State Tax Commission v. Quebedeaux Chevrolet, 5367
| Decision Date | 22 January 1951 |
| Docket Number | No. 5367,5367 |
| Citation | 71 Ariz. 280,226 P.2d 549 |
| Parties | STATE TAX COMMISSION et al. v. QUEBEDEAUX CHEVROLET. |
| Court | Arizona Supreme Court |
Fred O. Wilson, Atty. Gen., and Richard C. Briney, Asst. Atty. Gen., for appellant.
Scott & Green, of Phoenix, for appellee.
The present appeal is from a judgment rendered against the State Tax Commission of Arizona, defendant-appellant (hereafter called the commission), in favor of Quebedeaux Chevrolet, a corporation, plaintiff-appellee (hereafter called the plaintiff), upon an action containing two counts brought in the superior court for the recovery of certain excise taxes amounting in all to $244.81, which were paid under protest by plaintiff upon business transacted by it during the months of October and November, 1949.
This cause was submitted to the trial court upon a rather lengthy agreed statement of facts which we deem it unnecessary to set out verbatim. These facts establish that plaintiff is, among other things, engaged in the business of selling tangible personal property within the state, under a privilege license issued pursuant to the provisions of Laws 1935, Ch. 77, known as 'The Excise Revenue Act of 1935', Secs. 73-1301 to 73-1334, A.C.A. 1939, as amended (hereafter termed the Act).
Plaintiff, as required by Sec. 73-1314, timely filed with the commission its returns showing its 'gross proceeds of sales' and 'gross income from the business' (hereafter, for the sake of brevity, collectively termed 'gross income') for the months of October and November and the amounts of taxes it computed was due thereon. The commission, however, maintained that the figures were incorrect and that the correct amounts were larger than plaintiff reported. The difference between the lesser sums which plaintiff contends is payable and the larger sums which the commission insists is due, amounts to an additional tax of $118.65 for business transacted by plaintiff during October, and for November the further sum of $126.16, or a total on the two counts of $244.81.
The principle upon which the parties differ may well be illustrated by the following example:
Plaintiff's contention
----------------------
Retail sales price of an automobile
being plaintiff's gross income
therefrom ............................ $ 3,000
2% sales tax collected by plaintiff
on retail sale and tax due under
the Act .............................. $ 60
Commission's contention
-----------------------
Retail sale of automobile ..... $3,000
2% tax passed on to
purchaser................... 60
-------
Plaintiff's gross income ...... $3,060
Tax due under the Act (2% of
$3060)...................... $ 61.20
Or an additional sum due of $ 1.20
---------------------------
In the course of a year the additional sum which the commission claims is due on plaintiff's business alone would amount to approximately $1500, and it is estimated that on the entire annual volume of business done in the State of Arizona (if the commission's contention is sustained) the amount involved equals approximately a quarter of a million dollars.
In order to avoid being subjected to the penalties and sanctions of the Act, plaintiff paid under protest, before the delinquent date, the amount of the additional sums claimed due, at the same time giving written notice to the commission, as required by the Act, that the payments were made under protest and setting forth the grounds and reasons for same. A hearing was subsequently held at which the commission ruled adversely to plaintiff, making final the claimed additional tax liability. Within the time provided by law plaintiff filed an action in the superior court of Maricopa County to recover the amount of taxes paid under protest.
The facts show that plaintiff at all times billed and stated separately to its customers the purchase price of goods sold and the sums collected by it as payment of the tax, and in addition that plaintiff kept separate and apart from all other monies the sums received by it in payment of the tax.
On the stipulated facts before it, the trial court reversed the commission and rendered judgment for plaintiff. From this judgment and the whole thereof this appeal was taken.
From the example set forth, supra, it is readily apparent that the larger figures of the commission are based upon the contention that the gross income from plaintiff's business include all sums received by it during the two months, specifically including those sums received in payment of the 2% tax imposed upon plaintiff by Sec. 73-1303(d)(1), and that the tax for which plaintiff is liable at the rate of 2% must be computed and paid upon such total amount. On the other hand plaintiff contends that no tax is due on the 2% collected by it from its customers in payment of the tax.
The sole question presented by this appeal then is: Does the 2% tax imposed upon plaintiff by Sec. 73-1303(d)(1), constitute a part of plaintiff's 'gross proceeds of sales' or 'gross income from the business'? If it does, then plaintiff is liable for the additional taxes which the commission claims are due. Otherwise, it is not.
Plaintiff, in support of its contention that the terms 'gross proceeds of sales' or 'gross income from the business' do not include the 2% tax, argues that the inclusion of the tax as part of the gross income results in a 'tax on a tax' for the following reasons: (1) plaintiff is not engaged in the business of selling taxes and therefore any taxes collected by it are not a part of the gross income from the business; (2) that plaintiff merely collects the tax from the customer and remits it to the commission, i. e., plaintiff is a mere tax collector for the state; and (3) that under Sec. 73-1331, the provision concerning the use of tax tokens, the inclusion in subd. (c) of the words 'amounts added to the gross receipts of any business taxable under this act' clearly shows a legislative intent that the tax collected is not to be considered as a part of gross income from the business.
The commission on the other hand, claiming additional taxes are due, contends that the terms 'gross proceeds of sales' and 'gross income form the business' specifically include monies received as payment of the 2% tax.
These conflicting contentions involve purely a matter of statutory construction, hence we set out the applicable sections of the Act within which the answer must be found:
Sec. 73-1303: 'Imposition of the tax.--From and after the effective date of this act, there is hereby levied and shall be collected by the tax commission for the purpose of raising public money * * * annual privilege taxes measured by the amount or volume of business done by the persons on account of their business activities and in the amounts to be determined by the application of rates against values, gross proceeds of sales, or gross income, as the case may be, in accordance with the following schedule: * * *
'(d) At an amount equal to two per cent of the gross proceeds of sales or gross income from the business upon every person engaging or continuing within this state in the following businesses:
We think it essential to an understanding of the Excise Revenue Act of 1935 to recognize at the outset that the Act does not place a tax upon sales as such, i. e., that it is not a true sales tax measure, but rather a tax upon the privilege of engaging in business.
Plaintiff in support of its argument that the tax was not to be included as a part of its gross income argues that the inclusion of the tax therein results in a 'tax on a tax' for the reasons set forth above. The phrase 'tax on a tax' admittedly has a certain amount of popular appeal since it has the connotation of being extremely unjust, but the reasoning advanced to support the terminology indicates the weakness of this argument.
As to plaintiff's not being in the business of selling taxes, it obviously is true that plaintiff is engaged only in the business of selling tangible...
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