Mercedes-Benz of North America, Inc. v. State Board of Equalization

Opinion

KINGSLEY, J.

Plaintiff taxpayer appeals from an adverse judgment in its action to recover taxes. We affirm.

Under the California use tax law, a merchant who imports into the state merchandise for sale would ordinarily pay no tax under that law but would pay a sales tax on the value of the merchandise if and when sold. However, if such a merchant imports merchandise under that theory and thereafter uses it for purposes other than “retention, demon

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stration or display” he is subject to a use tax. Under the applicable statute (subd. (a) of § 6244 of the Rev. & Tax. Code) and the regulation adopted thereunder (Cal. Admin. Code, tit. 18, reg. 1669, subdivision (a)) the tax base is “the price paid by” the merchant.

Plaintiff here does not dispute its obligation to pay a use tax, since it admittedly has used motor vehicles for purposes other than retention, demonstration or display. It here contends that, as to it, the tax base should have been the cost to the manufacturer of the vehicles involved of the raw materials used in the manufacture. We reject that contention.

Taxpayer here is a Delaware corporation, duly authorized to do business, and transacting business, in California. It is a wholly owned subsidiary of a German corporation (herein DBAG); it purchased the vehicles herein involved either from DBAG or from another corporation (herein DBNA), also wholly owned by DBAG. It here attacks the statute and regulation under which the taxes in dispute were paid on the ground that they are unconstitutional, in that: (1) they violate the equal protection clause of the United States Constitution; (2) .they violate the commerce clause; (3) they violate the import-export clause, and (4) they violate the due process clause. We hold that none of those contentions have merit.

I

Some of those contentions are based on the taxpayer’s claim that a merchant buying a vehicle from an American manufacturer would have as its tax base the cost of the manufacturer’s raw materials. The record does not support that contention. It is clear that a merchant buying from an American manufacturer would have as its tax base the purchase price of the vehicles, just as that base is imposed on this taxpayer.