Payment is due after the printing of such advertisements in the journal and its ultimate circulation and distribution, which is alleged to be in New Mexico and other states.' 'Western III,' 303 U.S. at 252, 58 S.Ct. at 547.

It further appears that the transactions before the court involved representation by foreign advertising agencies.

'* * * These foreign advertisements are obtained by plaintiff both through personal solicitation and through what are known as advertising agencies, located in states other than New Mexico. Some of these advertising contracts are made between plaintiffs and the manufacturer, located in a foreign state, while others, as stated, are made between the plaintiffs and an advertising agency, which advertising agency having a different and a separate contract with the manufacturer, and in such cases all dealings in connection therewith are between the plaintiffs and the agency.' Western I, 41 N.M. at 143, 65 P.2d at 865.

A. Is the tax in question violative of the Commerce Clause as an undue burden on interstate commerce? No.

It appears to us that each of the elements involved here was a subject of consideration by the Supreme Court of the United States in Western III and it was there held that tax was 'not forbidden.'

'That the mere formation of a contract between persons in different states is not within the protection of the commerce clause, at least in the absence of Congressional action, unless the performance is within its protection, is a proposition no longer open to question. (citations omitted). Hence, it is unnecessary to consider the impact of the tax upon the advertising contracts except as it affects their performance, presently to be discussed. Nor is taxation of a local business or occupation which is separate and distinct from the transportation and intercourse which is interstate commerce forbidden merely because in the ordinary course such transportation or intercourse is induced or occasioned by the business. (citations omitted). Here the tax which is laid on the compensation received under the contract is not forbidden either because the contract, apart from its performance, is within the protection of the commerce clause, or because as an incident preliminary to printing and publishing the advertisements the advertisers send cuts, copy and the like to appellants.' 'Western III,' 303 U.S. at 253, 58 S.Ct. at 547.

B. Is the tax forbidden because of the possibility of multiple taxation?

In Western III, the court considered multiple taxation with reference to the magazines' activities as a whole, including interstate distribution, and said:

'* * * The vice characteristic of those which have been held invalid is that they have placed on the commerce burdens of such a nature as to be capable, in point of substance, of being imposed (citations omitted) or added to (citations omitted) with equal right by every state which the commerce touches, merely because interstate commerce is being done, so that without the protection of the commerce clause it would bear cumulative burdens not imposed on local commerce (citations omitted). The multiplication of state taxes measured by the gross receipts from interstate transactions would spell the destruction of interstate commerce and renew the barriers to interstate trade which is the object of the commerce clause to remove.' (citations omitted).

It is upon the basis of multiple taxation that taxpayer seeks to establish its claim of immunity from the taxation. The taxpayer argues that the possibility of multiple taxation which the Commerce Clause is intended to prohibit is present in the instant case in at least three distinct ways.

(First), since it is stipulated that the contracts between taxpayer and the national advertising agencies are made outside New Mexico, the state where the contracts are made could well impose a tax upon the receipts due under the contract.

(Second), the state where the advertiser lives could impose a tax upon the purchaser of the service for the amount of that service.

(Third), the state where the advertising agency resides could impose a tax upon the entire amount of the statement paid by the advertiser to the advertising agency, although the advertising agency retains only a percentage of the amount of the statement.

If compensation received under the contracts is not protected by the Commerce Clause, then, in our view, multiple taxation of these receipts would not bring them within such protection.

Should multiple taxation under these circumstances be treated as invoking protection of the Commerce Clause, the taxpayer, nevertheless, would have the burden of establishing his right to immunity from taxation. Norton Company v. Department of Revenue, 340 U.S. 534, 71 S.Ct. 377, 95 L.Ed. 517 (1951). Taxpayer has not shown that states other than New Mexico impose a tax upon any of the contracts or receipts which relate to, or are derived from, the sale of advertising space in taxpayer's newspaper. Taxpayer, as we have shown, contends only that a possibility of multiple taxation is present. In Northwestern States Portland Cement Company v. Minnesota, 358 U.S. 450, 79 S.Ct. 357, 3 L.Ed.2d 421, 67 A.L.R.2d 1292 (1959), the Supreme Court, in considering a net income tax as applied to receipts from interstate commerce, said, 'While the economic wisdom of state net income taxes is one of state policy not for our decision, one of the 'realities' raised by the parties is the possibility of a multiple burden resulting from the exactions in question. The answer is that none in shown to exist here.' 358 U.S. at 462, 79 S.Ct. at 364. Further, with respect to taxpayer's multiple tax contention, the court said:

'There is nothing to show that multiple taxation is present. We cannot deal in abstractions. In this type of case the taxpayers must show that the formula places a burden upon interstate commerce in a constitutional sense.' 358 U.S. at 463, 79 S.Ct. at 365.

There is no basis shown upon which multiple taxation can be considered, if it be...