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Arizona State Tax Commission v. Garrett Corp.

Supreme Court of Arizona

December 8, 1955

ARIZONA STATE TAX COMMISSION, a body politic and corporate, Warren Peterson, Thad M. Moore and William Stanford, as Members of and constituting the Arizona State Tax Commission, Appellants,

[79 Ariz. 390] Robert Morrison, Atty. Gen., and D. Kelly Turner, Asst. Atty. Gen., for appellants.

Kramer, Roche & Perry and Raymond Huffsteter, Phoenix, and C. W. Leinbach, Jr., and Brian G. Manion, Los Angeles, Cal., for appellee.


This appeal is from a judgment entered in the Superior Court of Maricopa County against appellant State Tax Commission in favor of appellee, the Garrett Corporation, for the sum of $13,587.20. Appellee is engaged in the business of manufacturing in the State of Arizona under the division name of AiResearch Manufacturing Company of Arizona, selling the products of its business to the United States government. Appellants levied an assessment on the gross receipts of these sales, which was paid under protest and this suit instituted for its recovery.

It is appellee's position that the Excise Revenue Act of 1935,, as amended, A.C.A.1939, § 73-1301 et seq., as amended, is in practical and legal effect a sales tax

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and that as such it imposes a direct tax upon the United States government. If this is sound then the action of the State Tax Commission is invalid and void as violating the Federal government's immunity from state taxation.

Section 73-1303, A.C.A.1939, as amended, is nearly word for word identical to its counterpart in the Act as originally passed in 1935:

'73-1303. Imposition of Tax.-From and after the effective date of this act, there is hereby levied and shall be collected by the tax commission * * * 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:

'(c) At an amount equal to two per cent (2%) of the gross proceeds of sales or gross income from the business upon every person engaging or continuing[79 Ariz. 391] within this state in the following businesses:

'1. Selling any tangible personal property whatsoever at retail, * * *'.

We have repeatedly held of this section and in fact of the entire Excise Revenue Act that the tax imposed is a tax on the privilege or right to engage in business and is not a sales tax: 'Trico Electric Cooperative v. State Tax Commission, 79 Ariz. 293, 288 P.2d 782; Arizona State Tax Commission v. Ensign, 75 Ariz. 220, 254 P.2d 1029, on rehearing 75 Ariz. 376, 257 P.2d 392; State Tax Commission v. Quebedeaux Chevrolet, 71 Ariz. 280, 226 P.2d 549; Duhame v. State Tax Commission, 65 Ariz. 268, 179 P.2d 252, 171 A.L.R. 684; Pratt-Gilbert Hardware Co. v. O'Neil, 64 Ariz. 393, 173 P.2d 91, on rehearing, 65 Ariz. 90, 174 P.2d 620; Arizona State Tax Commission v. Frank Harmonson Co., 63 Ariz. 452, 163 P.2d 667; Moore v. Pleasant Hasler Const. Co., 50 Ariz. 317, 72 P.2d 573; White v. Moore, 46 Ariz. 48, 46 P.2d 1077. For example, we said in State Tax Commission v. Quebedeaux Chevrolet, supra, after an extended discussion of the nature of the Excise Revenue Act:

'In conclusion we hold: (1) that the Act does not impose a tax upon the purchaser nor upon sales, but rather places a tax upon the seller for the privilege of engaging in business and fixes the gross income from sales as the base for computing the tax, (Citation of cases); (2) that the Act makes the tax the direct obligation of the retailer and not that of the consumer; (3) that there is no statutory authority for the retailer attempting to constitute himself a mere collector or agent of the state for the purpose of receiving same and transmitting it to the commission; (4) that the terms 'gross proceeds of sales' or 'gross income from the business' upon which the tax is based includes any and all sums received, regardless of whether or not the retailer separately bills to his customers the privilege tax he is passing on to them, and whether or not he segregates the amounts thus received.' 71 Ariz. 289, 226 P.2d 555.

In view of such positive unequivocal statements repeated over a period encompassing two decades, it would seem that a question so well settled is not now open to further argument, particularly where long continued legislative acquiescence warrants the presumption that it is in accord with legislative intent.

However, appellee seriously urges that a fundamental change has been made in the basic nature of the Act by reason of recent amendment thereot. It is argued that the amendments expressly sanction the passing on of the tax to the purchaser so that there is clearly and definitely imposed a sales tax on such purchaser regardless of the nomenclature used elsewhere in the Act. The changes relied on occur by the addition of Section 73-1302a, providing:

[79 Ariz. 392] 'Exclusion of tax.-For the purpose of this act the total amount of gross income, gross receipts or gross proceeds ...

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