{ "id": 2838944, "name": "HALLIBURTON COMPANY, Petitioner-Appellant, v. PROPERTY APPRAISAL DEPARTMENT, State of New Mexico, Respondent-Appellee", "name_abbreviation": "Halliburton Co. v. Property Appraisal Department", "decision_date": "1975-10-21", "docket_number": "No. 1792", "first_page": "476", "last_page": "481", "citations": [ { "type": "official", "cite": "88 N.M. 476" }, { "type": "parallel", "cite": "542 P.2d 56" } ], "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": "48 N.M. 17", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 1560813 ], "weight": 2, "year": 1944, "opinion_index": 0, "case_paths": [ "/nm/48/0017-01" ] }, { "cite": "80 N.M. 485", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5361171 ], "weight": 2, "year": 1969, "opinion_index": 0, "case_paths": [ "/nm/80/0485-01" ] }, { "cite": "74 N.M. 775", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 2796869 ], "weight": 2, "year": 1965, "opinion_index": 0, "case_paths": [ "/nm/74/0775-01" ] }, { "cite": "247 Iowa 609", "category": "reporters:state", "reporter": "Iowa", "case_ids": [ 4450555 ], "weight": 2, "year": 1956, "opinion_index": 0, "case_paths": [ "/iowa/247/0609-01" ] }, { "cite": "80 N.M. 462", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5360737 ], "weight": 2, "year": 1969, "opinion_index": 0, "case_paths": [ "/nm/80/0462-01" ] }, { "cite": "84 N.M. 114", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 2761893 ], "weight": 3, "opinion_index": 0, "case_paths": [ "/nm/84/0114-01" ] }, { "cite": "82 N.M. 82", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5326963 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nm/82/0082-01" ] } ], "analysis": { "cardinality": 660, "char_count": 16288, "ocr_confidence": 0.829, "pagerank": { "raw": 1.1200628713954125e-07, "percentile": 0.5732477067195809 }, "sha256": "79e3fc3aae8017736867ca4e531058b3fed266abd1e58b915e02e1c789160a3f", "simhash": "1:2d462bda949f9ff2", "word_count": 2557 }, "last_updated": "2023-07-14T21:34:46.516747+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "HERNANDEZ and LOPEZ, JJ., concur." ], "parties": [ "HALLIBURTON COMPANY, Petitioner-Appellant, v. PROPERTY APPRAISAL DEPARTMENT, State of New Mexico, Respondent-Appellee." ], "opinions": [ { "text": "OPINION\nWOOD, Chief Judge.\nThe PAD (Property Appraisal Department \u2014 See \u00a7 72-25-3, N.M.S.A.1953 (Repl. Vol. 10, pt. 2, Supp.1973)) valued, for property tax purposes, certain tangible personal property of the Halliburton Services Division and Welex Division of taxpayer, Halliburton (Halliburton Company). Halliburton protested the notices of value; the director of the PAD denied the protest after a hearing; the taxpayer appeals directly to this Court. Sections 72-25-10, 72-25-11, 72-25-12, N.M.S.A.1953 (Repl. Vol. 10, pt. 2, Supp.1973). Three of the issues are dispositive. They are: (1) PAD\u2019s jurisdiction to value the property, (2) exemption of vehicle mounted equipment from property taxation, and (3) exemption of sales inventories from property taxation.\nPAD\u2019s Jurisdiction\nSection 72-6-4(A)(l)(c), N.M.S.A.1953 (Repl. Vol. 10, pt. 2, Supp.1973) is the applicable statute. It provides for the PAD to determine the assessed value:\n\u201cof the machinery, equipment and other personal property in this state of all resident or nonresident contractors customarily engaged in contracting business which involves the movement and use of such machinery and equipment in more than one [1] county in the state, when such contractors, in the usual course of business, engage in work involving the use of, but not limited to, machinery and equipment commonly used in highway construction and maintenance, industrial building construction, engineering construction, pipeline construction, steel construction, utilities construction, and oil and gas well drilling.\u201d\nHalliburton does not contend that it is not a contractor. It asserts that to be a contractor within the meaning of the statute the contractor must be involved in constructing one of the items named in the statute. It argues that it does not drill oil or gas wells but only provides services for those wells. This contention is based on a misreading of the statute. The contractor\u2019s work must involve the use of, but is not limited to, machinery and equipment commonly used in oil and gas well drilling. The statute, by its terms, does not require Halliburton Company to be the drilling contractor.\nThere is evidence that the Halliburton Services Division cements surface casing to the depth required by state regulatory agencies, performs drill stem tests to help determine whether the well can be productive, cements the production casing and stimulates production either by fracturing or acidizing. There is evidence that Welex Division performs various logging services which are used in determining whether production casing should be set. The logging services are performed after reaching \u201ctotal depth\u201d of the well. Welex also perforates the casing at the production level of the well.\nAll of the foregoing activities are performed prior to production from the well. These activities are performed in the usual course of business; the activities involve the use of machinery and equipment, and this machinery and equipment is commonly used in the course of drilling an oil and gas well.\nAlthough there is conflicting evidence, it was for the director to choose between conflicting inferences. Rust Tractor Co. v. Bureau of Revenue, 82 N.M. 82, 475 P.2d 779 (Ct.App.1970). There being substantial evidence that Halliburton\u2019s activities came within \u00a7 72-6-4(A)(1) (c), supra, the decision of the director that Halliburton was within PAD\u2019s jurisdiction is affirmed. United Veterans Org. v. New Mexico Prop. App. Dept., 84 N.M. 114, 500 P.2d 199 (Ct.App.1972).\nExemption of Vehicle Mounted Equipment\nIncluded within the value determined by the PAD for property taxation purposes was the value of \u201cvehicle mounted machinery and equipment\u201d used in performing the activities previously described in this opinion. The contention is that this machinery and equipment should not have been valued for tax purposes because it is exempt from taxation under \u00a7 64-11-14, N.M.S.A.1953 (2d Repl. Vol. 9, pt. 2, Supp.1973) and \u00a7 72-1-23, N.M.S.A.1953 (Repl. Vol. 10, pt. 2, Supp.1973).\nSection 64-11-14, supra, states:\n\u201cNo vehicle upon which the registration fees provided for in the Motor Vehicle Code have been paid shall be assessed or taxed upon any property assessment rolls in this state for the period for which the fees are paid * *\nSection 72-1-23, supra, states:\n\u201cMotor vehicles registered under the provisions of the Motor Vehicle Code are exempt from property taxation except for mobile homes as defined in section 64-1-8 NMSA 1953.\u201d\nHalliburton purchases vehicular equipment produced by the manufacturer to Halliburton\u2019s specifications. This equipment is delivered to Halliburton in Duncan, Oklahoma. Halliburton then adds the specialized equipment necessary to perform the operations previously referred to in this opinion. The specialized equipment is bolted to the frame of the vehicle\u2019s chassis and, according to the evidence, is permanently mounted. The completed vehicle is then delivered to various locations of Halliburton. When delivered to a Halliburton location in New Mexico the vehicle is registered in New Mexico and registration fees are paid.\nIn denying Halliburton\u2019s claim of exemption, the director ruled that none of the property in question was a motor vehicle as that term is defined in the Motor Vehicle Code. The \u201cproperty in question\u201d is not the cab and chassis of the trucks or the chassis of the trailers; the disagreement is over the equipment mounted on the chassis.\nDefending the director\u2019s ruling, PAD asserts the equipment was special mobile equipment which was not subject to registration under \u00a7 64-3-2, N.M.S.A.1953 (2d Repl. Vol. 9, pt. 2). Special mobile equipment is defined in \u00a7 64-1-12, N.M.S.A.1953 (2d Repl. Vol. 9, pt. 2). Gibbons & Reed Company v. Bureau of Revenue, 80 N.M. 462, 457 P.2d 710 (1969). This definition reads in part: \u201cEvery vehicle not designed or used primarily for the transportation of persons or property and incidentally operated or moved over the highways * * * **\nThe evidence is undisputed that the equipment in question is added to the chassis for the purpose of carrying that equipment to and from drilling sites over the highways. \u201cIncidental\u201d means subordinate, nonessential, as occurring merely by chance or without intention or calculation. Webster\u2019s Third New International Dictionary (1966). The evidence is that the equipment was not incidentally moved over the highways; the equipment is not special mobile equipment under \u00a7 64-1-12, supra.\nPAD contends the equipment mounted on the chassis is not part of the vehicle and therefore not part of a motor vehicle entitled to the exemption. PAD would distinguish between the part of a vehicle necessary for its propulsion and the part unnecessary for propulsion. It states that \u201cvehicle\u201d, as used in our statute \u201cis not intended to include property * * * which is unnecessary to the function of the device in transporting or drawing the property upon a highway.\u201d This contention finds no support in the statutory definitions of \u201cvehicle\u201d and \u201cmotor vehicle\u201d. The definition of these terms in \u00a7 64-1-6, N.M.S.A.1953 (2d Repl. Vol. 9, pt. 2) does not distinguish between the propulsion and non-propulsion parts of a vehicle.\nAccording to the certificates of registration in evidence, the equipment is mounted either on trucks or freight trailers. We need not determine whether the equipment mounted on the trucks was a part of the trucks for purposes of vehicle registration fees. The registration fees for trucks are determined by declared gross weight. Declared gross weight is defined to include maximum gross vehicle weight \u201cat which a vehicle * * * will be operated during the registration period, as declared by the registrant for registration and fee purposes * * Sections 64-11-2 and 64-1-8.1, N.M.S.A.1953 (2d Repl. Vol. 9, pt. 2, Supp.1973). The evidence is undisputed that a gross weight was declared by Halliburton, that the declared gross weight included the mounted equipment and that registration fees were paid on that gross weight. Having paid the registration fees as provided in the Motor Vehicle Code, the equipment mounted on the trucks was exempt from property tax under \u00a7 64 \u2014 11\u2014 14, supra.\nThe registration fee provisions for freight trailers differ from the provisions for trucks. Section 64-11-2, supra, provides for a permanent registration fee \u201cirrespective of their weight\u201d. Accordingly we must determine whether the equipment mounted on the trailers is a part of the trailers. If so, once the permanent registration fee is paid, the trailer, including the equipment which is a part of the trailer, is exempt under \u00a7 64-11-14, supra. Although the equipment is bolted to the trailer, the evidence is that the trailer had no use apart from the equipment, that the equipment is an integral part of the trailer, that the trailer and equipment constitute a single unit and is used as such. See Crown Concrete Company v. Conkling, 247 Iowa 609, 75 N.W.2d 351 (1956). The evidence in this case shows the equipment was a part of the trailer.\nThe director erred in denying the exemption.\nExemption of Sales Inventories\nSection 72-1-22, N.M.S.A.1953 (Repl. Vol. 10, pt. 2, Supp.1973) states:\n\u201cPersonal property in the possession of a person, whether owned by him or not, and held as part of his inventory for sale or resale at wholesale, retail or on consignment is exempt from property taxation except for:\n\u2021 \u2021 \u2021 * * *\n\u201cB. personal property inventories held by a person whose property used in connection with the maintenance of personal property inventories is subject to assessment by the property appraisal department.\u201d\nThis statute was recompiled as \u00a7 72-29-3.2, N.M.S.A.1953 (Int.Supp.1974) by Laws 1974, ch. 92, \u00a7 35.\nHalliburton possesses sales inventories. The PAD valued these inventories for property tax purposes. Halliburton protested; the director overruled the protest. The director ruled that Halliburton came within the exception to the exemption and that the exception did not deprive Halliburton of equal protection of the law.\nTwo requirements must be met before the exception applies. First, Halliburton must have been subject to assessment by PAD. We held Halliburton was subject to assessment by PAD in the first issue of this opinion. Second, Halliburton must have property which is \u201cused in connection with the maintenance of personal property inventories.\u201d Halliburton attacks the sufficiency of the evidence to meet this requirement. Although the evidence on this issue is sparse, we assume, but do not decide, that the evidence is sufficient. We do so because of the equal protection issue.\nSection 72-1-22, supra, provides a general exemption from property taxation of sales inventories. The exception would take the exemption away from Halliburton because Halliburton\u2019s sales inventories are subject to assessment by PAD. Halliburton is subject to assessment by PAD because it is \u201ccustomarily engaged in contracting business which involves the movement and use of * * * machinery and equipment in more than one [1] county in the state * * Section 72-6-4(A)(1)(c), supra.\nThe effect of \u00a7 72-1-22, supra, and \u00a7 72-6-4(A) (l)(c), supra, is that contractors whose machinery and equipment is used in more than one county are subject to property tax on sales inventories and contractors whose machinery and equipment is not used in more than one county are not subject'to property tax on sales inventories.\nThe equal protection issue is whether there is a rational and natural basis for distinguishing between contractors whose machinery and equipment is used in more than one county and contractors whose machinery and equipment is not used in more than one county. Stated another way, is there a substantial difference between contractors operating in more than one county and contractors who do not? Gruschus v. Bureau of Revenue, 74 N.M. 775, 399 P.2d 105 (1965).\nIn considering the equal protection issue we recognize the Legislature possesses great freedom in classifications in the tax field, that Halliburton has the burden of negating every conceivable basis which might support the classification and that unless the classification is clearly arbitrary and capricious we cannot hold the classification unconstitutional. Michael J. Malo of & Co. v. Bureau of Revenue, 80 N.M. 485, 458 P.2d 89 (1969).\nHalliburton asserts a classification based solely on the use of machinery and equipment in more than one county is patently unreasonable. PAD asserts the classification has a reasonable basis because \u201cimposition of tax on the inventories of the contractors referred to in Section 72-6-4 (A) (1) (c), supra, is susceptible to better procedure in order to obtain uniformity and equality in the valuation and assessment of property throughout the state than is imposition of tax on inventories by the county assessor.\u201d Thus PAD defends a classification for tax purposes on the basis of assessment procedures. This does no more than show administrative convenience in arriving at a valuation of the property involved; it does not show a rational basis for taxing inventories of contractors who report value to PAD rather than to the county assessor. Specifically the fact that taxpayers may reasonably be required to report their property values to different government offices because of differences in geographic operations does not provide a reasonable basis for a difference in tax treatment on the values reported.\nPAD also asserts the difference in tax treatment of single county and multi-county contractors is similar to a difference in tax treatment of professional fees and wages. We do not understand this contention. The tax involved here does not distinguish between type of work or type of payment for work performed; the difference in tax treatment applies solely because a contractor crosses a county line.\nAt oral argument the suggestion was made that the difference in tax treatment is based on a difference in \u201csize\u201d of contractors, that a single county contractor would do less business than a multi-county contractor. \u201cSize\u201d is used in the sense of the dollar volume of the contractor, and dollar volume could refer to various items such as gross receipts or value of sales inventories. The argument is spurious. The tax difference with which we are concerned is based solely on whether the contractor crosses a county line in doing business; the statutes which establish the difference in tax treatment are not concerned with \u201csize\u201d of the contractor. Compare Gruschus v. Bureau of Revenue, supra.\nNo conceivable basis has been advanced why a contractor operating in San Juan and Rio Arriba Counties should have its sales inventory subject to the property tax and a contractor who operates only in San Juan County should be exempt from that tax. Compare State v. Sunset Ditch Co., 48 N.M. 17, 145 P.2d 219 (1944).\nThe difference in tax treatment based solely on whether a contractor uses his equipment in more than one county is arbitrary and results in a denial of equal protection of the law. This difference comes about because of the exception from the exemption in \u00a7 72-1-22, supra. Under that statute Halliburton\u2019s sales inventories were subject to property tax because their property was valued by PAD rather than the county assessor. To the extent that valuation by the PAD deprives Halliburton of the exemption, \u00a7 72-1-22, supra, is unconstitutional.\nThe director erred in ruling that taxation of Halliburton\u2019s sales inventory was not barred by the equal protection requirements of the Constitution.\nThe director\u2019s decision and order is set aside. The cause is remanded with instructions to give appropriate notices of this result. Section 72-25-12, N.M.S.A. 1953 (Repl. Vol. 10, pt. 2, Supp.1973).\nIt is so ordered.\nHERNANDEZ and LOPEZ, JJ., concur.", "type": "majority", "author": "WOOD, Chief Judge." } ], "attorneys": [ "Joe R. G. Fulcher, Modrall, Sperling, Roehl, Harris & Sisk, John B. Tittmann, James P. Saunders, Jr., Keleher & McLeod, Albuquerque, for petitioner-appellant.", "Toney Anaya, Atty. Gen., John C. Cook, Joseph T. Sprague, Property Tax Dept., Asst. Attys. Gen., Santa Fe, for respondent-appellee." ], "corrections": "", "head_matter": "542 P.2d 56\nHALLIBURTON COMPANY, Petitioner-Appellant, v. PROPERTY APPRAISAL DEPARTMENT, State of New Mexico, Respondent-Appellee.\nNo. 1792.\nCourt of Appeals of New Mexico.\nOct. 21, 1975.\nJoe R. G. Fulcher, Modrall, Sperling, Roehl, Harris & Sisk, John B. Tittmann, James P. Saunders, Jr., Keleher & McLeod, Albuquerque, for petitioner-appellant.\nToney Anaya, Atty. Gen., John C. Cook, Joseph T. Sprague, Property Tax Dept., Asst. Attys. Gen., Santa Fe, for respondent-appellee." }, "file_name": "0476-01", "first_page_order": 506, "last_page_order": 511 }