Twaits v. State Board of Equalization

SCHOTTKY, J. pro tem.

The three above named actions were commenced by plaintiffs and appellants against defendants and respondents to recover taxes paid under the Retail Sales Tax Act of the State of California (Stats. 1933, p. 2599, as amended) for periods prior to July 1, 1943. The respondents having asserted that certain receipts of appellants were subject to the retail sales tax, the appellants paid the taxes, interest and penalties demanded, filed claims for refund, and after denial of the claims, commenced these actions. The three actions involving substantially the same facts, were consolidated for trial and presented to the superior court upon the pleadings and a written stipulation of facts. The trial court held that the appellants were liable for the tax and this appeal is from the judgment entered in accordance with such holding.

The material facts are that appellants are construction contractors who, during the years 1940, 1941 and 1942,

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were engaged in the construction of facilities for the United States War Department at Camp Roberts, San Miguel, California, Port Ord, near Monterey, California, and Victorville Airport, Victorville, California. At each project the appellants provided mess and housing accommodations for the exclusive patronage of their own employees, and employees of subcontractors who were working on the project site. Said facilities were maintained for the convenience of the employers and employees and, in one ease, because of a requirement in the prime contract with the United States. A 50-cent charge was made for each meal served, whether the employees of the appellants or employees of subcontractors.

The appellants, believing that they were not “retailers” of the meals served, failed to report the receipts from this activity and paid no sales tax on account thereof. In reaching said conclusion, the appellants relied upon section 2(e) of the Retail Sales Tax Act, the pertinent portions of which read:

“ ‘Retailer’ includes every person engaged in the business of making sales at retail . . . Except . . . Employers or Employee Organizations Serving Meals Exclusively to Employees Shall Not Be Regarded as Retailers op the Meals Served by Them ...” [Stats. 1939, p. 2170.]

The issue to be determined upon this appeal is whether or not the amounts received by appellants as prime contractors on a construction project from the sale of meals exclusively to its employees and the employees of its subcontractors working on the< project, were subject to sales tax.