Southern California Freight Lines v. State Board of Equalization

ADAMS, P. J. This action was brought by Southern California Freight Lines to recover transportation taxes assessed under the provisions of chapter 339, Statutes of 1933 as amended, and paid under protest. Trial was had by the court sitting without a jury, and resulted in findings and judgment in favor of defendant.

Plaintiff is a highway common carrier, as that term is defined in section 2% of the Public Utilities Act, engaged in the business of transporting property for hire over the public highways of this state, and as such transportation company is subject to a tax on its gross receipts under the provisions of the California Motor Vehicle Transportation License Tax Act [Stats. 1933, p. 928; Deering’s Gen. Laws, Act 5130d]. It filed monthly reports showing its gross receipts for the period between September 1, 1937, and February 28, 1939, and paid a 3 per cent tax based thereon. Subsequently defendant Board of Equalization filed a claim for the additional taxes which are the subject of this action, the board claiming that appellant should have reported as its revenue a portion of what plaintiff claims was the revenue of the Southern California Freight Forwarders, which latter company is an express corporation within the meaning of section 2(k) of the Public Utilities Act, and, as such, is not subject to taxation under the Motor Vehicle Transportation License Tax Act, when vehicles operated by it are operated exclusively within the limits of municipalities.

The entire capital stock of both companies, which will be referred to hereinafter as the “carrier” and the “express company,” respectively, is owned by Southern California Freight Lines, Ltd., a third corporation. On December 17, 1934, by a decision of the Railroad Commission, Southern [28]California Freight Forwarders was granted the right to conduct an express business, and in August, 1935, its capital stock was increased to $8,150, but was not increased thereafter during the period covered by the tax in controversy. During the same period the capital investment of the carrier, which had been in existence for several years prior to the incorporation of the express company, was in excess of $200,000, while the express company had no assets other than furniture, fixtures and office equipment which it had acquired from plaintiff in return for certain shares of its capital stock, and which had a value of less than $8,000.

In 1935 the carrier and the express company entered into a joint facilities agreement, which, though by no means explicit in its terms, apparently was intended to provide that each company granted to the other the use of its facilities; that the carrier should transport on its trucks and trailers all property tendered to it by the express company for transportation over the highways of the state, and that the express company should perform the services of an express company, including pickup and delivery service within the limits of the municipalities which they served; that the express company should collect the revenue and distribute 40 per cent thereof to the carrier for the transportation of goods tendered by the express company, and that the remainder of the revenue of the express company, except a small amount to be retained to cover depreciation of its property, should be applied to the expenses of the two companies; that express company should publish rates, issue through bills of lading and contract with the public to perform complete transportation service, and, in so doing, jointly with the carrier, engage the services of employees, secure facilities, and contribute its own facilities to the use of the carrier to avoid duplication.