Court Opinion

ID: 3255978
Source: CourtListenerOpinion
Date Created: 2016-07-05 16:27:39.449459+00
Date Added: 2024-06-11T07:41:07.481647
License: Public Domain

I concur in the results arrived at in the opinion of the CHIEF JUSTICE. I do not agree with his interpretation that the determination of this case is in any wise controlled by our decision in Crane Co. v. Arizona State Tax Commission, Ariz.,163 P.2d 656. In that case merchants within the state of Arizona sold merchandise or materials manufactured and located without the state and caused them to be delivered directly to the purchasers within *Page 398 
the state. I am still thoroughly in accord with the opinion on the facts therein involved. That portion of the opinion which indicates that the delivery of the merchandise must be made to the purchaser in the taxing jurisdiction either directly from the extrastate source or through the offices of the seller within the taxing state was an abstract generalization applicable to the facts therein involved. I believe that the court should recede from that portion of the decision insofar as it may be construed to state an absolute rule applicable in all cases even to the facts in the case at bar.
The Act creating the Excise Revenue Act of 1935 (Laws 1935, Chap. 77) is entitled "An Act relating to excise taxation, and to impose a license fee and a privilege tax upon the privilege of engaging in certain occupations and business." This court first held that the tax exacted is in the nature of a license tax — to quote "* * * It must be kept in mind that a privilege tax is not a tax on property but a tax on the right to engage in business * * *." White v. Moore, 1935, 46 Ariz. 48,46 P.2d 1077, 1081. The next expression of the court came in City of Phoenix v. State of Arizona, 1938, 53 Ariz. 28, 85 P.2d 56, 58, wherein the court said, "The sales tax is an excise and not a property tax * * *," citing White v. Moore, supra. The court in O'Neil v. United P.  C. Co-operative, 1941, 57 Ariz. 295,113 P.2d 645, 647, in referring to the act under question, said:
"* * * It is an excise tax imposed by the legislature in the exercise of its taxing power for the purpose of raising revenue and is in no sense of the term for regulation. The power to provide for such a tax does not rest or originate in the police power of the state which enables it to regulate business in the interest of public peace, health and safety. That the sales tax is not a license tax is pointed out in Shanks v. Kentucky Independent Oil Co., 225 Ky. 303, 8 S.W.2d 383, 385, where the court in distinguishing between an excise tax in its original limited sense and a license tax said that `the tax levied by this act is an excise and approved the statement in 26 R.C.L. 34 that `excises, in their original sense were something cut off from the price paid on a sale of goods, as a contribution to the support of the government.' * * *"
Then only recently in Arizona State Tax Commission v. Frank Harmonson Co. Metal Products, 1945, Ariz., 163 P.2d 667, 668, the court said:
"Strictly speaking, the law under consideration is an Excise Revenue Act. It is something more than a sales tax measure. It is a tax on the right to engage in business. White v. Moore,46 Ariz. 48, 46 P.2d 1077. In most cases, the tax may be measured by the gross amount of sales, but a sale is not a prerequisite to the tax. * * *"
As pointed out in the O'Neil case, supra, the Act specifically provides that it was *Page 399 
enacted for the purpose of raising public money to be used in liquidating the outstanding obligations of the state, its counties, and for other public purposes. I am of the opinion that the Act is purely and simply a revenue measure. It is in no sense regulatory. Its purpose is and was to raise public monies. It is not a license tax nor a privilege tax. It exacts from the seller-taxpayer revenue measured in some instances on his gross income, in others on the gross proceeds of his sales from his business. It is not a tax on the privilege of doing business, rather it is a tax on business done. "`Business' includes all activities or acts, personal or corporate, engaged in or caused to be engaged in with the object of gain, benefit or advantage either direct or indirect, but not casual activities or sales." Section 73-1302. By the same section, a sale is defined 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 whatsoever, of tangible personal property, for a consideration, * * *."
To objectively and realistically observe the effects of the Act is of assistance to me in determining whether it is a license (privilege) tax or an excise and revenue-raising measure. The court is privileged to take judicial knowledge of the fact that the Act, in the fiscal year ending June 30, 1946, produced in excess of $9,500,000 in tax monies.
In the instant case the taxpayer received orders from customers doing business in Arizona for machinery and materials to be used and consumed in Arizona, all of which was well known to the vendor-taxpayer at the time the sales were made. The orders were taken at its Phoenix office; the purchase payments were made there. The taxpayer did not have the materials on hand so ordered them from various supply houses without the state with which it did business. The bills submitted by appellant to the purchasers showed that the seller had caused the articles purchased to be shipped direct to the purchasers at points from without the state, f.o.b. the cars, St. Louis, Trenton, and Cincinnati. It is the contention of the taxpayer that these sales are not taxable, asserting that the sales were made at the place of delivery to the railroads, and that the transactions are and were therefore transactions in interstate commerce and exempt from the tax under the provision of Section 73-1308, A.C.A. 1939, and forbidden by the Federal Commerce Clause. Art. 1, § 8, Cl. 3.
The tax is levied against gross proceeds of sales. "`Gross proceeds of sales' means the value proceeding or accruing from the sale of tangible personal property * * *." Section 73-1302, A.C.A. 1939. Under the statement of facts given, the proceeds of these sales accrued to the taxpayer in the state of Arizona. The taxpayer takes the position that before the tax can accrue *Page 400 
there must be a sale; that there can be no sale without the transfer of title and possession; and that title and possession pass at the time of delivery (in this case to the carrier). In support of this proposition it offers as authority the holding in State v. Hendrix, 56 Ariz. 342, 107 P.2d 1078; McGoldrick v. Berwind-White Coal Mining Co., 309 U.S. 33, 60 S. Ct. 388,84 L. Ed. 565, 128 A.L.R. 876; and McLeod v. J.E. Dilworth Co.,322 U.S. 327, 349, 64 S. Ct. 1023, 1030, 88 L. Ed. 1304, 1319. In the Berwind-White case, Mr. Justice Stone emphasized that the delivery was in New York to the buyer there. The tax, he says,"is conditioned upon events occurring within the state either transfer of title or possession of the purchased property, or an agreement within the state, `consummated' there, for the transfer of title, or possession."
A study of the facts and holdings in the various cases including McGoldrick v. Berwind-White Coal Min. Co., supra; McLeod v. Dilworth Co., supra; McGoldrick v. Felt  Tarrant Mfg. Co., 309 U.S. 70, 60 S. Ct. 404, 84 L. Ed. 584; J.D. Adams Mfg. Co. v. Storen, 304 U.S. 307, 58 S. Ct. 913, 82 L. Ed. 1365, 117 A.L.R. 429; General Trading Co. v. State Tax Commission, 322 U.S. 335,64 S. Ct. 1028, 88 L. Ed. 1309; and the analyses and observations on these cases contained in articles appearing in 57 Harvard Law Review at pages 40 (Wm. B. Lockhart) and 1086 (Thomas Reed Powell), indicates that not all of the taxable events must absolutely occur and be consummated in the taxing state.
It is true that in the Dilworth case [322 U.S. 327,64 S. Ct. 1025] there is language from which appellant gains comfort and has support. That case involved the application of an Arkansas sales tax to Tennessee corporations with home offices and places of business in Tennessee, not qualified to do business in Arkansas and having neither sales office, branch plant nor any other place of business in that state. Orders were solicited in Arkansas by agents domiciled in Tennessee or by mail or telephone. As the court said, "In short, we are here concerned with sales made by Tennessee vendors that are consummated in Tennessee for the delivery of goods in Arkansas." The holding forbad the imposition of the tax by the state of the buyer. The facts of that case are in no wise comparable with the facts here.
In McGoldrick v. Felt  Tarrant Mfg. Co., supra, the Supreme Court of the United States upheld a sales tax imposed by New York City on transactions which were more involved in interstate commerce than are those of the appellant herein. DuGrenier, Inc., was a Massachusetts corporation with its factory and main office in that state. It made and sold automatic vending machines, all sales throughout the United States being handled by an exclusive agent who had an office in New York. The sales in New York City were made by the agent's solicitations of orders. The *Page 401 
prospective purchaser signed either an order or a conditional sale contract on partial payment. These were forwarded to the Massachusetts office, and if accepted there, the merchandise was shipped direct to the purchaser in New York City, who paid the freight. In other words, the machines were shipped f.o.b. the factory or main office in Massachusetts. On the authority of its holding in the Berwind-White Coal Mining Co. case, the court sustained the New York sales tax. The court specifically said "the tax so laid does not infringe the commerce clause," (Chief Justice Hughes, Justice McReynolds, and Justice Roberts dissenting).
Mr. Justice Douglas (Justices Black and Murphy concurring) in his dissent in the Dilworth case appraised the holding of the court in McGoldrick v. Felt  Tarrant Mfg. Co. as follows: It
"* * * makes plain that the transfer of possession need not be by the seller, for in that case, as in the present one, deliveries were made by common carriers which accepted the goods F.O.B. at points outside the State. In terms of state power, receipt of goods within the State of the buyer is as adequate a basis for the exercise of the taxing power as use within the State. And there should be no difference in result under the Commerce Clause where, as here, the practical impact on the interstate transaction is the same."
In further rejection of attaching any significance to the seller's completion of his part of the contract in his home state, Mr. Justice Douglas says:
"It is no answer to say that the Arkansas sales tax may not be imposed because the out-of-state seller was `through selling' when the tax was incurred. That was likewise true of both the use tax cases, including General Trading Co. v. State Tax Commission,322 U.S. 335, 64 S. Ct. 1028, 88 L. Ed. 1309, and the sales tax decision in McGoldrick v. Felt  Tarrant Mfg. Co. The question is whether there is a phase of the interstate transaction on which the State of the buyer can lay hold without placing interstate commerce at a disadvantage. There is no showing that Tennessee was exacting from these vendors a tax on these same transactions or that Arkansas discriminated against them. I can see no warrant for an interpretation of the Commerce Clause which puts local industry at a competitive disadvantage with interstate business. If there is a taxable event within the State of the buyer, I would make the result under the Commerce Clause turn on practical considerations and business realities rather than on dialectics. If that is not done, I think we should retreat from the view that interstate commerce should carry its fair share of the costs of government in the localities where it finds its markets and adopt the views expressed in the dissent in the Berwind-White case."
In State v. Hendrix, 56 Ariz. 342, 107 P.2d 1078, 1080, contracts between publishers and the State for the sale of books provided *Page 402 
that the books would be delivered f.o.b. cars at a central depot in Chicago. Construing these contracts the court said:
"Under these contracts the books became the property of the state when delivered to the carrier at any central depot in Chicago. The state became responsible for transportation charges from point of delivery to point of destination and if the books were lost or destroyed in transit the loss would be the state's. When parties have agreed, as here, that the seller may ship from a central depot in a given city, a delivery by the seller to a carrier at such a depot is a delivery to the buyer and constitutes full performance of the seller's obligation to make delivery, and in such case the delivery passes the title to the buyer and the risk of loss or injury in transit is on the buyer. * * *"
This rule, though applicable to the general law of sales for locating the incidence of loss in transit or other questions arising among buyer, seller, and carrier, is not necessarily applicable for the purpose of taxation, as is pointed out by Mr. Justice Rutledge in his special opinion, concurring in General Trading Co. v. State Tax Commission, supra, and in International Harvester Co. v. Dept. of Treas. of Indiana, 322 U.S. 340,64 S. Ct. 1019, 1030, 88 L. Ed. 1313, and dissenting in McLeod v. J.E. Dilworth Co., supra, in the following excerpt [322 U.S. 340,64 S. Ct. 1032]:
"* * * Surely the state's power to tax is not to turn on the technical legal effect, relevant for other purposes but not for this, that `title passes' on delivery to the carrier in Memphis and may or may not so pass, so far as the record shows, when the Minnesota shipment is made to Iowa. In the absence of other and more substantial difference, that irrelevant technical consideration should not control. However it may be determined for locating the incidence of loss in transit or other questions arising among buyer, seller and carrier, for purposes of taxation that factor alone is a will-o'-the-wisp, insufficient to crux a due process connection from selling to consuming state and incapable of increasing or reducing any burden the tax may place upon the interstate transaction."
My interpretation of the various late decisions of the Supreme Court above referred to leads me to believe that the tax was lawfully imposed and its collection will not be in contravention of the Federal Commerce Clause. In view of the fact that the appellant-taxpayer was an Arizona corporation with its principal place of business in Phoenix and doing business here; that it took the orders in question here; that it made the contracts here; that it received the sales price here; and here gave the orders and directions to have the merchandise purchased delivered to the cars f.o.b. directed to the individual purchasers, I believe that there were sufficient taxable events within the state of Arizona to furnish all the underpinning necessary for the validity of the imposition of the tax. The appellant was through selling *Page 403 
when it collected the sales price. That is when the tax was incurred. I do not believe that upon the mere incidence of the deliveries to the non-interested carriers the taxpayer should be allowed to take refuge behind the Federal Commerce Clause. The imposition of the tax does not impinge on the Commerce Clause and does not cause any undue burden on interstate commerce of the taxpayer. It is a local merchant and should pay its just share of the expenses of the government.
Accordingly I concur in the affirmance of the decision of the lower court.