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Arizona State Tax Commission v. Frank Harmonson Company Metal Products

Supreme Court of Arizona

November 9, 1945

ARIZONA STATE TAX COMMISSION, a Body Politic and Corporate; THAD M. MOORE, D. C. O'NEIL and JOE HUNT, as Members of the Arizona State Tax Commission, Appellants,
v.
FRANK HARMONSON COMPANY METAL PRODUCTS, a Corporation, Appellee

APPEAL from a judgment of the Superior Court of the County of Maricopa. M. T. Phelps, Judge.

Judgment reversed except as to denial of injunctive relief.

Mr. John L. Sullivan, Attorney General, Mr. Earl Anderson, Assistant Attorney General, for Appellants.

Messrs. Moeur & Moeur, Mr. Leslie C. Hardy, for Appellee.

Messrs. Bilby & Shoenhair, Messrs. Darnell & Robertson, Messrs. Cunningham & Carson, Messrs. Gust, Rosenfeld, Divelbess & Robinette, Messrs. Kramer, Morrison, Roche & Perry, Mr. Orme Lewis, Mr. Blaine B. Shimmel, Messrs. Sloan, Scott & Green, Messrs. Snell, Strouss & Wilmer, Messrs. Struckmeyer & Struckmeyer, Mr. Louis B. Whitney, of Counsel for Appellee.

Morgan, J. LaPrade, J., concurs. Stanford, C. J. (specially concurring.)

OPINION

[63 Ariz. 453] Morgan, J.

Appellee, as plaintiff, brought this action against appellants (tax commission), as defendants, to enjoin them from collecting taxes from plaintiff arising from the construction of projects for the United States government, either as a prime or subcontractor, under the Excise Revenue Act, Sections 73-1301 to 73-1334, inclusive, Arizona Code Annotated 1939, and for a judgment declaratory of plaintiff's liability for such tax. Plaintiff was a licensed contractor and the tax sought to be collected was against it as such contractor. The defendants, on August 15, 1941, had adopted a regulation

Page 668

which, in effect, provided that the furnishing of materials or service to the federal government upon defense contracts shall be exempt from sales tax. This appears to have been rescinded in 1943. In September of that year, the tax commission made an audit, claiming certain excise taxes against plaintiff based upon the materials furnished by it in such defense contracts.

[63 Ariz. 454] The facts were admitted, and the trial court entered judgment denying plaintiff injunctive relief, but adjudging that the commission was estopped from levying and collecting the taxes which accrued during the period the regulation was effective. Both parties appealed, the defendants on the ground that no estoppel resulted from their action, the plaintiff because of the failure of the court to allow injunctive relief.

Our determination of this case is largely controlled by our opinion in Crane Co. v. Tax Commission, 163 P.2d 657. We held in the Crane case that "the regulation of the tax commission, upon which appellant (the taxpayer) bases its plea of estoppel, was wholly unauthorized. The tax commission cannot by any rule or regulation exempt a taxpayer from the payment of a tax unless such authority has been specifically granted to it by the legislature. Here no such authority exists." The rule announced is applicable to the regulation involved here, which apparently formed the basis of the lower court's decision finding against defendants, and in favor of plaintiff. Reference is made to the opinion in the Crane case for a discussion of estoppel as applied in cases of this character, and for reasons why it cannot be successfully invoked.

Plaintiff contends, however, that even if the court erred in holding that the tax commission was estopped, it was entitled to judgment and an injunction against the collection of the tax under the provisions of Section 73-1308, Arizona Code Annotated 1939. This section provides:

"The taxes herein levied shall not be construed to apply to transactions in interstate commerce . . . or upon any sales made to the United States ...


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