121 P.2d 646 | Ariz. | 1942
This action was brought by the Valley National Bank of Phoenix, a national banking association, against the State Tax Commission seeking a declaratory judgment as to whether it should pay a sales tax on rentals it has collected and proposes to collect from tenants of offices in the Security Building located in Phoenix. It acquired said building on December 23, 1938, in the ordinary course of its banking operations and, as an incident of ownership and possession, leases space in the building and collects rent therefor. The federal statute,
The State Tax Commission feels that plaintiff should pay the tax since it is nondiscriminatory and is imposed by a general law to obtain revenue for the state to operate on. Sections 73-1301 to 73-1334, Arizona Code 1939. Section 73-1303, subdivision (f) 2, lays a 2% tax on the gross income or receipts of rentals. Plaintiff denies the right of the state to collect of it such tax on the ground that it was organized for and is used by the government in the operation of its governmental functions and is an instrumentality of the government. This contention was sustained by the trial court. The tax commission has appealed. We are asked to decide which is right. *541
[1] We should state that the plaintiff is an agent or instrumentality of the United States. This has been settled ever since McCulloch v. Maryland, 4 Wheat. 316,
[2, 3] The reason that the state may not tax an instrumentality of the United States, or the national government the instruments employed by the state in carrying on its functions, is that each may administer its own affairs within its own sphere and be left free from undue interference by the other. A discussion of the question as to whether the tax here demanded would interfere with the administration of the government is not necessary for the reason that it is controlled by statute (section 5219, Revised Statutes United States;
"This section [5219], then, of the Revised Statutes is the measure of the power of a state to tax national banks, their property, or their franchises. By its unambiguous provisions the power is confined to a taxation of the shares of stock in the names of the shareholders and to an assessment of the real estate of the bank. Any state tax, therefore, which is in excess of, and not in conformity to, these requirements, is void."
See, also, First National Bank of Albuquerque v. Albright,
At the trial the attorney general, to sustain the tax commission's contention, relied upon a decision of the Supreme Court of North Dakota in the case of Federal Land Bank v.Bismarck Lumber Co.,
Since the plaintiff is a governmental instrumentality and the tax is not permitted under section 5219, supra, it follows by parity of reasoning that it is exempt from paying the sales tax on rentals from the Security Building.
The judgment of the lower court is affirmed.
LOCKWOOD, C.J., and McALISTER, J., concur.