Title: Swift & Company v. State Tax Commission
Citation: 105 Ariz. 226, 462 P.2d 775
Docket Number: 9749-PR
State: Arizona
Issuer: Arizona Supreme Court
Date: December 15, 1969

105 Ariz. 226 (1969) 462 P.2d 775 SWIFT &amp; COMPANY, a corporation, Appellant v. STATE TAX COMMISSION of Arizona et al., Appellees. No. 9749-PR. Supreme Court of Arizona. In Banc. December 15, 1969. *227 Gust, Rosenfeld &amp; Divelbess, by John C. Wesley, Phoenix, for appellant. Gary K. Nelson, Atty. Gen., Darrell F. Smith, Former Atty. Gen., James D. Winter, Asst. Atty. Gen., for appellees. McFARLAND, Justice: These are Cross-Petitions for Review from a decision of the Court of Appeals, Division One, Swift &amp; Co. v. State Tax Commission, 10 Ariz. App. 10, 455 P.2d 459. The petitioner-plaintiff, Swift &amp; Company (Swift) brought suit in the Superior Court of Maricopa County to recover Transaction Privilege Taxes[1] and Education Excise Taxes[2] imposed by the petitioner-defendant, State Tax Commission (Commission). The taxes were levied on meat and dairy products sold to base exchanges, commissaries and commissioned officers' clubs located on several military bases throughout the State during the period from March 1, 1961, to December 31, 1964. Swift originally paid the sum of $16,524.43 without protest. However, as a result of an audit the Commission made an additional assessment of $19,191.36. Swift paid the latter sum under protest, and followed the procedures set forth in § 42-1339, A.R.S. The facts not being disputed both plaintiff and defendant made cross-motions for summary judgment, and the Superior Court denied Swift's motion, granted that of the Commission, and entered judgment thereon. Swift appealed from the entire judgment, which by implication included its contention as to non-protested tax payments, although the Superior Court did not explicitly rule on that point because of its disposition of the basic question. The Court of Appeals reversed the order and judgment of the trial court as to the claim for refund of the protested $19,191.36 payment, and then affirmed the lower court as to the disposition of the original, non-protested payment of $16,524.43, which actually was never determined by that court. Technically, this was error in that the Court of Appeals attempted to affirm a non-existent judgment. In view of this, and our subsequent opinion, the decision of the Court of Appeals will be vacated. According to the uncontroverted facts and the underlying statutory law it is quite simple Swift wholesales its products to the various military establishments (not for general troop requirements such as mess halls where, in such case, Swift would undeniably be a retailer) which establishments prepare and resell the food for consumption to qualified base personnel, their families and guests. That the sales involved here are not for direct troop consumption is apparent from the following portion of an uncontroverted affidavit: That this same resale procedure obtains at the other facilities here involved is pointed out in the following excerpts from other uncontroverted affidavits: The Base Exchange Supervisor, J.R. Trammell, averred: Clearly then, under the Transaction Privilege Tax statutes, Swift is a wholesaler and thereby is within the tax exemption. Section 42-1301, A.R.S., defines the terms as follows: Any doubt as to the tax status of Swift in its dealings with the military customers is resolved by Section 42-1312, subsec. D, A.R.S.: Section 42-1313, A.R.S., referred to in § 1312, places the tax obligation on the resellers of the food commodities[3]: Thus, the transactions between Swift and the military stores and restaurants were intended for resale to the authorized customers of such facilities for a consideration within the definition of "sale" in § 42-1301, subsec. 12, supra. It is manifest that Swift was engaged in the business of wholesaling under the plain terms of the Transfer Privilege Tax Statutes. The Commission contends that certain regulations, promulgated by it in 1956, under the authority of § 42-1305, A.R.S., transform Swift's status from wholesaler to retailer in these particular dealings with the military facilities. The pertinent regulations follow: The above regulations are based, in part, on § 1321 subsecs. B and C, A.R.S.: Swift's type of business is expressly excluded from the foregoing exemption by subsections F and G of § 1321, A.R.S. But the Commission, by its regulations, attempts to place it within the 50-percent deduction clause, supra, by "deeming" the sales as retail and not wholesale. Subsection C, however, by its very terms, applies only to those who would otherwise be taxable at the full rate under § 1312, A.R.S. and Swift, as we pointed out above, is exempt under that section. The legislature obviously intended to decrease both the tax base and tax rate in a certain area of transactions involving the United States Government. The Commission, on the other hand, attempted to broaden the tax base by placing an otherwise exempt business within the tax-deduction clause contrary to the plain language of the Transaction Tax Article. This it cannot do. In Hunt v. Norton, 68 Ariz. 1, 198 P.2d 124, 5 A.L.R.2d 668, this Court stated: The legislature, either intentionally or inadvertently, allowed a tax gap. Had it wished to foreclose the exemption it could have done so by providing that the tax be levied on the last taxable sale, whether wholesale or retail; or by other plain language directed to the problem involved here. The legislature has not done so, and the Commission cannot legislate for it. It is fundamental in administrative law that an administrative agency or commission must exercise its rule-making authority within the grant of legislative power as expressed in the enabling statutes. Any excursion by an administrative body beyond the legislative guidelines is treated as an usurpation of constitutional powers vested only in the major branch of government. General Electric Company v. Burton, 372 F.2d 108 (6th Cir.); Busey v. Deshler Hotel Co., 130 F.2d 187, 142 A.L.R. 563 (6th Cir.); 2 Am.Jur.2d, Administrative Law, § 211. One other point remains on this particular question. The Commission contends that since the regulations have been in effect for more than eleven years, and that the legislature has been presumably aware of them, their validity has been established by this long period of acquiescence. In Long v. Dick, 87 Ariz. 25, 29, 347 P.2d 581, 583, 80 A.L.R.2d 949, we said: And in City of Mesa v. Killingsworth, 96 Ariz. 290, 394 P.2d 410, this Court stated: While in Long v. Dick, supra, it seems apparent that the legislature was aware of the administrative regulations, there are no facts presented here to support such presumption; and even a presumption of legislative acquiescence would be questionable. But even presuming legislative awareness of the Commission's regulations affords scant support to the contentions of the Commission. Unlike the City of Mesa case, supra, there is no ambiguity in the provisions of the tax statutes here; and unlike Long v. Dick, supra, any acquiescence by the legislature, even if it were proved here, would be "manifestly erroneous" in the light of the clear and contrary language of the Transaction Tax Article. Therefore the imposition of the Transaction Privilege Tax in the amount of $19,191.36, and paid under protest by Swift, was invalid. Swift also claims that, contingent upon a decision that these sales are exempt from the Transaction Taxes, it is entitled to a refund of the initial payment, in the sum of $16,524.43, even though such payment was made without protest. Conceding that it did not follow the protest procedure set forth in § 42-1339, Swift relies on § 42-1326, contending that this section requires the Commission to make a refund. The section reads as follows: This question was decided by this Court in City of Phoenix v. Phoenix Newspapers, Inc., 100 Ariz. 189, 412 P.2d 693, where we denied the claim for a refund under a City Ordinance which is almost identical to the provisions of the Transaction Privilege statutes involved here. We said: Maricopa County v. Leppla, 89 Ariz. 220, 360 P.2d 227, 84 A.L.R.2d 1129, cited in City of Phoenix v. Phoenix Newspapers, supra, is readily distinguishable. There we approved a refund to a taxpayer who inadvertently paid the same tax a second time. In the instant case the taxes were voluntarily paid without objection or protest, and the money expended for public purposes. Under City of Phoenix v. Phoenix Newspapers, supra, they are not recoverable. Therefore, it is our decision that Swift is not entitled to a refund of that portion of the tax not paid under protest in compliance with § 42-1339. The decision of the Court of Appeals is vacated. The judgment of the Superior Court is reversed, and the matter remanded for further proceedings consistent with this decision. UDALL, C.J., LOCKWOOD, V.C.J., and STRUCKMEYER and HAYS, JJ., concur. [1] § 42-1301 et seq., A.R.S. [2] § 42-1361 et seq., A.R.S. [3] The parties here concede that these military retailers are immune from this tax under the authority expressed in Standard Oil of Calif. v. Johnson, 316 U.S. 481, 62 S. Ct. 1168, 86 L. Ed. 1611.