{ "id": 1568771, "name": "STREBECK PROPERTIES, INC., Appellant, v. NEW MEXICO BUREAU OF REVENUE, Appellee", "name_abbreviation": "Strebeck Properties, Inc. v. New Mexico Bureau of Revenue", "decision_date": "1979-03-20", "docket_number": "No. 3611", "first_page": "262", "last_page": "269", "citations": [ { "type": "official", "cite": "93 N.M. 262" }, { "type": "parallel", "cite": "599 P.2d 1059" } ], "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": "93 N.M. 252", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 1568733 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nm/93/0252-01" ] }, { "cite": "476 P.2d 850", "category": "reporters:state_regional", "reporter": "P.2d", "opinion_index": 0 }, { "cite": "106 Ariz. 394", "category": "reporters:state", "reporter": "Ariz.", "case_ids": [ 4210353 ], "weight": 3, "year": 1970, "opinion_index": 0, "case_paths": [ "/ariz/106/0394-01" ] }, { "cite": "277 N.Y.S.2d 869", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1967, "opinion_index": 0 }, { "cite": "27 A.D.2d 215", "category": "reporters:state", "reporter": "A.D.2d", "case_ids": [ 5546854 ], "year": 1967, "opinion_index": 0, "case_paths": [ "/ad2d/27/0215-01" ] }, { "cite": "82 N.Y.S.2d 572", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1948, "opinion_index": 0 }, { "cite": "191 Misc. 884", "category": "reporters:state", "reporter": "Misc.", "case_ids": [ 939735 ], "year": 1948, "opinion_index": 0, "case_paths": [ "/misc/191/0884-01" ] }, { "cite": "503 P.2d 626", "category": "reporters:state_regional", "reporter": "P.2d", "year": 1972, "opinion_index": 0 }, { "cite": "31 Colo.App. 316", "category": "reporters:state", "reporter": "Colo. App.", "year": 1972, "opinion_index": 0 }, { "cite": "262 N.W.2d 467", "category": "reporters:state_regional", "reporter": "N.W.2d", "case_ids": [ 10688950 ], "opinion_index": 0, "case_paths": [ "/nw2d/262/0467-01" ] }, { "cite": "91 N.M. 215", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 1571118 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nm/91/0215-01" ] }, { "cite": "80 N.M. 48", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5361430 ], "weight": 2, "pin_cites": [ { "page": "51" }, { "page": "937" } ], "opinion_index": 0, "case_paths": [ "/nm/80/0048-01" ] }, { "cite": "85 N.M. 565", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 2768245 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nm/85/0565-01" ] }, { "cite": "87 N.M. 259", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 2832993 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nm/87/0259-01" ] }, { "cite": "11 Utah 2d 164", "category": "reporters:state", "reporter": "Utah 2d", "case_ids": [ 8862638 ], "weight": 3, "year": 1960, "pin_cites": [ { "page": "286" } ], "opinion_index": 1, "case_paths": [ "/utah-2d/11/0164-01" ] }, { "cite": "93 Idaho 367", "category": "reporters:state", "reporter": "Idaho", "case_ids": [ 4442451 ], "weight": 2, "year": 1969, "opinion_index": 1, "case_paths": [ "/idaho/93/0367-01" ] }, { "cite": "83 N.M. 105", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5336476, 5331239 ], "weight": 2, "year": 1971, "opinion_index": 1, "case_paths": [ "/nm/83/0105-01", "/nm/83/0105-02" ] }, { "cite": "83 N.M. 110", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5336665 ], "weight": 2, "opinion_index": 1, "case_paths": [ "/nm/83/0110-01" ] }, { "cite": "29 L.Ed.2d 134", "category": "reporters:federal", "reporter": "L. Ed. 2d", "opinion_index": 1 }, { "cite": "91 S.Ct. 1655", "category": "reporters:federal", "reporter": "S. Ct.", "opinion_index": 1 }, { "cite": "402 U.S. 969", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11765320, 11765273, 11765376, 11765440 ], "opinion_index": 1, "case_paths": [ "/us/402/0969-02", "/us/402/0969-01", "/us/402/0969-03", "/us/402/0969-04" ] }, { "cite": "81 N.M. 772", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5360353, 5370506, 5370471 ], "weight": 2, "year": 1970, "opinion_index": 1, "case_paths": [ "/nm/81/0772-02", "/nm/81/0772-01", "/nm/81/0772-03" ] }, { "cite": "81 N.M. 724", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5367243 ], "weight": 2, "opinion_index": 1, "case_paths": [ "/nm/81/0724-01" ] }, { "cite": "63 N.M. 185", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 2778174 ], "weight": 2, "year": 1957, "opinion_index": 1, "case_paths": [ "/nm/63/0185-01" ] } ], "analysis": { "cardinality": 1057, "char_count": 28066, "ocr_confidence": 0.786, "pagerank": { "raw": 5.0011153170616546e-08, "percentile": 0.31327038757858083 }, "sha256": "e722f376effc34cc01e613194dd9a2814b9c727d5da545ba29f347bf55408ac1", "simhash": "1:8269cc0af0af8a57", "word_count": 4610 }, "last_updated": "2023-07-14T15:53:36.909287+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "WOOD, C. J., concurs.", "ANDREWS, J., dissents." ], "parties": [ "STREBECK PROPERTIES, INC., Appellant, v. NEW MEXICO BUREAU OF REVENUE, Appellee." ], "opinions": [ { "text": "OPINION\nWALTERS, Judge.\nAppellant (Strebeck) conducts a 24-hour coin-operated laundry business in Clovis. The washers and dryers were purchased in another state and installed by Strebeck at its Clovis location. The business is operated as many laundromats are: the premises are not usually attended by any Strebeck employees; customers bring clothes to be washed and dried, select a machine or machines to be used, deposit the necessary coins required to make the machine(s) operate, and remove the clothes when the washing or drying operation is complete. No personal services are performed for customers by Strebeck. Strebeck pays the New Mexico Gross Receipts Tax on the proceeds received from the machines.\nUpon these facts, not disputed on appeal or in the record, and after an audit for the period of April, 1974 through June 30, 1977, the New Mexico Bureau of Revenue (Bureau), assessed a compensating tax under \u00a7 72-16A-7, N.M.S.A. (1953) [now \u00a7 7-9-7, N.M.S.A. (1978)]. Strebeck filed a protest arguing that since its equipment was leased, it was entitled to the deduction provided in \u00a7 72-16A-15.1, N.M.S.A. (1953) [now \u00a7 7-9-78, N.M.S.A.1978)]. The protest was denied by the Bureau\u2019s Hearing Examiner and Strebeck timely appealed.\nThe Decision and Order of the Bureau included the following paragraphs:\n4. As stated by taxpayer, the issue in the case is the application of \u00a7 72-16A-15.1, N.M.S.A. (1953) [now \u00a7 7-9-78, N.M.S.A.1978], which provides:\nThe value of tangible personal property, other than furniture or appliances furnished as part of a leased or rented dwelling house or apartment by the landlord or lessor, and other than mobile homes as defined in \u00a7 64-1-8, N.M.S.A.1953, may be deducted in computing the compensating tax due if the person using the tangible personal property:\nA. is engaged in a business which derives a substantial portion of its receipts from leasing or selling tangible personal property of the type leased; and\nB. does not use the tangible personal property in any manner other than holding it for lease or sale, or leasing or selling it either by itself or in combination with other tangible personal property in the ordinary course of business.\n5. The taxpayer contends it \u201cleases\u201d its coin-operated machines to its customers and relies on the definition of leasing as defined in \u00a7 72-16A-3(J) (which language is repeated in instructions which accompany blank CRS-1 reports).\n6. At the hearing, it was contended that the taxpayer makes no \u201cuse\u201d of the imported machines; the only \u201cuse\u201d of the machines is by customers of the taxpayer. Under the definition of \u201cuse\u201d in \u00a7 72-16A-3(L), it is concluded that this taxpayer used the machines.\n7. Is this taxpayer entitled to the deduction authorized in \u00a7 72-16A-15.1, which provides for a deduction from compensating tax, if the taxpayer is engaged in leasing the imported property to its customers? \u201cLeasing\u201d is defined in \u00a7 72-16A-3(J):\n\u201cLeasing\u201d means any arrangement whereby, for a consideration, property is employed for or by any person other than the owner of the property;\nA Bureau Regulation (G.R. Regulation 3(J):1) points out in the following example, that a license to use is not a lease:\nExample 1: W Company leases ten coin-operated washing machines to the Parkdale Apartments. W claims that since Parkdale\u2019s tenants will in turn lease the machines for their own use, the receipts it receives from the transaction may be deducted under \u00a7 72-16A-14.5, p. 85, which allows a deduction for property leased for subsequent leasing. W may not deduct these receipts because Parkland\u2019s tenants are not leasing the washing machines. See G.R. Regulation 14.5:2, p. 85.\nThe parties agree that the sole issue to be resolved on appeal is whether Strebeck leased the use of its machines to its customers, qualifying it for the statutory deduction. The Bureau maintains that the laundromat operation constituted a license to the users, and imposition of the tax was correct.\nThe Bureau recognized that Strebeck claimed its deduction under \u00a7 72-16A-15.1 (see quoted Paragraph 4 above). It applied a Bureau regulation (see quoted Paragraph 7 above), which refers to the \u201cleasing\u201d definition of \u00a7 72-16A-3(J) [now \u00a7 7-9-3(J), N.M.S.A. (1978)], and cited the example thereunder illustrating a claimed deduction under \u00a7 72-16A-14.5, N.M.S.A. (1953) [now \u00a7 7-9-50, N.M.S.A. (1978)], which provides a deduction from gross receipts tax for receipts on tangible property ieased for subsequent leasing. Neither the tax referred to in that section, nor the manner of acquisition of the tangible property, nor the illustration relied on by the Bureau has any application to the facts of this case.\nExample 1 shown in Paragraph 7 of the Bureau\u2019s decision does not reach the \u201clicense-lease\u201d distinction claimed by the Bureau. It does refer to G.R. Regulation 14.5:2 which, again, is a regulation applicable to a gross receipts tax deduction under \u00a7 72-16A-14.5 for receipts from leasing property that is to be subsequently leased by the first lessee. That regulation is entitled \u201cLease vs. License to Use,\u201d and the examples cited thereunder, even though concerned with gross receipts tax, may be instructive on the question of license or lease:\nG.R. REGULATION 14.5:2 \u2014 LEASE vs. LICENSE TO USE\u2014\nReceipts of a person who is a lessor of tangible personal property from leasing tangible personal property to a lessee who grants a license to use the leased items of tangible personal property to a third party may not be deducted from gross receipts pursuant to this section. However, the deduction will be allowed if the lessor has accepted a non-taxable transaction certificate from the buyer in good faith that the property would be used in a non-taxable manner. [Emphasis supplied.]\nIf the lessee delivering the nontaxable transaction certificate does not use the property in a nontaxable manner, the Compensating Tax is due.\nExample 1: Television Leasing, Inc., leases television sets to X Motel to place in the rooms of their guests. X Motel delivers a nontaxable transaction certificate to Television Leasing, Inc., pursuant to this section. X Motel may not properly deliver a nontaxable transaction certificate pursuant to this section because it is not subsequently leasing the television sets to its guest in the ordinary course of business; rather, it is granting its guests a license to use the television sets.\nExample 2: X Bowling Equipment Company leases bowling equipment to a local bowling alley which in turn grants its customers a license to use that equipment. The local bowling alley may not deliver nontaxable transaction certificate to X Bowling Equipment Company pursuant to this section because the lease of the equipment is not for subsequent lease. See G.R. REGULATION 3(J):1, p. 22.\nExample 3: X is in the business of selling and leasing golf carts. Y, a country club, leases a golf cart from X and permits golfers to use it for a consideration. X\u2019s receipts from leasing the golf cart may not be deducted from gross receipts pursuant to Section 72-16A-14.5, because Y is not subsequently leasing the golf cart to golfers, but is merely granting a license to use the golf cart.\nG.R. Regulation 14.5:1 was not referred to by the Bureau in its decision but it, too, may shed some light on the Bureau\u2019s interpretations of such a transaction as it considers a lease. It reads:\nG.R. REGULATION 14.5:1 \u2014 GENERAL EXAMPLES\u2014\nThe following examples [sic] illustrate the application of Section 72-16A-14.5 in various situations:\nExample 1: The H Tool Company manufactures fishing tools for use in the oil field. H leases these tools to J Rental Company which in turn rents the tools to the P Drilling Company. If the J Rental Company delivers a nontaxable transaction certificate to H, H may deduct the amount of its rental from its gross receipts.\nUnlike the country club in Example 3 of G.R. Regulation 14.5:2 (dealing with gross receipts tax deductions), Strebeck customers do not conduct a larger business to which laundromat equipment is merely incidental; nor are they like the motel owners who lease television sets simply to provide an additional service to customers for the benefit of the principal business of renting rooms; nor do they fall into the same category as bowling alley operators who occasionally rent shoes and bowling balls and other bowling incidentals for the convenience of some of the customers of the alleys. All of those illustrations are concerned with operators of larger businesses providing services to their customers which are incidental to the principal businesses conducted. For purposes of being excused from payment of gross receipts tax, the supplier of such equipment to the business owner or operator is not considered to be leasing for re-lease.\nThe greater problem, however, is that (although Regulation 14.5:2 refers indiscriminately to \u201clessee\u201d and \u201cbuyer\u201d) all of the illustrations are concerned with a lessor\u2019s liability for gross receipts tax on the lease price received from one who, in turn uses the merchandise in a leasing business and delivers to the first lessor a nontaxable transaction certificate. Those illustrations are not concerned with a purchaser-lessor\u2019s obligations to pay a compensating tax if the seller-supplier is an out-of-state merchant, and the purchaser uses the merchandise in a New Mexico leasing business. We do not find the Bureau\u2019s regulations helpful because they are directed toward a dissimilar section of the Act. Our inquiry is whether Strebeck is entitled to the deduction from compensating tax liability for the \u201cvalue of tangible personal property . . [used by a person who]: A. is engaged'in a business which derives a substantial portion of its receipts from leasing tangible personal property of the type leased; and B. does not use the tangible personal property in any manner other than holding it for lease ... in the ordinary course of business.\u201d \u00a7 7-9-78, N.M.S.A. (1978).\nThe Bureau relied on the definition of \u201cleasing\u201d as set forth in its G.R. Regulation 3(J):1 to deny that appellant was leasing the washing and drying machines (see Paragraph 7 of the Bureau\u2019s decision quoted above), and concluded that Strebeck \u201cused\u201d the equipment as defined in \u00a7 72-16A-3(L) [now \u00a7 7-9-3(L), N.M.S.A. (1978)].\nExample 1 of G.R. Regulation 3(J):1 is not in point. It is concerned with W Company\u2019s gross receipts tax liability and thus illustrates the provisions of \u00a7 72-16A-14.5 [now \u00a7 7-9-50], \u201cDeduction; gross receipts tax; lease for subsequent lease,\u201d not with \u00a7 72-16A-15.1 [now \u00a7 7-9-78]: \u201cDeductions; compensating tax; use of tangible personal property for leasing.\u201d Secondly, the claim of Parkland\u2019s \u201csubsequent lease\u201d of washing machines to its tenants falls because it is not in the \u201cordinary course\u201d of Parkland\u2019s business, but is merely incidental to its principal and \u201cordinary\u201d business of renting apartments. Finally, in justification of the last sentence of Example 1, and from the standpoint of W\u2019s liability for gross receipts tax, Parkland\u2019s tenants indeed are not leasing from W Company. This example is not of assistance in resolving the compensating tax liability of one in the shoes of Strebeck, an owner who purchases equipment out of state for the sole purpose of making its use available directly to its own New Mexico customers, not to the users of the entity to whom it first leases the property.\nThe second example of G.R. Regulation 3(J):1 was not cited nor quoted by the Bureau. It reads:\nExample 2: C, a Texas contractor, enters into a contract for a road construction job in New Mexico. When he enters New Mexico to begin construction, he brings with him ten pieces of heavy equipment. But for the short time that he will require this equipment and giving thought to his future needs, C purchases three of the pieces and rents the other seven from the Heavy Equipment Leasing Corporation in Dallas, Texas. C consults the Bureau of Revenue as to the Compensating Tax liability. C must pay Compensating tax on the value of the three pieces he owns, but there is no liability for Compensating Tax of the rental equipment. The rental received by H.E.L.C. is subject to the Gross Receipts Tax. It is not a receipt from the sale of construction services and is therefore not subject to the deduction permitted by Section 72-16A-14.7, p. 88.\nThe Bureau summarily concludes that the Texas contractor in the example is not liable for compensating tax on the seven pieces of equipment rented from a Dallas leasing company and used in construction of a New Mexico road. No statutory authority is cited but since the contractor is not re-leasing the equipment to another in New Mexico, it is clear that \u00a7 7-9-78 \u201c . use of tangible personal property for leasing\u201d (the section with which this case is concerned), does not provide the basis for that portion of the Bureau\u2019s interpretation.\nParagraph 6 of the Bureau\u2019s order and decision concludes that Strebeck \u201cused the machines according to the definition of \u201cuse\u201d found in \u00a7 72-16A-3(L) [now \u00a7 7-9-3(L), N.M.S.A. (1978)]:\nL. \u201cuse\u201d or \u201cusing\u201d includes use, consumption or storage other than storage for subsequent sale in the ordinary course of business or for use solely outside this state.\nThat conclusion ignores the statutory definition of \u201cuse\u201d as specifically expanded in the portion of the Act pertinent to Strebeck\u2019s protest. Subsection B of \u00a7 72-16A-15.1 [now \u00a7 7-9-78], grants the deduction if the one using the property for leasing \u201cdoes not use [or consume or store] the tangible personal property in any manner other than holding it for lease or sale . . . (Our emphasis.)\nThe statute under which Strebeck sought its deduction, \u00a7 72-16A-15.1 [now \u00a7 7-9-78], is also interpreted by Bureau Regulation. For some reason, the Director did not refer to it in his decision and order. In its entirety, that regulation specifies:\nG.R. REGULATION 15.1:2 \u2014 GENERAL EXAMPLES\u2014\nThe following examples illustrate the application of Section 72-16A-15.1 in various situations:\nExample 1: E, a New Mexico corporation, is solely engaged in the business of leasing electric typewriters to a business establishment in New Mexico. E purchases a typewriter in Texas to hold for lease in the ordinary course of its business. It does not use the typewriter in any other manner. E may deduct the value of the typewriter in computing its Compensating Tax due. Compare G.R. REGULATION 3(L):1, Example 1, p. 24. Example 2: E, a Colorado company, buys stoves from A, a Colorado company. E initially uses the stoves in its business in Colorado but later converts their use solely to leasing. E then brings the stoves into New Mexico for purposes of leasing. E asks if the firm is liable for the payment of the Compensating Tax. E is not liable for the Compensating Tax if the stoves are leased to restaurants. If E brings the stoves into New Mexico to be furnished as part of a leased dwelling house of which E is the lessor, E is liable for the Compensating Tax.\nThe use of the property described in the last sentence of Example 2 is that which the statute expressly excludes from deduction. In contrast, the other uses of tangible properties shown by Examples 1 and 2 meet the precise conditions set forth in the statute to permit deduction.\nUnless we are to accept what the Bureau\u2019s illustrations seem to indicate, i. e., that leasing situations which normally are entered into formally and in writing \u2014 lease of oil field equipment, lease of typewriters, lease of restaurant equipment \u2014 are the only kinds of transactions that will be considered leases rather than licenses, we are faced with trying to differentiate the use of Strebeck\u2019s laundromat equipment solely by others from the use of E\u2019s typewriters by business establishments in Example 1, and the restaurants\u2019 use of the Colorado company\u2019s stoves in Example 2 of G.R. Regulation 15.1:2.\nThe issue thus indeed boils down to the Bureau\u2019s judgment that \u201cleasing\u201d as defined in the statute is sufficiently ambiguous to require interpretation by regulatory illustration to distinguish a lease from a mere license. S.S. Kresge Co. v. Bureau of Revenue, 87 N.M. 259, 531 P.2d 1232 (Ct.App.1975), relied on by the Bureau, defined \u201clicense\u201d to mean \u201cpermission to act,\u201d but the court emphasized that the parties to the instrument there had declared in writing that the agreement was not intended to create, nor to be construed as creating, a lease. In New Mexico Sheriffs and Police Ass\u2019n v. Bureau of Revenue, 85 N.M. 565, 514 P.2d 616 (Ct.App.1973), also cited by the Bureau, this court held that a contract granting another the exclusive right to publish, distribute and sell, and solicit advertising for the Association\u2019s official magazine, under which the Association would receive a 16% royalty from advertising receipts only, created a \u201clicense\u201d and proceeds from the license would be subject to gross receipts tax; and it did not provide to the Association the deduction from gross receipts tax available to those receiving income from publishing newspapers or magazines. The question of \u201clease v. license\u201d did not arise, and the case is not helpful on the issue now to be decided.\nIn Transamerica Leasing Corp. v. Bureau of Revenue, 80 N.M. 48, 51, 450 P.2d 934, 937 (Ct.App.1969), where the tax statutes concerned did not define \u201clease,\u201d Judge Wood wrote that \u201c[generally speaking, a lease is an agreement under which the owner gives up the possession and use of his property for a valuable consideration and for a definite term,\u201d at the end of which term \u201cthe owner has the absolute right to retake, control and use the property.\u201d The agreement in that case, although termed a lease, provided that the \u201clessee\u201d would own the property at the end of the term of lease payments upon a final payment of $1.00. The document there was determined to be a security instrument rather than a lease, and the transaction a purchase from the manufacturer by the \u201clessee,\u201d financed by the \u201clessor.\u201d\nThere are no elements of eventual ownership in the users of Strebeck\u2019s equipment which might destroy the categorization of the instant arrangement as a \u201clease.\u201d The reported cases most frequently discuss the lease-license question in connection with real estate, typical of which are Cutter Flying Service, Inc. v. Property Tax Dep\u2019t, 91 N.M. 215, 572 P.2d 943 (Ct.App.1977), and Lee v. North Dakota Park Service, 262 N.W.2d 467 (N.D.1977).\nA few cases have considered and classified the type of arrangement between the owner of coin-operated machines and a property owner who permits them to be installed in his building in consideration of a part of the gross income from , the machines, to be a license, e. g., American Coin-Meter of Colorado Springs, Inc. v. Poole, 31 Colo.App. 316, 503 P.2d 626 (1972); Wash-O-Matic Laundry Co. v. 621 Lefferts Ave. Corp., 191 Misc. 884, 82 N.Y.S.2d 572 (1948). One such case, Bathrick Enterprises, Inc. v. Murphy, 27 A.D.2d 215, 277 N.Y.S.2d 869 (1967), did not decide what the arrangement was, but did declare what it was not. There, the Appellate Division ruled against the Tax Commissioner and held that receipts from coin-operated music machines were not taxable to the owner of the machines under the theory that Bathrick had granted a \u201clicense to use\u201d tangible personal property.\nIn all of the above cited cases, however, the arrangements were unlike the case presently before us, since they dealt with the owner\u2019s placement of his machines in business establishments of others. State Tax Commission v. Peck, 106 Ariz. 394, 476 P.2d 849 (1970), is more directly on point. Peck owned a laundromat in which were installed coin-operated washers and dryers. A co-appellee, Sollberger, owned a business equipped with automatic car-washing machinery. Both owners furnished utilities, including heat and water, for operating their machines, but in both businesses the customers operated the equipment and performed whatever manual activity was necessary to use the facilities. Arizona\u2019s statute imposed a transaction privilege tax on businesses engaged in renting or leasing personal property. The taxpayers in Peck took a position exactly opposite that taken by the taxpayer here, urging that they performed personal services and thus were exempt from the Arizona tax. Justice Udall\u2019s analysis is particularly pertinent to the precise question to be answered here. At 476 P.2d 850-851, he wrote:\nThe major dispute between the parties here concerns the meaning of the terms \u201cleasing\u201d or \u201crenting\u201d as used in [the statute]. The legislature has not defined these terms as they are used in this section, and it does not appear from the context that a special meaning was intended. We must therefore be guided by the ordinary meaning of the words. [Citing cases]\n. Webster\u2019s Third International Dictionary defines the verb \u201cto rent\u201d as \u201c(1) to take and hold under an agreement to pay rent,\u201d or \u201c(2) to obtain the possession and use of a place or article for rent.\u201d There is no question that when customers use the equipment on the premises of the plaintiffs herein, such customers have an exclusive use of the equipment for a fixed period of time and for payment of a fixed amount of money. It is also true that the customers themselves exclusively control all manual operations necessary to run the machines. In our view such exclusive use and control comes within the meaning of the term \u201crenting\u201d as used in the statute.\nIt is plaintiff\u2019s principal contention here that because the equipment is at all times located upon the premises of the plaintiffs, and because the plaintiffs as owners supply the utilities necessary to operate the machines, that the customers do not obtain a requisite degree of control or \u201cpossession\u201d of the equipment. We do not believe that the terms \u201cleasing\u201d or \u201crenting\u201d as used in the statute require that the property so leased or rented be physically capable of being transported from one place to another by the customer. Nor do we believe that the mere attachment of a label such as \u201clicense\u201d, borrowed from other areas of law, can be dispositive of the tax question before us.\nUnder the definition of \u201cleasing\u201d found in our statute, and following the reasoning of State Tax Commission v. Peck, supra, the Bureau was in error in determining that Strebeck \u201cused\u201d and did not \u201clease\u201d property, to deny the deduction. If the regulation adopted by the Bureau creates an exception from exempt transactions which was not contemplated by the legislative act even though such administrative interpretations are entitled to great weight in ascertaining the meaning of the statute, the courts may not give legal sanction to the agency\u2019s incorrect construction of unambiguous statutory language. Miller v. Bureau of Revenue, 93 N.M. 252, 599 P.2d 1049 (Ct.App.1979). The statutory definition of \u201cleasing\u201d needs no interpretation by Bureau regulations.\nThe property of Strebeck is used for a consideration by persons other than the owner, and the transactions, therefore, are \u201cleasings\u201d as defined in \u00a7 7-9-3(J). It follows that Strebeck was entitled to the deduction allowed by \u00a7 72-16A-15.1 [now \u00a7 7-9-78],\nThe decision and order of the Director is reversed; the taxpayer\u2019s claimed deduction is to be allowed.\nIT IS SO ORDERED.\nWOOD, C. J., concurs.\nANDREWS, J., dissents.", "type": "majority", "author": "WALTERS, Judge." }, { "text": "ANDREWS, Judge\n(dissenting).\nI dissent.\nThe sole issue on appeal is whether the taxpayer is entitled to a deduction in computing the compensating tax owed pursuant to \u00a7 7-9-78, N.M.S.A.1978 Comp.- (\u00a7 72-16A-15.1, N.M.S.A.1953 Comp.). This section provides in material part:\nThe value of tangible personal property, . . may be deducted in computing the compensating tax due if the person using the tangible personal property:\nA. is engaged in a business which derives a substantial portion of its receipts from leasing, . . tangible personal property of the type leased; and\nB. does not use the tangible personal property in any manner other than holding it for lease ... or leasing . it either by itself or in combination with other tangible personal property in the ordinary course of business. (Emphasis added.)\nIf the taxpayer\u2019s customers \u201clease\u201d the washers and dryers, the taxpayer is entitled to the deduction. If the taxpayer\u2019s customers \u201cuse\u201d the washing machines but the \u201cuse\u201d does not constitute a \u201clease\u201d within the meaning of the Compensating Tax Act, the taxpayer is not entitled to a deduction.\nThe term \u201cleasing\u201d is defined in the Compensating Tax Act, \u00a7. 7-9-3(J), N.M.S.A. 1978 (\u00a7 72-16A-3(J), N.M.S.A.1953), as follows:\n. \u201cleasing\u201d means any arrangement whereby, for a consideration, property is employed for or by any person other than the owner of the property;\nIn my opinion, regardless of the criteria established in this definition, the definition can only be applied if the transaction in question is shown to be an \u201carrangement.\u201d While this term appears to be quite broad, it is subject to interpretation; and, where it affects a tax deduction, should be reasonably, but narrowly construed. McKee, General Contractor, Inc. v. Bureau of Revenue, 63 N.M. 185, 315 P.2d 832 (1957); EVCO v. Jones, 81 N.M. 724, 472 P.2d 987 (Ct.App.1970); cert. denied 81 N.M. 772, 473 P.2d 911 (1970); vacated 402 U.S. 969, 91 S.Ct. 1655, 29 L.Ed.2d 134, on remand 83 N.M. 110, 488 P.2d 1214 (Ct.App.1971); cert. denied 83 N.M. 105, 488 P.2d 1209 (1971).\nAn \u201carrangement\u201d is \u201ca mutual agreement or understanding,\u201d Websters Third New International Dictionary (1976). Thus, in order to establish the existence of an \u201carrangement\u201d between the taxpayer and customers using the washers and dryers, there must be a mutual agreement or understanding between the two. In this situation, taxpayer has no contact with the customers and does not even have knowledge of their identity. There is no evidence of a \u201cmutual agreement\u201d or \u201cunderstanding.\u201d Absent such an arrangement between identifiable persons, \u201cleasing,\u201d within the meaning of the Act, does not occur. Rather, the activity described herein is a \u201cservice\u201d as defined in \u00a7 7-9-3(K), N.M.S.A.1978 (\u00a7 72-16A-3(K), N.M.S.A. 1953 Comp.). The deduction therefore does not apply. See Boise Bowling Center v. State, 93 Idaho 367, 461 P.2d 262 (1969) for a helpful discussion of the nature of businesses which provide \u201ca unique combination of goods and services.\u201d\nIn Francom v. Utah State Tax Commission, 11 Utah 2d 164, 356 P.2d 285 (1960), interpreting a sales tax law imposing a tax upon charges for \u201claundry service,\u201d the Court characterized this type of coin-operated laundry business as providing a \u201claundry service.\u201d The business was like that of taxpayer in that customers performed all the manual labor in the washing and drying of their articles, and no attendant was on duty at the premises. In spite of these facts, the Court said:\nRegardless of the fact that the actual manual operation or labor is performed by the customer, we are of the opinion that the plaintiffs are performing a \u201claundry service\u201d within the meaning of the statute . . . . The mere fact that the plaintiffs have no attendant at the establishment does not mean that the plaintiffs are not performing a \u201cservice\u201d. By making available to the public the machines necessary to the washing and drying of articles, they are performing a \u201claundry service\u201d. 356 P.2d 285 at 286.\nIn his testimony at the hearing, Mr. Strebeck, president of taxpayer corporation, characterized his business as a \u201cservice\u201d when he stated that \u201c[w]e feel that that\u2019s providing a service for the people that cannot afford a washer and dryer at home. .\u201d Tape 312. Likewise, I would find that the taxpayer\u2019s business is that of providing a \u201cservice\u201d and therefore taxable under the Compensating Tax Act.-\nThe decision and order of the Director should be affirmed.", "type": "dissent", "author": "ANDREWS, Judge" } ], "attorneys": [ "James F. Hart, Clovis; for appellant.", "Jeff Bingaman, Atty. Gen., Daniel H. Friedman, Sp. Asst. Atty. Gen., Santa Fe, for appellee." ], "corrections": "", "head_matter": "599 P.2d 1059\nSTREBECK PROPERTIES, INC., Appellant, v. NEW MEXICO BUREAU OF REVENUE, Appellee.\nNo. 3611.\nCourt of Appeals of New Mexico.\nMarch 20, 1979.\nJames F. Hart, Clovis; for appellant.\nJeff Bingaman, Atty. Gen., Daniel H. Friedman, Sp. Asst. Atty. Gen., Santa Fe, for appellee." }, "file_name": "0262-01", "first_page_order": 308, "last_page_order": 315 }