Thad MOORE, Warren Peterson and William E. Stanford, as members of and constituting the Arizona State Tax Commission, Appellants,
Ed. E. SMOTKIN and G. W. Bromley, a partnership doing business under the name and style of American Homes Association, Appellees.
[79 Ariz. 78] Robert Morrison, Atty. Gen., D. Kelly Turner, Asst. Atty. Gen., for appellants.
James Elliott Dunseath, Tucson, James E. Flynn, Phoenix, for appellees.
This action originated in the Superior Court of Pima County, Arizona, for the recovery of $9,311.57 paid under protest to the State Tax Commission. Judgment was entered in favor of appellees and against appellant Tex Commission, the court finding that appellees' business activities were not subject to the occupation tax imposed by the Excise Revenue Act of 1935 as amended, specifically Section 73-1303, A.C.A.1939, as follows:
'(h) at an amount equal to one per cent of the gross proceeds or gross income from the business, upon every person engaged or continuing in the business of contracting. * * *'
[79 Ariz. 79] The appellees conducted their business essentially in the following manner, viz.: The purchase of a tract of land, its subsequent improvement as the owners by laying of streets, water, gas and electric conduits, its division into suitable lots, the construction of houses upon such lots and the sale of house and lot as an integral unit.
Before entering into a discussion of the principal question at issue, several ancillary questions presented by the parties will be disposed of summarily. First, this court has heretofore stated in unequivocal language the construction to be given to the Excise Revenue Act:
'We have here a revenue act, the construction of which to say the least, is doubtful, and consequently should be given a strict construction against the taxing power, giving due regard to the expression of the legislative intent. General Petroleum Corporation v. Smith, 62 Ariz. 239, 157 P.2d 356, 158 A.L.R. 364. Taxing statutes are not and should not be extended to embrace objects bearing the burden of taxation by a strained construction or implication. 59 C.J. Section 670, p. 1131. Matters or persons upon whom these burdens are placed should be pointed out with reasonable clarity and not left to the realm of speculation.' Alvord v. State Tax Commission, 69 Ariz. 287, 213 P.2d 363, 366.
Second, while appellees seriously urge that they are speculative builders in the business of speculative building, we are not so much concerned with what label appellees use to describe their business activity, being inclined to agree with Shakespeare:
'What's in a name? That which we call a rose
By any other name would smell as sweet.'
Third, we believe and the Tax Commission ultimately concedes that the decision in this case does not turn on whether the appellees are or are not licensed as contractors under the particular provisions of Section 67-803, A.C.A.1939 as amended. Even if the appellees were licensed as contractors, the question would still remain to be determined whether that particular portion of the business activities here sought to be taxed is contracting. Fourth, we do not think that this case is controlled by the decision in White v. Moore, 46 Ariz. 48, 46 P.2d 1077. Therein we held that the incidental business activity of a banking institution in the renting of office and storage space was subject to the provision of the act providing for a tax on gross income derived from rentals even though the principal business of banking was not taxable under the act. We did not say that an integrated, unitary commercial operation involving in part the doing of that which would ordinarily be taxable was subject to the act or that an [79 Ariz. 80] integrated, unitary business could be arbitrarily partitioned so as to tax a portion of the business covered by the act. Here the Tax Commission seeks only to tax that portion of appellees' income which it believes is derived from the construction of houses; therefore this cause can be fully adjudicated by a determination of whether that portion of appellees' business against which the tax was levied and collected is actually within the 'business of contracting.'
Semasiologically the words 'contractor' and 'contracting' are derivatives of the word 'contract'. A 'contract'
in a strict legal sense when used as a noun means an agreement or the instrument evidencing it. 17 C.J.S., Contracts, p. 289. In its full and more liberal significance it has the well defined meaning of being the expression by two or more persons of the common intention to effect their legal relations. The word 'contractor' is aptly described:
'While, in a strict sense, both parties to a contract are contractors, and in a narrow sense, a contractor is a person who contracts with another, the term has acquired a specific meaning as applied to a business, and, in a general sense, a contractor is one who enters into a contract to do special work for another, according to ...