Rhodes & Jamieson, Ltd. v. California State Board of Equalization

PIERCE, J.

The question on this appeal is whether a buyer who hauls purchased cement in his own truck from a place of manufacture to place of use and receives a credit from the seller in an amount (fixed by the latter) based upon what the seller regards to be the buyer’s cost of transportation is making a “specific charge for transportation” (which makes the transaction taxable) or is merely receiving a “price differential.”

The trial court held it was the latter and that the transaction was not taxable under the California Motor Vehicle Trans-License Tax Law. We with that conclusion.

Said law imposes a license tax measured by the gross receipts (Rev. & Tax. Code, § 9651) of operators of motor vehicles for hire or compensation for the transportation of persons or property upon any public highway in this State, either directly or indirectly (Rev. & Tax. Code, § 9603, subd. (a)), but section 9603.3, subdivision (a) of said code excludes from the definition of an “operator”: .

[345]

“ (a) Any person transporting his own property in a motor vehicle owned or operated by him unless he makes a

specific charge

for the transportation . . . .” (Emphasis added.)

Respondents, who sell cement in the Bay area, purchase their product from various manufacturers in Northern California. All of these manufacturers have adopted a sales policy known as “variable mill prices,” under which, to meet competition and overcome the advantage otherwise enjoyed by rival cement plants located closer to consumer markets, a credit is allowed by the seller on the price delivered at mill. This credit, fixed

by the seller

is nevertheless determined by, and varies in proportion to, the weight of the product and the distance from the mill to the ultimate delivery point. Thus, in effect, the seller absorbs

what he deems to be

the transportation costs. The credit applies only if the buyer hauls in his own trucks. But if the cement is hauled by a contract carrier the seller pays the latter’s bill. Under the facts peculiar to this case, the invoices set forth the credit as a separate item, the problem in subtraction being performed on the face of the invoice. Appellant board decided to, and did, tax the buyer under the law above mentioned. In cases where the invoices did not separately show the credit, no tax was imposed. Respondents sued for a refund—and in the meantime also promptly persuaded their sellers to perform their arithmetic elsewhere than on the invoice. Since then no tax has been assessed. The logic of a position whereby taxability depends on the piece of paper on which a computation is made eludes us. We agree with the trial court’s well-reasoned opinion in which it is stated: