STATE TAX COMMISSION et al.
EL PASO NATURAL GAS CO.
Fred O. Wilson, Atty. Gen., Perry M. Ling, Asst. Atty. Gen., for appellants.
Knapp, Boyle, Bilby & Thompson, of Tucson, and Morris & Malott, of Globe, for appellee.
De Concini, J., having announced his disqualification, the Honorable Francis J. Donofrio, Judge of the Superior Court of Maricopa County, was called to sit in his stead.
[73 Ariz. 44] This appeal, by the State Tax Commission of Arizona, is from an injunction restraining
the commission from collecting or attempting to collect any privilege sales taxes from the appellee, El Paso Natural Gas Company. The State Tax Commission will hereinafter be referred to as the commission, and the El Paso Natural Gas Company as the company or appellee.
The facts, briefly stated, are these:
The appellee is principally engaged in the transportation of natural gas through its interstate pipelines originating in New Mexico and Texas and passing through Arizona to California. Its pipelines are tapped for the sale of gas to fifteen consumers in Arizona -- five public utilities, four municipalities, the U. S. Army, three copper companies, and two industries allied with the copper business. In April of 1947, the commission sent its accountant to the head office of the company in El Paso, to make an audit of appellee's books for the eleven-year period involved in this suit (January 1, 1936 to December 31, 1946) preparatory to assessing sales tax for sales made to the Arizona consumers.
The auditor wrote to the company's general manager under the date of April 18, [73 Ariz. 45] 1947 that "they (Commissioners Moore and Hunt) would be glad to have you come up and talk this matter regarding the audit over with them". A tentative date for this preliminary talk was set for the first week in May, but this was later changed to May 13, at the request of the company's representatives. Their attorneys, Honorable Sam H. Morris and Cleon T. Knapp, appeared on May 13, at the commission offices in the capitol building at Phoenix and had a general discussion in the private office of one of the commissioners. Two commissioners, Chairman Joe Hunt and member Thad M. Moore, and the company's attorneys were the only persons present at this conference. Counsel presented their views why the company was not liable for the tax, but suggested a compromise by offering to pay the tax for the previous three years, in order to avoid litigation. No agreement or conclusion was reached and another conference was held on May 19, under the same conditions and with the same parties present.
On June 9, 1947, the commission notified the company that a purported assessment had been made against it covering the eleven-year period for $ 277,727.26 and a formal hearing could be had if they requested it within ten days. The company made timely request for a hearing but was then told that the assessment was final as of June 9, 1947 and that it had been given a hearing on May 13, 1947.
The sole question necessary to determine this appeal is whether the company was granted a public hearing as required by section 73-1316, A.C.A.1939. In other words did the informal ...