{
  "id": 2822767,
  "name": "L. A. PATTEN, Appellant, v. The BUREAU OF REVENUE of the State of New Mexico, Appellee",
  "name_abbreviation": "Patten v. Bureau of Revenue",
  "decision_date": "1974-06-12",
  "docket_number": "No. 1319",
  "first_page": "355",
  "last_page": "358",
  "citations": [
    {
      "type": "official",
      "cite": "86 N.M. 355"
    },
    {
      "type": "parallel",
      "cite": "524 P.2d 527"
    }
  ],
  "court": {
    "name_abbreviation": "N.M. Ct. App.",
    "id": 9025,
    "name": "Court of Appeals of New Mexico"
  },
  "jurisdiction": {
    "id": 52,
    "name_long": "New Mexico",
    "name": "N.M."
  },
  "cites_to": [
    {
      "cite": "200 Or. 640",
      "category": "reporters:state",
      "reporter": "Or.",
      "case_ids": [
        5069485
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      "weight": 2,
      "year": 1954,
      "opinion_index": 0,
      "case_paths": [
        "/or/200/0640-01"
      ]
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    {
      "cite": "145 P.2d 49",
      "category": "reporters:state_regional",
      "reporter": "P.2d",
      "year": 1944,
      "opinion_index": 0
    },
    {
      "cite": "62 Cal.App.2d 466",
      "category": "reporters:state",
      "reporter": "Cal. App. 2d",
      "case_ids": [
        4692045
      ],
      "year": 1944,
      "opinion_index": 0,
      "case_paths": [
        "/cal-app-2d/62/0466-01"
      ]
    }
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  "last_updated": "2023-07-14T22:44:27.328252+00:00",
  "provenance": {
    "date_added": "2019-08-29",
    "source": "Harvard",
    "batch": "2018"
  },
  "casebody": {
    "judges": [
      "HENDLEY and SUTIN, JJ., concur."
    ],
    "parties": [
      "L. A. PATTEN, Appellant, v. The BUREAU OF REVENUE of the State of New Mexico, Appellee."
    ],
    "opinions": [
      {
        "text": "OPINION\nWOOD, Chief Judge.\nThe issue in this gross receipts tax case is whether Patten\u2019s activities amounted to \u201csevering,\u201d as that word is used in the applicable statute.\nBy contract, Patten engaged in mining activities at the location known as Continental No. 1 on property of United States Smelting Refining and Mining Company near Fierro, New Mexico. Unless exempted, these activities were a construction service and the receipts derived from the activities were taxable under our gross receipts law. See \u00a7\u00a7 72-16A-3, \u00b6\u00b6 C(11), E, and K, and 72-16A-4, N.M.S.A.1953 (Repl.Vol. 10, pt. 2, Supp.1973). Section 72-16A-12.23, N.M.S.A.1953 (Repl.Vol. 10, pt. 2, Supp.1973) states that when a privilege tax is imposed by the Resources Excise Tax Act, that act applies and determines the \u201cfull measure\u201d of tax liability for the privilege of engaging in the business stated in the act.\nThe Resources Excise Tax Act is compiled as \u00a7\u00a7 72-16A-20 through 72-16A-29, N.M.S.A.1953 (Repl.Vol. 10, pt. 2, Supp. 1973). Patten\u2019s mining activities were in connection with copper ore and, thus, in connection with a natural resource. Section 72-16A-22(B), supra. His activities were in connection with natural resources \u201cowned by another person.\u201d The \u201cservice tax\u201d provided by \u00a7 72-16A-25, supra, has been paid.\nThe service tax, however, is applicable only if Patten\u2019s receipts resulted from the \u201csevering or processing\u201d of a natural resource. Patten claims his activities amounted to \u201csevering,\u201d that his receipts were subject to the service tax (which is a privilege tax under \u00a7 72-16A-25, supra), and, thus, \u00a7 72-16A-12.23, supra, exempts his receipts from the gross receipts tax. The Commissioner of Revenue disagreed and denied Patten\u2019s protest of the Bureau\u2019s assessment of gross receipts tax, penalty and interest for the audit period involved. Patten appeals the Commissioner\u2019s decision.\nPatten\u2019s records, examined by the Bureau auditor, included \u201csettlement sheets\u201d from the mining company and general ledger postings. These records distinguished \u201cdevelopment\u201d work from mining. The auditor testified that he discussed development work with Patten. According to the auditor, Patten stated development work \u201cwas different from mining because it was more or less digging toward the ore body and the way I understood it, they had to dig toward a big ore body in order to get the ore out.\u201d\nThe tax assessment is based on Patten\u2019s receipts for development work. The Bureau\u2019s position is that development work does not amount to \u201csevering\u201d a natural resource, thus, the service tax is not applicable and the gross receipts tax applies to the receipts from development work.\nThe practical difference between the two positions is the tax rate applicable to the receipts involved. Compare \u00a7 72-16A-4, supra, with \u00a7 72-16A-23, supra.\nCertain mining industry terms require explanation. An exhibit introduced by Patten, not contradicted, defines a \u201cshaft\u201d as a vertical or inclined excavation in a mine extending downward from the surface or from some interior point as a principal opening through which the mine is exploited. A \u201cdrift\u201d is a horizontal opening in or near an ore body and parallel to the course of a vein or long dimension of the ore body. See Empire Star Mines Co. v. Butler, 62 Cal.App.2d 466, 145 P.2d 49 (1944). A \u201cwinze\u201d is a vertical or inclined opening sunk from a point inside a mine for the purpose of connecting with a lower level or of exploring the ground for a limited depth below a level. A \u201craise\u201d is a vertical or inclined opening driven upward from a level to connect with the level above, or to explore the ground for a limited distance above one level. The Bureau defines an \u201cadit\u201d as a horizontal passage used for access, haulage, drainage, ventilation and similar items. See Kramer v. Taylor, 200 Or. 640, 266 P.2d 709 (1954). According to the evidence, a \u201cstope\u201d is an irregularly shaped room inside the mine.\nThe evidence is undisputed that the Continental No. 1 is an old mine; that a preexisting shaft was not involved in Patten\u2019s workings. The evidence is also undisputed that there was a preexisting adit which Patten used but on which Patten did no work. The evidence is also undisputed that none of Patten\u2019s work involved driving or digging a prospect drift; that is, a drift in search of ore.\nPatten\u2019s development work did involve the driving or digging of drifts, some raises and possibly a winze. The tax assessment is based on receipts from this development work. Receipts from \u201cmining\u201d were receipts received for removing ore from a \u201cstope.\u201d The Bureau does not claim that receipts from stoping are subject to the gross receipts tax.\nThe evidence is undisputed that the drifts, raises and winze were dug or driven into a known ore body that had been previously located by the mining company; that Patten\u2019s first penetration was into the ore body. Material removed during the development work was not distinguished from material removed from stopes. Total material removed from all work exceeded 183,000 tons. Only 1,000 tons of this material were not processed at the mining company\u2019s mill.\nThe evidence is undisputed that after penetrating the ore body by digging drifts, the drifts were expanded into stopes so that eventually the drifts were gone; that as a result, the area mined by Patten is \u201cjust one big room.\u201d\nSection 72-16A-22(H), supra, defines \u201csevering\u201d to mean \u201cmining, quarrying, extracting, felling or producing any natural resource in New Mexico for sale, profit or commercial use.\u201d The undisputed evidence is that Patten\u2019s development work extracted a natural resource in New Mexico; no claim is made that this was not done for profit or commercial use.\nThe Bureau\u2019s response to the undisputed evidence showing a \u201csevering\u201d goes both to the facts and the law.\nThere is evidence that development work is different than \u201cmining\u201d or \u201cstope\u201d work. The area being worked differs in size; the method of working the area is different. There is evidence that development work is paid by the linear foot while stope work is paid on the basis of tonnage and at a lesser rate than development work. The differential in the price paid is explained; development work is paid higher because of its more limited work area and the requirements of that work. If development work was paid at the same rate as stope work, Patten \u201ccouldn\u2019t make any money or couldn\u2019t even break even.\u201d\nConceding the above differences between development work and stope work, they do not show that the development work in this case was not \u201csevering\u201d as defined in \u00a7 72-16A-22(H), supra. Specifically, the evidence of differences between development work and stope work does not raise a conflict in the evidence. The undisputed evidence, referred to above, is that Patten\u2019s development work was \u201csevering\u201d under the statute.\nConcerning the law, the Bureau\u2019s position is that development work which comes within the definition of construction in \u00a7 72-16A-3(C) (11), supra, cannot be considered as severing because it was not a part of the business of severing. The undisputed evidence answers this; severing was taking place as the development work was performed. In this case none of Patten\u2019s work was preliminary to or preparatory for severing. The initial penetration was into a known ore body.\nThe Bureau contends that if Patten\u2019s development work is severing, then construction work in mines has been effectively eliminated from the gross receipts tax law. Its position is that development work amounting to construction, as defined in \u00a7 72-16A-3(C)(ll), supra, is a phase of mining which must be considered separate and distinct from severing. Thus, the Bureau would limit the statutory definition of severing to the extraction of a natural resource not involving construction.\nAssuming that all of Patten\u2019s receipts for development work were receipts for construction, the issue in this case is whether an exemption applies. The exemption provided by \u00a7 72-16A-12.23, supra, applies in this case if Patten\u2019s development work was severing as defined in \u00a7 72-16A-22(H), supra. Contrary to the Bureau\u2019s position, all receipts from development work, which is also \u201cconstruction,\u201d are not exempted. There may be receipts from construction work not amounting to severing.\nThe undisputed evidence is that Patten\u2019s development work was severing. Because the work was severing, receipts from the development work were exempted from the gross receipts tax.\nThe Commissioner\u2019s Decision and Order is reversed because not supported by substantial evidence. Section 72-13-39 (D) (2), N.M.S.A.1953 (Repl.Vol. 10, pt. 2, Supp. 1973).\nPatten is to recover his costs on appeal. See Rule 27 of Rules Governing Appeals.\nIt is so ordered.\nHENDLEY and SUTIN, JJ., concur.",
        "type": "majority",
        "author": "WOOD, Chief Judge."
      }
    ],
    "attorneys": [
      "Wayne D. Calderwood, Las Vegas, for appellant.",
      "David L. Norvell, Atty. Gen., Vernon O. Henning, Bureau of Revenue, Asst. Atty. Gen., Santa Fe, for appellee."
    ],
    "corrections": "",
    "head_matter": "524 P.2d 527\nL. A. PATTEN, Appellant, v. The BUREAU OF REVENUE of the State of New Mexico, Appellee.\nNo. 1319.\nCourt of Appeals of New Mexico.\nJune 12, 1974.\nRehearing Denied July 1, 1974.\nWayne D. Calderwood, Las Vegas, for appellant.\nDavid L. Norvell, Atty. Gen., Vernon O. Henning, Bureau of Revenue, Asst. Atty. Gen., Santa Fe, for appellee."
  },
  "file_name": "0355-01",
  "first_page_order": 385,
  "last_page_order": 388
}