Aircraft Tank Service, Inc. v. State Board of Equalization

SHINN, P. J. The action is brought under California Sales and Use Tax Law (Rev. & Tax. Code, §§ 6001-7176) for a refund of sales taxes paid by plaintiff and claimed to have been in excess of the amounts due. Plaintiff’s demand was for $7,234.12. Pursuant to defendant’s concession that there was a partial overpayment, plaintiff had judgment for $818.39 at 6 per cent interest to February 1, 1962; plaintiff appeals from the judgment.

The facts were stipulated and were in substance the following. A part of plaintiff’s business consisted of the modification of the wings of aircraft and associated work. It main[583]tained a stock of wings for use as follows: a customer would bring his aircraft for inspection and an agreement would be reached respecting the changes that were desired. Due to the fact that the modification would require several months’ work, the customer would continue to use the aircraft in its then condition until plaintiff was prepared to deliver wings of the same type with the modifications that had been agreed upon, whereupon one or two wings as modified would be installed and the wing or wings removed from the aircraft would be placed in plaintiff’s stock for future use. Plaintiff charged the customer an amount equal to the value of the material used and a price for the labor employed in the modification, plus a percentage of profits. A tax was assessed upon the total amount of the charge. In each of seven transactions for which plaintiff paid the taxes in question a substantial portion of the charge was for material used in the modification. The basis of plaintiff’s claim for refund is that the taxes should have been assessed only upon the amounts charged for the materials. It contends that it was not a seller of the modified wings but only a repairer and as such was exempt from tax liability upon the amounts that it had charged and received for labor performed in modifying the wings.

The following sections of the code are relevant, and the substance may be stated as follows: a retailer is one who makes any retail sale or sales of tangible personal property (§ 6015); a retail sale is any sale for any purpose other than resale (§ 6007); sale includes exchange (§ 6006); the sales tax is upon gross receipts (§ 6051); gross receipts is the total amount received without deduction of the cost of materials used or labor or service costs (§ 6012, first subd. (b)).

The court found the following material facts, all of which are assailed by plaintiff as unsupported by the evidence: “3. Each transaction in issue was an exchange by Plaintiff of its own property, i.e., modified aircraft wings, for consideration. 4. Plaintiff modified and substantially altered the aircraft wings which it furnished to its customers in each transaction in issue, and did not merely repair wings. The wings modified were at all times during the performance of any work thereon, Plaintiff’s own property. ... 6. In each transaction in issue, Plaintiff was not acting as a repairman or repairer. 7. In the transactions in issue, Plaintiff was not treated in a manner more burdensome than other taxpayers engaged in similar activities. 8. Plaintiff was at the time of