The CITY OF PHOENIX, a municipal corporation, and B. W. Bear, City Assessor, Appellants,
The BERDEN COMPANY, a corporation, Appellee.
Rehearing Denied July 8, 1958.
William C. Eliot, City Atty., George Mariscal, John F. Mills and Dale E. Marenda, Asst. City Attys., Phoenix, for appellants.
Evans, Kitchel, & Jenckes and Jos. S. Jenckes, Jr., Phoenix, for appellee.
The Borden Company, appellee (plaintiff below), brought this action against the City of Phoenix, appellant (defendant below), to determine whether certain of appellee's sales should be included in the measure of [84 Ariz. 251] the tax which the city, by its Ordinance No. G-93, imposed on persons engaging in business within the city. A declaratory judgment was issued declaring that the sale and delivery of appellee's products outside the city limits of Phoenix was not subject to the privilege tax imposed by the ordinance, and that appellee was not liable to the City of Phoenix for such a tax on any sales previously made from its vehicles, trucks or stores outside the city limits direct to purchasers. This is an appeal by the City of Phoenix from such declaratory judgment.
The City of Phoenix by its Ordinance No. G-93 has levied a tax in the following language:
'Section 2. Imposition of the Tax. * * * there is hereby levied * * * the privilege taxes measured by the amount or volume of business done by the persons on account of their business activities and the amounts to be determined by the application of rates against values, gross proceeds of sale, or gross income, as the case may, be, in accordance with the following schedule:
* * *
* * *
'(c) At an amount equal to one-half of one per cent of the gross proceeds of sales or gross income from the business upon every person engaging or continuing
within the City of Phoenix in the following businesses:
'1. Selling any tangible personal property whatsoever at retail, except bonds and stocks.'
The Borden Company maintains a processing plant within the corporate limits of the defendant City of Phoenix. It receives milk from dairies and this and its by-products are processed and bottled. The plaintiff also makes its own orange drink and cream. These products, plus other finished products, orange juice, cottage cheese, butter, eggs, goat milk and readywhip are sold by plaintiff. It also maintains its administrative and sales force at its plant located within the corporate limits of the City of Phoenix.
The portion of the Privilege License Tax Ordinance involved herein only applies to retail sales, and the only sales in issue are the retail sales made by the plaintiff outside the corporate limits. The plaintiff accomplishes its retail selling by employees who drive trucks on retail routes. Some of these routes are exclusively within the city, others are exclusively beyond the corporate limits, and then there are those weave in and out of the corporate limits. The trucks are refrigerated delivery wagons; whatever merchandise is not sold after the daily delivery is left on the truck and the refrigeration unit is then connected. The empties are removed and then the following day these trucks are loaded for another day's operation. The route men have what [84 Ariz. 252] is called a 'route book' which contains the name of the customer, his address, and the running balance of the customer's account. Statements are prepared and left by the driver at the customer's address at a predesignated period. Any collections these route men make are credited to the customer and turned into the office at the plant. The office in turn gives credit to the driver for the monies turned in. On occasion checks are mailed by the customer to plaintiff's office and these are turned over to the route men so that they may post the credit to the customer. Plaintiff deposits these checks, plus any monies collected by the route men, in the bank.
At the end of each month the route man has to balance his books with the office. Each day the route man is charged with merchandise loaded on his truck; at the end of the day he turns in any money collected, which in turn is deducted from that charge. The difference between the charge to the route man and his credit for monies received must be the balance charged to customers on his route book. These route books are then microfilmed and the route book becomes the statement to the customer. Microfilms are kept in the office. The customer's address is reflected on the microfilm.
The plaintiff, in computing its sales tax, makes its returns and pays only on those sales made within the city limits and excludes those sales made beyond the city limits. Every third month plaintiff's office goes through the route books to determine which sales were made within ...