[87 Ariz. 377] Robert Morrison, Atty. Gen., Bernard T. Caine and Robert G. Mooreman, Asst. Attys. Gen., for appellant.
James Elliott Dunseath, Tucson, for appellee.
This is an appeal from summary judgment entered against the State Tax Commission, defendant, for the recovery of transaction privilege taxes paid under protest by plaintiff-appellee. The parties will hereinafter be referred to as the plaintiff and the Commission.
Plaintiff is a corporation engaged in the business of operating several supermarkets in this state. Its complaint sought a money judgment for the recovery of taxes paid under protest, based upon an assessment following an audit covering the period of April 14, 1954, to November 30, 1956. The purpose of the audit was to determine the plaintiff's sales tax liability for that period. Plaintiff was a 'self-redeemer' of 'trading stamps.' The Commission determined that, in addition to the taxes paid by plaintiff on its reported gross sales, it was also liable for a tax of $2,739.25 computed on the value of merchandise given as premiums to its customers in redemption of trading stamps.
It was the plaintiff's contention that any taxes which might be due have been paid since the value of the items of merchandise [87 Ariz. 378] which were 'exchanged' for accumlated trading stamps was added to the charge made for items sold in the regular course of business; and therefore, was included in the total gross sales made by plaintiff, and that all tax due on such gross sales had been fully paid. Appellant has admitted there existed no genuine issue as to any material fact.
Two affidavits were filed by plaintiff in support of its motion for summary judgment; one by Elmer M. Thierman, a certified public accountant, and the other, by E. C. Marques, vice president and general manager of plaintiff. Both affidavits support plaintiff's position that any tax which might have been due upon the items of merchandise in question was paid since their cost was added to and included in the total gross sales made by plaintiff. This fact is nowhere denied by affidavit or otherwise.
An affidavit of Neal Trasente, Director of the Sales Tax Division, was filed by the Commission opposing the plaintiff's motion for summary judgment. Briefly paraphrased, this affidavit urged the same argument as set forth in the Commission's pleadings; that since plaintiff had purchased this merchandise for resale, and it was 'exchanged' for trading stamps (as consideration), this constituted a 'sale' as defined by A.R.S. paragraph 11 of § 42-1301.
When the parties appeared on the date set to argue the motion for summary judgment they made two stipulations: (1) that all of the merchandise exchanged by plaintiff as premiums for their stamp plan was purchased by plaintiff from its suppliers in the ordinary course of business and for resale, and (2) to the withdrawal of the issue of whether plaintiff's stamp redemption plan constituted a cash discount as contemplated under A.R.S. paragraph 6 of § 42-1301.
Thereupon, the court finding no material issues of fact to be determined upon the affidavits, controverting affidavit, and stipulation of counsel, found that the plaintiff was entitled to judgment as a matter of law.
On appeal it is the Commission's position that the 'exchange' of trading stamps for the items of merchandise in question is a taxable retail sale under the Transaction Privilege Taxes Act, A.R.S. § 42-1301 et seq. The position of the plaintiff below, as set forth in its affidavits for summary judgment, is reasserted here.
In connection with summary judgment we would normally have to examine the record with two fundamental questions in view (1) whether there were any material issues of fact to be determined, and (2) whether the court erred in its application of the law. But inasmuch as the Commission admits, and this is borne out by the [87 Ariz. 379] record, that there remained no genuine issue of fact to be determined at the time the judgment was entered, we are concerned here only with the latter question: whether the court erred in its application of the law to the facts.
A.R.S. paragraph 11 of § 42-1301 defines a 'sale' as follows:
"Sale' means any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatever, of tangible personal property, for a consideration, * * *.'
But the tax imposed by our Privilege Transaction Tax (A.R.S. § 42-1301 et seq.) is not a tax upon the sale of items of merchandise but is a tax upon the privilege of engaging in business measured by the gross income from sales. See, Arizona State Tax Commission v. Garrett Corporation,79 Ariz. 389, 291 P.2d 208, and the cases therein cited in support of this proposition. It is agreed by both plaintiff and the Commission that the articles herein involved were purchased for resale. Plaintiff claims their value was included in the amount of gross income from sales and that the tax thereon had been paid. The Commission neither admitted nor denied this ...