Stockton Kenworth, Inc. v. State Board of Equalization

Opinion

EVANS, J.

Plaintiff, a California corporation, is a retail truck dealer with its principal place of business in Stockton. Between April 1975 and March

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1978, plaintiff acquired nine diesel trucks for lease to various out-of-state carriers. In acquiring the trucks, plaintiff paid neither sales nor use taxes.

After executing each of the lease agreements, plaintiff drove the trucks, sans payload, to points outside California, where the lessees took possession of the trucks and the leases commenced. Plaintiff did not report or pay any taxes to defendant, the California State Board of Equalization (Board), with respect to any of the lease transactions.

The Board determined plaintiff’s delivery of the trucks to the out-of-state lessees constituted a “use” of the trucks within California and that plaintiff was subject to tax under the Sales and Use Tax Law. (See Rev. & Tax. Code, § 6001 et seq.) Plaintiff paid the taxes assessed under protest and filed a claim for refund which was denied. Following the exhaustion of its administrative remedies, plaintiff filed an action in superior court for a refund.

The trial court determined plaintiff’s delivery of the trucks to out-of-state lessees did not constitute a taxable use within the state and entered a judgment for plaintiff directing a refund of use taxes paid, plus interest. The Board appeals.

Discussion

The California use tax is an excise tax “on the storage, use, or other consumption in this state of tangible personal property purchased from any retailer ... for storage, use, or other consumption in this state . . . .” (Rev. & Tax. Code, § 6201; hereafter all statutory citations are to this code unless otherwise indicated.) “The use tax applies to property purchased for use in this state wherever purchased, unless the gross receipts from the sale have been included in the measure of the California sales tax (Rev. & Tax. Code, § 6401),

or unless the transaction is otherwise exempted by the statute

or by the state or federal Constitution.” (Italics added;