Taxpayer, Western Electric Company, appeals from a Decision and Order of the Commissioner of Revenue. The order affirmed assessment of a compensating tax on the transportation costs of materials purchased by Mountain States Telephone and Telegraph Company (Mountain Bell) from the taxpayer.
The taxpayer alleges three points of error, the first of which is dispositive of this appeal, to-wit: “The transportation charges here at issue would not be subject to gross receipts tax if they had been incurred in New Mexico and consequently cannot be held subject to the compensating tax.” We agree.
Most of the pertinent facts are set forth in the Commissioner’s Decision and Order:
“5. The taxpayer sells and Mountain Bell purchases telephone material and apparatus. Such purchases are subject to a blanket contract and related documents, which provide, among other things, that title to purchased property passes to the purchaser at point of shipment; that the taxpayer is to pay freight charges from point of origin to point of destination; and that the taxpayer will bill the purchaser for the freight charges paid by the taxpayer.
*165“6. All purchases in question here involve shipments of the property from points out of state to Mountain Bell locations located within New Mexico.
“7. All shipments of purchased property involved in this matter are handled substantially as follows: The taxpayer will determine the mode of shipment, viz: common carrier or United States mail; the taxpayer will pay freight charges — i. e., the mail costs or pay the common carrier; the taxpayer will bill Mountain Bell for the property sold; and the taxpayer will separately bill Mountain Bell for the freight charges.”
The record also discloses that the price of the materials was f. o. b. the taxpayer’s storerooms or factories. Further, the taxpayer normally selected the mode of shipment and the carrier, however, Mountain Bell had the option, as per the agreement, to designate these matters or to transport the materials in its own trucks. Materials purchased from the taxpayer’s Phoenix facility were usually transported by an independent contractor with whom Mountain Bell had a ten year contract which terminates on March 1, 1981. Taxpayer billed Mountain Bell separately for all postage and freight charges from statements for materials sold.
Section 72-16A-2, N.M.S.A.1953 (Vol. 10, pt. 2, Supp.1975) provides:
“The purpose of the Gross Receipts and Compensating Tax Act [72-16A-1 to 72-16A — 19] is to provide revenue for public purposes by levying a tax on the privilege of engaging in certain activities within New Mexico and to protect New Mexico businessmen from the unfair competition that would otherwise result from the importation into the state of property without payment of a similar tax.”
Section 72-16A^l(A), supra, provides: “For the privilege of engaging in business, an excise tax equal to four percent [4%] of gross receipts is imposed on any person engaging in business in New Mexico.”
Section 72-16A-7, supra, provides:
“A. For the privilege of using property in New Mexico, there is imposed on the person using property an excise tax equal to four per cent [4%] of the value, at the time of acquisition or of introduction into the state, whichever is later, or of conversion to use by the manufacturer of property that was: * * *. (2) acquired outside this state as the result of a transaction that would have been subject to the gross receipts tax had it occurred within this state * * *.” [Emphasis Ours.]
The Commissioner, pursuant to the authority granted him by § 72-13-23, supra, issued G. R. Regulation 3(F):48, Freight Charges which provides:
“Transportation costs that are paid by the seller to the carrier are an element of the sales price of the property. “Transportation costs that are paid to the carrier by the buyer are not an element of the sales price of the property * *.”
The Bureau contends that “under G. R. Regulation 3(F) :48 a seller must include transportation expenses in his gross receipts if he pays them and invoices the buyer for them.” In support of this contention the Bureau cites In Re Sales Tax Assessment No. 50030 v. Department of Revenue, 522 P.2d 149 (S.Ct.Wyo.1974), [hereinafter Mead]; Puna Sugar Company Limited, Haw., 547 P.2d 2, decided March 8, 1976; Colonial Pipeline Company v. Clayton, 275 N.C. 215, 166 S.E.2d 671 (1969). In all of these cases, courts accepted the general proposition that transportation costs form part of the “price” of an item, and therefore a gross receipts tax can be imposed on these costs. The issue here is not, however, whether a gross receipts tax includes these costs; it is rather whether the taxpayer falls within the exemption created by G. R. Regulation 3(F) :48. This regulation excludes transportation costs from the sales price of the property when paid to the carrier by the buyer.
Thus the issue in this case is the narrow one of determining who paid the transportation costs — the seller or the buyer.
*166The relationship between the taxpayer and Mountain Bell is shown by the following excerpts from their basic agreement:
ARTICLE I — SCOPE.
“1. Manufacture and Purchase of Materials.
The Electric Company [Taxpayer] will manufacture or purchase materials which the Telephone Company [Mountain Bell] may reasonably require for its business and which it may order from the Electric Company; provided, however, that nothing herein contained obligates the Telephone Company to purchase any materials from the Electric Company.
“2. Delivery of Materials.
The Electric Company will deliver said materials to the Telephone Company upon its written orders, in such quantities, in such manner, and at such times as the Telephone Company may reasonably designate.
“5. Distributing Storerooms.
The Electric Company will maintain distributing storerooms as at present established or at such points as from time to time may be agreed upon, for the distribution of materials to the Telephone Company.
“6. Stocks of Materials.
(a) The Electric Company will exercise due diligence in maintaining at all times, at its distributing storerooms, reasonable stocks of materials, except apparatus which must be specially assembled for each job (such as central office switchboards) and other materials which are customarily shipped direct, such as poles and directories.
(b) The Electric Company will carry such special stocks of materials as the Telephone Company may authorize.
‘Special stocks’ means all stocks authorized by the Telephone Company other than or in excess of reasonable stocks.
“8. Transportation Charges.
The Electric Company as authorized by the Telephone Company and in so far as practicable will pay for the account of the Telephone Company such of the following transportation charges as under the Electric Company’s prices and terms should be borne by the Telephone Company:
(a) On shipments of materials made hereunder to the Telephone Company.
(b) On shipments of materials returned from the Telephone Company to the Electric Company’s distributing storeroom or other points designated by it.
(c) On shipments of Class ‘B’ returned materials from the Electric Company’s distributing storerooms to its reclamation plants or other points of disposition designated by the Electric Company-
The Electric Company will adjust claims with carriers arising out of shipments hereunder.
“9. Repairs to Materials.
The Electric Company will maintain repair shops as at present established or at such points as from time to time may be agreed upon and will make such repairs to returned materials as the Telephone Company may reasonably require.
“10. Other Services.
The Electric Company will perform such other services as the Telephone Company may reasonably require from time to time.”
ARTICLE II — PRICES AND TERMS.
“2. Materials, Equipment Specification and Installations.
The prices to be paid by the Telephone Company to the Electric Company for materials, equipment specifications and installations shall be those established from time to time by the Electric Company. Such prices in so far as practicable and any conditions affecting them not specifically provided for in this Article shall be included in the Electric Company's published price lists. Prices for materials shall include inspection provided for in paragraph 3 Article I of this Agreement. [Emphasis ours.]
“5. Transportation Charges.
The Telephone Company will reimburse the Electric Company for transportation charges paid by it as provided for in paragraph 8 Article I of this Agreement.
As of the first of every month the Electric Company will render monthly statements of account which shall be due and payable by the Telephone Company thirty days after date of such monthly statements. If payment is deferred, the account shall thereafter bear interest at a reasonable rate.”
As can be seen, this is more than a sales contract; it is also an agency contract. An agent is defined as a person authorized by another to act on his behalf and under his control. The presence of an agency relationship must be determined from all the facts and circumstances of the case. See Brown v. Cooley, 56 N.M. 630, 247 P.2d 868 (1952). One of the aspects of agency present here is that the taxpayer is authorized to pay transportation charges not only on materials sold to Mountain Bell, but on those materials returned by Mountain Bell for credit or repair. This case is to be distinguished from the situation in Mead where the relationship of the equipment dealer and his customers was that of buyer and seller, and where the equipment dealer paid the freight charges and included them in the purchase price.
The Bureau concedes that its gross receipts regulations are controlling. G.R. Regulation 3(F):48, supra, specifically excludes from the sales price of the property transportation costs that are paid to the carrier by the buyer. The taxpayer argues, and we agree, that the buyer is in fact paying the transportation costs in this instance since Mountain Bell reimburses Western Electric for transportation costs.
Had the sale of these materials from the taxpayer to Mountain Bell taken place in New Mexico, this situation would clearly have come within the ambit of G.R. Regulation 8:2 and the gross receipts tax could not be levied on the freight charges; a priori, neither could the compensating tax. It is evident from the language of § 72-16A-2, supra, that the legislature intended to make our gross receipts tax and our compensating tax correlates: an exemption from the gross receipts tax must also be treated as an exemption from the compensating tax.
The Commissioner was in error in his decision and order for the reasons stated above and consequently the assessment is annulled.
IT IS SO ORDERED.
LOPEZ, J., concurs.
SUTIN, J., specially concurs.