Rathjen Bros. v. Collins

PETERS, P. J. This action was brought by Rath jen Bros., Inc. to recover deficiency excise taxes collected by the State Board of Equalization under the Alcoholic Beverage Control Act (Stats, of 1935, p. 1123, ch. 330) as amended in 1937 (Stats, of 1937, p. 2126, ch. 758). The plaintiff is a duly licensed distilled spirits'rectifier and distributor engaged in business in California, and, as such, for the tax period commencing July 1, 1937, and ending June 30, 1938, paid to the state large sums of money under the tax statute here involved. The State Board of Equalization, pursuant to the authority conferred by the act, levied a deficiency assessment against plaintiff for that period. After a hearing, and after deducting from the original deficiency assessment a loss tolerance to which the taxpayer was entitled, the board determined there was a deficiency owing the state of $1,083.39. This sum was paid by the taxpayer under protest and this action instituted to recover the amount so paid. The trial court rendered judgment for the taxpayer, and the defendants appeal.

The act under which these taxes were paid was passed in 1935, and materially amended in 1937. The 1937 amendments are admittedly applicable to this proceeding. Generally speaking, the act imposes a stamp tax, the stamps to be purchased by the wholesaler or rectifier, and such stamps must accompany delivery of the distilled spirits to the retailer, by whom they are affixed to the bottles and canceled.

The appellants contend that regardless of the other contentions made, the decision in Empire Vintage Co. v. Collins, 40 Cal. App. (2d) 612 [105 Pac. (2d) 391], decided by the First Appellate District, Division Two, requires a reversal. The Supreme Court denied a hearing in that case, three of the justices voting for a hearing, and two of the justices not participating. The same tax statute as that involved in the instant case was involved in the Empire Vintage Co. case, but the period in dispute was for the period July 1, 1935, to June 30, 1937. The action in the Empire Vintage Co. ease, as in the instant ease, was brought to recover a deficiency paid under protest by the wholesaler. On pleadings and evidence substantially similar to those here involved, the trial court rendered its judgment in favor of the taxpayer. The appellate court reversed this judgment on the sole ground that the findings did not support the judgment. The findings in that ease were to the effect that the wholesaler there involved had [767]made no sales to on- or off-sale licensees which were not tax paid. The appellate court property held that this finding did not negative unlawful sales having been made to those who were not licensees, and, upon which unlawful sales, taxes had not been paid; that, although the wholesaler could lawfully sell only to licensees, the taxpayer could not recover a tax collected by the state on unlawful sales to non-licensees. The court also held that the findings did not negative sales having been made which were not shown on the books of the taxpayer. It is to be noted that the court did not hold that in fact unlawful sales had been made to non-licensees which were not tax paid, but simply passed upon the sufficiency of the findings to support a judgment of recovery. The exact holding of the court in that case is disclosed in the following quotation (40 Cal. App. (2d) at p. 619) : “The other findings are to the effect that the plaintiff had paid its taxes on those sales to on-sale and off-sale licensees. There is no finding that other sales, whether legal or not, were not made or that the tax had been paid thereon. But to support a judgment in favor of the plaintiff it is obvious the findings of the court should clearly show that the plaintiff, for the period July 1, 1935, to June 30, 1937, had paid taxes on all sales, legal or illegal, and that the defendants arbitrarily compelled it to pay the amount sued for. The findings do not make that showing.”