Comer v. State Tax Commission of New Mexico

The plaintiff, appellant here, instituted the suit out of which this appeal arises in the district court of Santa Fe county to recover from defendants, appellees here, under the provisions of Laws 1934, Sp. Sess. c. 7, § 314, and Laws 1935, c. 73, § 313, certain taxes paid under protest which had become due under the terms of said acts. The amount of the tax paid under the 1934 act is $29.75 covering sales for the month of June, 1935, and the amount paid under the 1935 act is the sum of $25.54, covering sales for the month of July, 1935. Each payment is set up and recovery sought in a separate cause of action in plaintiff's first amended complaint. The identical questions are presented for decision under each act.

The defendants demurred separately to each cause of action on the ground that it appears from the face of said complaint that plaintiff is subject to the tax sought to be avoided. The trial court sustained the demurrer, and plaintiff electing to stand on his complaint the same was dismissed, from which judgment of dismissal this appeal is prosecuted.

The essential facts as disclosed by the complaint and which stand admitted by the demurrer are as follows: The plaintiff is the wholesale agent at Albuquerque, N.M., for the sale and distribution of petroleum, gasoline, and other products of Phillips Petroleum Company. His compensation is a commission on all products handled by him as such agent. The material allegations of the complaint touching the nature of plaintiff's occupation are the same in both causes of action. As taken from the first cause of action they are:

"That on the 28th day of July, 1933 plaintiff was employed as agent of the Phillips Petroleum Company in Albuquerque, New Mexico, and has continued in such employment as agent of said Phillips Petroleum Company since the 28th day of July, 1933 down to and including the time of the filing of this complaint; that plaintiff is so employed as agent of Phillips Petroleum Company on a commission basis for his services as such agent.

"That plaintiff as such agent is charged with the duties of the sale and distribution of petroleum and other products at wholesale of said Phillips Petroleum Company and is paid a commission on all such products handled by plaintiff as such agent. * * *

"That this plaintiff is employed by Phillips Petroleum Company under a written contract; that said written contract imposes upon plaintiff the duty of devoting all his time and efforts in promoting the sale at wholesale of Phillips Petroleum Company products; that in the discharge of his duties this plaintiff is subject to the instructions of the Phillips Petroleum Company in the matter of all sales of company's products; that this plaintiff is paid for his services on a commission basis and receives a percentage on the wholesale price of all products of the company sold through plaintiff's efforts; that plaintiffdoes not in any manner hold himself out to the public as one whois ready or willing to sell the products or commodities of anymember of the general public who desires the use of plaintiff'sservices as a selling agent, but on the contrary this plaintiffacts solely in the name of and in behalf of Phillips PetroleumCompany and is legally obliged at all times to work for the interests of Phillips Petroleum Company exclusively in the same manner and to the same extent as salaried employees of other oil companies are required to do." (Italics ours.)

The tax is imposed by section 201 of article 2, Laws 1934 (Sp.Sess.) c. 7, and by the same section and article of Laws 1935, c. 73, in the following language, to wit:

"There is hereby levied, and shall be collected by the Tax Commission, privilege taxes, measured by the amount or volume of business done, against the persons, on account of their business activities, engaging, or continuing, within the State of New Mexico, in any business as herein defined, and in the amounts determined by the application of rates against gross receipts, as follows: * * *

"K — At an amount equal to two per cent of the gross receipts of the business of every person engaging or continuing in the business of acting as factor, agent or broker selling on a commission basis, and where title to the goods, wares or merchandise sold does not vest in such person at any time during the transaction."

The term "engaging" is given a statutory meaning in article 1 of each act (section 3, par. (g) of 1934, Sp.Sess., and section 103, par. (g) of 1935, as follows:

"The term ``engaging' as ["when" in 1935 act] used in this Act with reference to engaging or continuing in a business or a profession shall also include the exercise of corporate or franchise power, but the term ``engaging' shall not be construed in this Act to include occasional and isolated sales, ortransactions by a person who does not hold himself out asengaged in business." (Italics ours.)

The terms "business" and "engaging" are each defined by the act, but still not made definite enough (in view of paragraph K) to make them perfectly clear. But when we consider article 2 as a whole in connection with the definitions mentioned, it becomes at once apparent that the term "engaging in business" has reference to the person who owns the business, not mere employees. Paragraph A has reference to those persons engaged in mining business, etc.; paragraph B has reference to the various kinds of manufacturing business; paragraph C of wholesale merchandise; paragraph D. of retail merchandise; and paragraph E of several different kinds of businesses; and so on to paragraph K. In every instance the tax is levied against the business of an owner oroperator, and not against the employee acting as manager or agent for the principal who is "engaged in business."

The fact that the general provisions of the act are directed at those engaged in businesses on their own account bears heavily in favor of a construction of paragraph K as being the same character of business, that is, against those engaged in business and not their employees. This would limit the tax in paragraph K to those in the "agency" business and not a person who is employed to operate a business for another. This is indicated further from the fact that this business, and others operated like it, would be subject to a double tax; although one of them would be comparatively small.

It is true, the language literally would indicate an intention to tax the plaintiff, but taking the whole act together, and particularly article 2, we find no intention to tax employees at all and that persons working for ordinary salaries and wages include persons who are working on commission.

It might be stated in passing that chapter 73 of Laws 1935 is not an amendment of the 1934 act, notwithstanding it is the basis of that act. It is a new act entirely, and the fact that certain parts of sections were left out cannot be given as much weight in construing the meaning of the subsequent act as might have been in the case of amendment.

It may be argued that paragraph K of said section 201, as hereinabove quoted, shows that plaintiff's activities as delineated in his complaint come within the literal language thereof unless removed by the statutory definition of the term "engaging" as used in paragraph (g) of section 3, article 1. We believe, however, that he is not "engaged" in the "business" of being an agent, and therefore he is not embraced in the statutory definition heretofore referred to.

The plaintiff confines his agency to the sale of products of Phillips Petroleum Company and does not tender his services as factor, broker, or agent to the public generally as one engaged in the business of being an agent to those who may desire his service as agent. It is specifically admitted by the demurrer that "* * * plaintiff does not in any manner hold himself out to the public as one who is ready or willing to sell the products or commodities of any member of the general public who desires the use of plaintiff's services as a selling agent, but on the contrary this plaintiff acts solely in the name of and in behalf of Phillips Petroleum Company."

Plaintiff admits he is an agent. A clerk in a store who is paid for his services on a commission basis is the same type of agent. A manager of a store or an integrated business belonging to some one else, whose compensation is based on a commission determined either by the profit or the gross sales, is likewise an agent of the owner of the business in the same sense that Comer is agent for Phillips Petroleum Company. Each of those enumerated by way of analogy is engaged as agent for his principal on a commission basis, yet neither holds himself out as engaged in the business of being agent.

We do not believe that it was the intention of the Legislature to tax employees whose compensation is computed on a percentage of the business done. This is clear from a reading of Laws 1934 (Sp. Sess.) c. 7, article 2, § 212 (d); Laws 1935, c. 73, article 2, § 212 (d), wherein we find an exemption from the taxes imposed by the act upon "income received in the form of ordinary wages or salaries." Ordinary wages or salaries need not necessarily be in a fixed, predetermined, or round sum. Ordinary wages or salaries may likewise be based on the amount of labor expended, goods sold, or income received. There is little difference in status between the local agent of an oil company who receives a flat or fixed salary of $5,000 a year, and the agent whose compensation is determined by a percentage of the gross sales. The income of each may amount to the sum of $5,000 per annum. Each has identical duties to perform. Each is agent for his employer. Each conducts the business in the name of his employer. Their compensation is determined in a different manner. Wages or salaries are compensation for services. In the instant case the demurrer admits that the compensation of the plaintiff is a commission on his sales. However, neither agent is engaged in the business of acting as agent in the broad sense.

If we adopt the narrower view, then every sales girl or manager whose compensation is determined on a commission basis is subject to the tax imposed simply because their compensation is determined upon a percentage of the business done or goods sold instead of a flat salary or wage.

We look to the statute to find out the kind of agent contemplated. If we accept the literal view, we thereby must include every form of agent whose compensation is on a commission basis rather than a fixed salary as those subject to the tax. We believe the Legislature intended taxing only those who areengaged in an agency business, as, for example, real estate agents, fire insurance agents, brokers, factors, etc.

The term "agent" as found in the statute is to be construed in a stricter sense than that commonly given it. "The term is also often used in statutes or constitutional provisions in a more restricted sense than that commonly given it, and, where so used, its significance must generally be determined by a study of the context. The maxim, Noscitur a sociis, will be applied where the word is found in association with others which indicate an intent to give it a limited or particular meaning, but where there is nothing to indicate an intent to employ the term in a limited sense it will be taken in the common and usual sense." 2 C.J.S. p. 1026, Agency, § 1.

The Legislature by associating the word "agent" with "factor" or "broker" indicated the type of agency contemplated to be taxed. The word itself must be determined in the statute by the society it keeps, to wit, brokers and factors.

In finding the words "factor" or "broker" in the same sentence with the word "agent," it is clear that the Legislature intended to limit the meaning of the term "agent" to a particular and circumscribed business, to wit, a general agency business, that is, one not engaged as agent for a single firm or person but one who holds himself out to the public as being engaged in the business of being an agent. "It does not comprehend the broad and general signification of the term, as applied to a person who performs a duty or an act for another. The term agent is understood by its associate terms, captain, owner, master, consignee; it is known by its associates — noscitur a sociis." Childs v. The Brunette, 19 Mo. 518, 522.

The statute contemplates taxing the receipts of one engaged in the agency business as an independent contractor, not as an employee. The plaintiff is the local representative or manager of the Phillips Petroleum Company. The plaintiff acts solely in the name of and in behalf of Phillips Petroleum Company. The record is silent, but we assume that the Phillips Petroleum Company pays all taxes which are due the state under Laws 1935, c. 73, upon the sale of any of its products. As agent or manager of the Phillips Petroleum Company, the plaintiff's acts are considered to be the acts of the principal. Magnolia Petroleum Co. v. Pierce, 132 Okla. 167, 269 P. 1076, 61 A.L.R. 218. He is the servant or employee of his principal.

For the reasons given the cause will be remanded to the district court, with instructions to overrule the demurrer, and proceed in accordance with the views herein expressed.

It is so ordered.

BRICE, J., concurs.

HUDSPETH, C.J., did not participate.