Mapo, Inc. v. State Board of Equalization

[247]

Opinion

FLEMING, Acting P. J.

The State Board of Equalization (Board) appeals the judgment in consolidated cases ordering the refund of $213,979.80, plus interest, for sales taxes and interest paid by respondent Mapo, Inc. (Mapo) on transactions from 1965 to 1971 with its corporate grandparent, Walt Disney Productions (Productions). The dispositive issue is whether those transactions constituted “sales” within the meaning of Revenue and Taxation Code section 6006, subdivision (b): “ ‘Sale’ means and includes: ...(b) The producing, fabricating, processing, printing, or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing, or imprinting.”

The trial court found that from July 1965 to July 1971 Mapo was a corporation wholly owned by WED Enterprises, Inc. (WED), which in turn was wholly owned by Productions. Mapo’s sole function was to fabricate entertainment devices, chiefly animated mechanical figures, for use at Productions’ amusement parks, including Disneyland and Walt Disney World. Up to 1965 Productions fabricated these entertainment devices at its motion picture studio machine shop, but multi-union jurisdictional problems involving diverse motion picture unions and guilds led to the formation of Mapo, by means of which the same fabrication work could be carried out by the same employees under one vertical union agreement. Subsequent to its corporate dissolution in 1971, Mapo continued its same work as a division of Productions.

Roger Broggie, a longtime Productions employee and head of its machine shop, ran Mapo operations throughout. He hired and fired Mapo personnel and supervised its day-to-day operations through subordinate supervisors at Mapo. Mapo’s corporate parent, WED, designed the devices built by Mapo, and its personnel consisted of nonunion architects and engineers who enjoyed a profit-sharing plan. Broggie was carried on WED’s payroll in order that he could enjoy the benefits of its profit-sharing plan. WED and Mapo occupied adjacent buildings in Glendale a few miles from Productions’ studio in Burbank, their personnel worked closely on design and construction, but they undertook no project without the approval of the executive committee and board of directors of Productions. The officers of Mapo were on WED’s payroll; its corporate directors were paid by WED and