Richfield Oil Corp. v. County of Los Angeles

California Court of Appeal Nov 20, 1950 No. Civ. No. 17603Published

Before: Drapeau

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Holding. The court held that taxpayers are entitled to deduct debts owed to persons doing business in California from their solvent credits for tax purposes, regardless of the creditor's domicile, and that the legislative inclusion of such persons in the definition of deductible debts is constitutional.

Issues

Whether debts owed to governmental agencies doing business in California are deductible from solvent credits under the state Constitution and Revenue and Taxation Code.
Whether the inclusion of 'persons doing business in this State' in the definition of deductible debts in Section 114 of the Revenue and Taxation Code is unconstitutional.

Disposition. affirmed

Quotations verified verbatim against the opinion

“To ascertain the taxable amount of solvent credits, taxpayers’ debts to persons doing business in this state are deductible, without regard to the domicile of such persons.”

“It is the duty of this court to give force and effect to the statutes of the state unless clearly unconstitutional.”

DRAPEAU, J. On the first Monday of March, 1943, Rich-field Oil Company had accounts receivable from agencies of the "United States government of $4,025,109.72. At the same time Richfield had accounts payable to agencies of the United

[537]States government of $2,158,145.40. These accounts and agencies were:

Accounts receivable:

United States Army .....................$ 2,164.71

United States Army Air Forces ........... 59,233.67

United States Army Engineers ........... 178,260.75

United States Navy ...................... 11,515.18

United States Navy Bureau of Supplies and

Accounts ............................ 2,032,899.13

United States War Department ........... 749.24

Defense Supplies Corporation ............. 295,631.40

Various departments of the United States Government, including Treasury Procurement Service War Shipping Administration ................................. 481,719.13

War Shipping Administration ............ 22,649.23

War Shipping Administration Time Charter

hire, war bonus subsistence, wages, etc. 940,287.28

Accounts payable:

War Shipping Administration Freight on

Charter Voyages ...................$ 682,949.60

Defense Supplies Corporation Advance to be repaid out of sales or returned in cash if Richfield fails to deliver .............. 1,475,195.80

A solvent credits tax was levied by the county of Los Angeles and the city of Los Angeles against the full amount of accounts receivable, without deduction of accounts payable.

Richfield paid under protest, and instituted this action to secure a refund of the tax paid on the amount in excess of the balance of the two accounts. The superior court found that the governmental agencies and instrumentalities were bona fide residents of California; that they were entities doing business in the state; that the debts owing to them were of the same class as Richfield’s accounts receivable; and that Richfield’s taxable solvent credits due from the United States government were $1,866,964.32, representing the “net balance” owing to plaintiff by the government.

Richfield Oil Corp. v. County of Los Angeles

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