Court Opinion

ID: 9577232
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:33:17.832858+00
Date Added: 2024-06-11T13:20:12.865583
License: Public Domain

SUTIN, Judge (dissenting). I dissent from that portion of the majority opinion which subjects Cardinal Fence to taxation. The Gross Receipts and Compensating Tax Act (§§ 72-16A-1 to 72-16A-19, N. M.S.A.1953 [Repl.Vol. 10, pt. 2, Supp. 1971]), with repeals and amendments thereof, is a rigmarole which defies explanation or interpretation. Neither the Commissioner, the attorneys, or the courts of review understand the words, phrases, definitions and complexities involved. Reed v. Jones, 81 N.M. 481, 468 P.2d 882 (Ct.App.1970); Church of the Holy Faith v. State Tax Commission, 39 N.M. 403, 48 P.2d 777 (1935). Most of the definitions are surplusage. They create ambiguities, lead to various rules of construction, and cause a battle of the dictionaries. Here, the legislature passed an ill-defined statute. The Commissioner waited three years to audit a taxpayer’s records. The definitions were amended. After an indeterminate decision and order, the Commissioner added penalty and interest. He burdened the taxpayer with attorney fees, costs and expenses. Of late, the Commissioner has moved into cloudy areas, roamed about the rim of the definitions to seek additional avenues for revenue. One purpose of the Gross Receipts Tax Act “is to provide revenue for public purposes,” [§ 72-16A-2, supra], but this does not mean that this purpose should be accomplished by “semantic niggling.” Rules of statutory construction are adopted solely for the purpose of arriving at a decision for or against the Commissioner. These rules are used where ambiguity or doubt exists about the meaning of words or phrases. If there is no ambiguity or doubt, judicial construction disappears. Till v. Jones, 83 N.M. 743, 497 P.2d 745 (Ct.App.1972). If there is ambiguity or doubt, it is not the fault of the taxpayer. Yet, where a deduction is claimed, we cast upon him the burden to clearly establish his right to a deduction, a deduction which must be clearly and unambiguously expressed in the statute. Reed v. Jones, supra. But, where an exemption is claimed by a taxpayer, the statute should be liberally construed in his favor because the exemption is granted for a beneficent purpose. Santa Fe Lodge No. 460 v. Employment Security Commission, 49 N.M. 149, 159 P.2d 312 (1945). Compare, however, Church of Holy Faith v. State Tax Commission, supra. The tax deductions claimed by Cardinal Fence [§§ 72-16A-14.9, 72-16A-14.15, 72-16A-16, supra] are not for the benefit of Cardinal Fence. They are for the benefit of government agencies, institutions and Indian tribes. Therefore, we should protect the taxpayer by judicial construction. In support of the taxpayer, we must not forget that taxing statutes should “ ‘be given a fair, unbiased and reasonable construction, without favor either to the taxpayer or the state, to the end that the legislative intent is effectuated and the public interests to be subserved thereby furthered.’ ” Evco v. Jones, 81 N.M. 724, 472 P.2d 987 (Ct.App.1970); Chavez v. Commissioner of Revenue, 82 N.M. 97, 476 P.2d 67 (Ct.App.1970). When the above rules of statutory construction are all thrown together, they cast a glow that the rules should be abolished. The court should decide each case without favor according to its own sense of justice. I proceed on that basis. The parties stipulated that Cardinal Fence is engaged in the business of selling fences and fencing materials. This means it is not engaged in “servicing” fence installations, or “construction activities” or “contracting.” The parties stipulated that Cardinal Fence sold installed fencing and fencing material; that it was the buyer’s desires, buyer’s time and economics, or the type of fencing material sold which involved Cardinal Fence in the installation of fences; that when installed at the buyer’s request, the gross receipts attributable to labor was less than a mean average of 25% of each installation. What this means is: The cost of installation was incidental to the sale. It is not a condition of the sale. Cardinal Fence is completely indifferent as to what the buyer’s request will be. It does not sell fences to generate fencing installation revenues. It does not render the incidental service to make the fence salable or to add to its value. The Commissioner denied the protest because in the sale and erection of the entire fence, Cardinal Fence was performing “construction services” or “contracting services” as defined. The decision stated: For the period beginning December 5, 1969, I have relied on G.R. Regualtion [sic] 3(C)-2 in reaching my decision. This regulation pertains to the definition of “construction” used in § 72-16A-3(C) which includes activities “related to the oil and gas industry.” The basis for the decision was obviously erroneous. On this appeal, the Commissioner abandoned this position. In its complaint on appeal, Cardinal Fence protested the assessment because it was not engaged primarily in the performance of service as distinguished from selling property; that the sale and erection of fencing material for governmental agencies, institutions and Indian tribes were deductible. The Commissioner did not meet the issues raised. Cardinal Fence contends: The sole question to be decided . . . is whether . . . the sale and installation of a fence constitutes the sale of tangible personal property or the performance of a service. The deduction statutes cited, supra, are clear and unambiguous. Cardinal Fence is entitled to a deduction for all tangible personal property sold to the agencies mentioned. Does this deduction include the incidental cost of installation? I say “yes.” Section 72-16A-3(K), supra, states in part: “service” means all activities engaged in for other persons for a consideration, which activities involve primarily the performance of a service as distinguished from selling property. [Emphasis added.] The stipulation states unequivocally that installation was not an activity which involved “primarily” the performance of a service. No inferences to the contrary can be permitted. See Till v. Jones, supra. In Amarillo Lodge No. 731, A. F. & A. M. v. City of Amarillo, 473 S.W.2d 264 (Tex.Civ.App.1971), the Masons sought a statutory exemption from taxation of property used for purely public charity. By stipulation, the property was used for fraternal purposes incident to the Masonic work. The court said: “Incident,” in law, means pertaining to, or involved in, though not an essential part of another thing. The use of the property purely incidental to the primary purposes and functions of the organization does not defeat the exemption. An establishment with a dance floor was not exempt from a cabaret tax where 60.8% or 50% of gross revenues was from the sale of refreshments, because refreshments were not incidental to its facilities for dancing. Luna v. Campbell, 302 F.2d 166 (5th Cir. 1962); Billen v. United States, 273 F.2d 667 (10th Cir. 1960). Sources of revenue, if substantial, can change “incidental” service to a “primary” service. Cardinal Fence derived an average of only 25% of its gross receipts only from those installations requested by buyers. Installed fencing constitutes the sale of tangible personal property and Cardinal Fence is entitled to a complete deduction for all sales made. The decision and order of the Commissioner is not sustained by substantial evidence in the record and is not in accordance with law. Judgment should be entered for Cardinal Fence.