Pratt-Gilbert Hardware Co. v. O'Neil

• Decision Date: 30 September 1946
• Docket Number: 4902
• Citation: Pratt-Gilbert Hardware Co. v. O'Neil, 64 Ariz. 393, 173 P.2d 91 (Ariz. 1946)
• Parties: PRATT-GILBERT HARDWARE CO. v. O'NEIL et al., State Tax Commission
• Court: Arizona Supreme Court

173 P.2d 91

64 Ariz. 393

PRATT-GILBERT HARDWARE CO. v. O'NEIL et al., State Tax Commission

No. 4902

Supreme Court of Arizona

September 30, 1946

Appeal from Superior Court, Maricopa County; Harold R. Scoville Judge.

Judgment affirmed.

Snell Strouss & Wilmer, of Phoenix, for appellant.

John L Sullivan, Atty. Gen., and Burr Sutter, Asst. Atty. Gen., for appellees.

Stanford Chief Justice. La Prade, Judge (specially concurring). Morgan, Judge (dissenting).

OPINION

Stanford, Chief Justice.

Appellant paid certain taxes under our excise tax law and thereafter under Sec. 73-1318, A.C.A.1939, filed its protest addressed to the State Tax Commission claiming:

"1. The sales are not sales within the State of Arizona, and are, therefore, not subject to the privilege sales tax for the reason that delivery was made without the State of Arizona.

"2. The transactions are and were transactions in interstate commerce and exempt from tax under the provisions of Section 73-1308, A.C.A.1939."

Thereafter, appellant asked for a hearing before the tax commission and after hearing and denial, brought its action in the superior court. Judgment there was rendered on behalf of appellee, from which judgment this appeal is taken.

When the appellant made its return of sales each month as the law required, it did not include sales f. o. b. outside the state. This particular sale occurred at the office of appellant in Phoenix, Arizona, and payment made there, and the appellants contend that since the sales were f. o. b. points outside of Arizona they were, therefore, sales in interstate commerce and not subject to our excise revenue act.

In our recent case of Crane Co. v. Arizona State Tax Commission, Ariz., 163 P.2d 656, 661, we said:

"Under the agreed facts, the sales were made in Arizona and are, therefore, taxable. If the transactions were in interstate commerce, under the terms of section 73-1308, A.C.A.1939, no tax based on such sales could be levied or collected. But obviously they are not in interstate commerce, within the meaning of the commerce clause. It has been repeatedly held that sales taxes do not unconstitutionally burden interstate commerce as applied to sales under the circumstances shown here. It seems to be well settled that general sales taxes or privilege taxes based on sales do not unconstitutionally burden interstate commerce in the following situation: Where the seller solicits or enters into a contract of sale within the state and the seller maintains a place of business within the state, even though the article cannot be purchased within the boundaries of the taxing jurisdiction, and it is necessary to transport the property in interstate channels from without the boundaries of the taxing jurisdiction; provided, however, that the delivery of the merchandise is made to the purchaser in the taxing jurisdiction either directly from such extrastate course or through the offices of the seller within the taxing state; and provided further, that no congressional enactment or policy is offended. McGoldrick v. Berwind-White Coal Co., 309 U.S. 33, 60 S.Ct. 388, 84 L.Ed. 565, 128 A.L.R. 876, and note p. 900. It would serve no useful purpose to discuss the various reasons why a transaction of this character does not come within the interstate rule. No cases were cited by appellant in support of its claim that the transactions mentioned were in interstate commerce, nor is any congressional enactment or policy involved.

"The late case of Montgomery Ward & Co. v. State Comm. of Revenue and Taxation, 156 Kan. 408, 133 P.2d 1008, deals with the precise question we now have for consideration. In that case the supreme court of Kansas rejected a similar contention on behalf of the taxpayer. There, as here, the taxpayer was a foreign corporation maintaining a place of business in Kansas. It sold to residents of the state merchandise which was shipped from without the state either directly to the customer within the state or by relay through the seller's office in Kansas. Under a similar statute to ours, it was held that these were taxable transactions. They were Kansas sales within the meaning of the statute, and not interstate commerce transactions."

In the instant case appellant in its brief states:

"The identical question here presented was before the Supreme Court of Missouri in the cases of American Bridge Co. v. Smith, 352 Mo. 616, 157 A.L.R. 798, 179 S.W.2d 12 and Bingley Coal Co. v. Smith, 352 Mo. 627, 179 S.W.2d 17.

"In holding the Missouri sales tax void as applied to sales f. o. b. points outside the State of Missouri, the Missouri Court state in American Bridge Co. v. Smith, supra, 179 S.W.2d at page 15:

"'* * * further the application of a sales tax to an event of a sales transaction of interstate commerce, which event does not occur in the territory of the taxing authority, should be held invalid (cf. McGoldrick v. Berwind-White Coal Mining Co., supra); the sale as stated in the brief of defendant's counsel "must occur in this state."'"

We further quote from the case of American Bridge Co. v. Smith, supra [352 Mo. 616, 179 S.W.2d 15]:

"The transfer of the ownership of, or title to, the property -- the sale at retail as defined by the Sales Tax Act [Mo.R.S.A. § 11407 et seq.], the 'taxable event' (McGoldrick v. Berwind White Coal Mining Co., supra) -- appears, under the facts of the case at bar, to be in some instances in states other than Missouri, for the evidence shows that in compliance with many of the contracts of sale plaintiff's products were delivered free on board cars at its plants without this state. The transfers of the ownership of, or title to, the products of the plaintiff are presumed to have taken place where the possession of the products was delivered to the vendees; there is no evidence that the plaintiff and the purchasers had a contrary intention. And in these instances where title was presumptively transferred to the purchasers in a foreign state (delivery f. o. b. cars at plaintiff's plants in other states) it would seem beyond question that such sales may not be taxed (basically) under the provisions of our Sales Tax Act, inasmuch as the sales were not sales at retail 'in this State,' Subsection (a), Section 11408, supra; * * *."

As stated by appellant,

"The Supreme Court of the United States denied a petition for certiorari in Smith v. American Bridge Co., supra, 323 U.S. 712, 65 S.Ct. 37, 89 L.Ed. 573, thus approving the decision of the Supreme Court of Missouri."

The answering brief of the appellee in the instant case states:

"* * * the American Bridge Co. case, supra, conceded that if section 11409, supra, (the Missouri Code Section), was intended to exempt only those sales the taxation of which would infringe the Commerce Clause, then the sales in question would not have been exempt from taxation. Those sales, as in the instant case, were sales f. o. b. a point outside the State of Missouri. * * *"

We quote further from Smith v. American Bridge Co., supra:

"It must be conceded that the Sales Tax Act, if applicable to the sales in controversy, does not aim at, or discriminate against interstate commerce, and imposes the same burden upon the sales in controversy as is imposed on sales in intrastate commerce. To construe the exemption section to include sales of tangible personal property in which the transfer of ownership, or title to, the property occurs after the property has come to its destination in this state, would exempt sales at retail in the state with resultant loss of revenue, although the personalty so sold, being at the end of its journey within Missouri was consequently receiving the protection of the state's laws. And a construction of the exemption section which would exempt sales in interstate commerce which the state may otherwise tax -- the purchasers of goods from sellers in intrastate commerce being required to pay the sales tax, and purchasers, in sales in interstate commerce (otherwise taxable), not being obliged to pay -- would place sellers in intrastate commerce in a position of competitive disadvantage. Of such a tax, although imposed upon a taxable event in integral part of a transaction of interstate commerce, it is now written that the burden of such a tax upon interstate commerce is merely incidental or consequential. * * *"

That part of Section 11409, Mo.R.S.A., as amended, of the laws of the state of Missouri 1941, which is relative to the issue here, is as follows:

"* * * There is hereby specifically exempted from the provisions of this article and from the computation of the tax levied, assessed or payable under this article such retail sales as may be made in commerce between this state and any other state of the United States * * * and any retail sale which the State of Missouri is prohibited from taxing under the Constitution or laws of the United States of America, * * *."

Our Section 73-1308, supra, relating to the matter at issue is as follows:

"Constitutional prohibition. -- The taxes herein levied shall not be construed to apply to transactions in interstate commerce which, under the Constitution of the United States, the state of Arizona is prohibited from taxing or upon any sales made to the United States government, its departments or agencies, nor to businesses or transactions exempted from taxation under the Constitution of the United States, or the constitution of the state of Arizona."

As stated by appellees, "The only interstate transactions exempted from the sales tax are those that the federal constitution required to be exempt."

In the instant case, an Arizona corporation, having offices in and place of business in Arizona, entered into the sales contracts in this state and received payment...