Title: Coors Porcelain Company v. State

State: colorado

Issuer: Colorado Supreme Court

Document:

517 P.2d 838 (1973) COORS PORCELAIN COMPANY, Plaintiff-Appellant, v. STATE of Colorado and John H. Heckers, Director of Revenue, Defendants-Appellees. No. 26158. Supreme Court of Colorado, En Banc. December 10, 1973. Rehearing Denied January 28, 1974. Reardon, Reardon & Reardon, Julie M. Reardon, Denver, for plaintiff-appellant. John P. Moore, Atty. Gen., John E. Bush, Deputy Atty. Gen., Bernard S. Kamine, Asst. Atty. Gen., Denver, for defendants-appellees. *839 GROVES, Justice. As it had done in previous years, for the years 1963 through 1966 the plaintiff (Coors) included in its state income tax returns only the income which it regarded as allocable to Colorado. The Director of Revenue (referred to as the director) assessed income tax for all of Coors income for those years. Coors paid the deficiencies assessed and brought action in the district court to recover them. The court concluded that under an agreed statement of facts the deficiencies had been properly assessed, and dismissed the complaint. Coors appealed to the Court of Appeals and we accepted the case upon petition of the Court of Appeals under 1969 Perm. Supp., C.R.S.1963, 37-21-10(1)(a). We affirm. The court concluded that Coors "does no business outside Colorado and has no established business tie outside Colorado." The implied effect of the judgment of dismissal is that the applicable statutes and regulations are valid and that the director correctly proceeded thereunder to collect tax on all of Coors' income. The material portions of the stipulation of facts read as follows: * * * * * * It is Coors' contention that our statute is being misinterpreted by the director, or if correctly interpreted, the applicable regulation of the Department of Revenue and rulings thereunder to the effect that Coors is not doing business outside of Colorado constitute an unconstitutional interference with interstate commerce. We mention initially that we are inclined to agree with the statement of the Attorney General that our General Assembly has sought to tax all the income that Colorado can constitutionally tax. Our statute provides as follows: The statute further provides for the allocation or apportionment to other states in certain instances of receipts of interest from intangible personal property, dividends, gains and losses, royalties and rents. The statute then states, "If the corporation carries on no business outside of Colorado, the whole or the remainder of the net income shall be allocated to Colorado." A formula is provided for computations of the tax on income derived from sources both within and without Colorado, 1965 Perm. Supp., C.R.S.1963, 138-1-37. Regulation 37 of the Department of Revenue contains criteria for determining whether or not a corporation is doing business in Colorado, and whether or not the portions of its income arising from out-of-state sales are taxable under the Income *841 Tax Act. Regulation 37 provides in part: "The criteria for determining when a corporation is doing business in Colorado shall be the same as for determining when a corporation is doing business out of Colorado." It has been the rule that a foreign corporation which had "established a commercial domicile" in the state might be taxed by that state on income allocable to that state, and that such taxation would not be an unconstitutional burden upon interstate commerce. Underwood Typewriter Co. v. Chamberlain, 254 U.S. 113, 41 S. Ct. 45, 65 L. Ed. 165 (1920). The corollary has been that such taxation upon a corporation which had not established a commercial domicile would unduly burden interstate commerce. As further background, we quote from Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 79 S. Ct. 357, 3 L. Ed. 2d 421 (1959): In Northwestern States Portland Cement Co., supra, the foreign corporation operated an office within the taxing state, and one or more salesmen actively solicited orders within the state for the purchase of the corporation's products. Such orders were subject to acceptance, filling and delivery at the corporation's principal office located in another state. It was held that the taxing state could collect an income tax on that portion of the net income reasonably attributable to the corporation's business activities within that state. Later that year Congress enacted P.L. 86-272, 73 Stat. 555, 15 U.S.C. § 381. This statute fixed minimum standards of business activity for a foreign corporation under which *842 the state could not tax any portion of the corporation's income. It provided in part that a corporation could not be taxed if its only business activities within the state were either, or both, of the following: To show the reason for and effect of the federal statute, we quote from Heublein, Inc. v. South Carolina Tax Commission, 409 U.S. 275, 93 S. Ct. 483, 34 L. Ed. 2d 472 (1972): The director uses this federal statute as a guideline, but, as is to be observed from the above quoted regulation, it is turned around. The statute relates to doing business by a foreign corporation within a state, whereas the regulation provides in effect that, if under this statute a foreign corporation is not doing business in a state, then the income attributable to that state is taxable by the state in which the corporation is domestic. Coors contends that the federal statute relates only to standards applicable to a foreign corporation, and that the corollary cannot be used as standards for taxable income by the state in which the corporation is domestic. Therefore, says Coors, Northwestern States Portland Cement Co. v. Minnesota, supra, is applicable and, under the stipulated facts, Colorado cannot tax income attributable to other states. We disagree and hold that the statute may be used in a correlative manner as the regulation provides. No unconstitutionality has been demonstrated to us. There have been cited and we have read Hervey v. AMF Beaird, Inc., 250 Ark. 147, 464 S.W.2d 557 (1971); Hawes v. William L. Bonnell Co., 116 Ga.App. 184, 156 S.E.2d 536 (1967); Tonka Corporation v. Commissioner of Taxation, 284 Minn. 185, 169 N.W.2d 589 (1969); Iron Fireman Manufacturing Company v. State Tax Commission, 251 Or. 227, 445 P.2d 126 (1968); Herff Jones Co. v. State Tax Commission, 247 Or. 404, 430 P.2d 998 (1967); Cal-Roof Wholesale, Inc. v. State Tax Commission, 242 Or. 435, 410 P.2d 233 (1966); Commonwealth v. Hellertown Manufacturing Co., 438 Pa. 134, 264 A.2d *843 382 (1970), and Wisconsin Department of Taxation v. Blatz Brewing Co., 12 Wis.2d 615, 108 N.W.2d 319 (1961). These cases involve either circumstances beyond the solicitation of orders or are distinguishable by reason of difference in statutes, or both. Coors has emphasized General Motors v. Colorado, Colo., 509 P.2d 1260 (1973), which at the time the briefs were written was pending on appeal. The issues involved here were not raised in that case. Coors does not seriously contend that under the federal statute it is doing business in a tax sense in states other than Colorado. Rather, it is argued that the statute applies to foreign corporations and cannot be applied to domestic corporations. We have already disposed of that argument. Nevertheless, we must rule on whether Coors was "doing business" outside the state. The question may be distilled to an inquiry of whether or not Coors went beyond the solicitation of orders in its out-of-state business. It is implicit in the trial court's ruling that it concluded that Coors' out-of-state business did not extend beyond solicitation of orders. We reach the same conclusion. From the stipulated facts, the only possible extension by Coors' out-of-state representatives beyond the solicitation of orders is the statement that "on occasion they possessed Coors products for shipment to the customer and also retained Coors products which have been rejected by the customer by delivery." It appears that these acts are not in common practice and are the exception rather than the rule. Otherwise, we can assume that Coors would have seen to it that the stipulation demonstrated that these acts were not exceptional and were in the course of regular practice. An assistant attorney general in oral argument expressed the opinion that the stipulation of facts is not sufficiently complete and definitive, and that we should remand the matter to the trial court for a hearing to further develop the facts.[2] Coors, however, is satisified with the stipulation and wants the case determined on the agreed facts. Certainly, the Department of Revenue is bound by its stipulation and we have no right to remand for further hearing absent the consent of Coors. If Coors changes its mind in this respect, it can so indicate in its petition for rehearing. Coors has emphasized that for the years prior to 1963 it uniformly was permitted to allocate Colorado and out-of-state income. We held in Union Pacific R.R. Company v. Heckers, Colo., 509 P.2d 1255, announced earlier this year, that the director may change methods of allocation. The same rule applies here. Judgment affirmed. KELLEY, J., did not participate. [1] The taxes involved are for the years 1963 through 1966. Our income tax statutes were repealed and re-enacted in 1964. We here cite the re-enactments. The predecessor statute was C.R.S.1963, 138-1-1 through 65. So far as this case is concerned, we have not perceived any substantial change by the re-enactment. [2] Another assistant attorney general participated in the preparation of the stipulation.