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Keywords

statutelease
appealtrialplealease

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Arizona Dept. of Revenue v. Mountain States Tel. & Tel. Co., 113 Ariz. 467, 556 P.2d 1129

Facts

Mountain Bell, primarily engaged in providing telephone communication services, made an isolated sale of a telephone communications system and a short-term lease of a switcher to the U.S. Army. This sale and lease were the only such transactions conducted by Mountain Bell in Arizona in several years, and they were not part of its regular business activities. The State Tax Commission assessed taxes on these transactions, leading Mountain Bell to file a suit for recovery after paying the taxes under protest.

The State Tax Commission assessed a transactional privilege and education excise tax of $3,172.28 against Mountain States Telephone and Telegraph Company (Mountain Bell) on the sale and lease of telephone equipment to the United States Government, Department of the Army. Mountain Bell paid the taxes under protest and filed suit in Superior Court for their recovery.

Issue

Are the sale and lease transactions exempt 'casual activities or sales' under A.R.S. s 42—1301(1)?

Although more than one issue is raised by the pleadings in the trial court and by the parties on appeal, we believe the answer to one question is dispositive of this matter: Are the sale and lease transactions exempt ‘casual activities or sales' under A.R.S. s 42—1301(1)?

Rule

'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 directly or indirectly, But not casual activities or sales.

'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 directly or indirectly, But not casual activities or sales.' (Emphasis supplied)

Analysis

The court determined that Mountain Bell's sale of the telephone system and lease of the switcher were unanticipated and isolated transactions, not part of its regular business of providing telephone services. The court referenced previous cases to support the conclusion that these transactions qualified as 'casual sales' under the relevant statute, thus exempting them from the transaction privilege tax.

We think Selby, supra, is dispositive of this case. The facts submitted by the parties clearly support the conclusion that Mountain Bell made an unanticipated and isolated sale of its equipment to the United States Government. We cannot say that Mountain Bell is in the business of selling telephone communications equipment on the basis of one sale. This was a ‘casual sale’ within the meaning of A.R.S. s 42—1301(1) and is not subject to the transaction privilege tax under A.R.S. s 42—1312.

Conclusion

The Supreme Court affirmed the lower court's judgment in favor of Mountain Bell, concluding that the transactions were exempt from the transaction privilege tax.

Affirmed.

Who won?

Mountain States Telephone and Telegraph Company (Mountain Bell) prevailed because the court found that the sale and lease were casual transactions not subject to the transaction privilege tax.

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