Engine Rebuilders, Inc. v. State
| Decision Date | 29 April 1965 |
| Docket Number | No. 37361,37361 |
| Citation | 401 P.2d 628,66 Wn.2d 147 |
| Court | Washington Supreme Court |
| Parties | ENGINE REBUILDERS, INC., and Tam Engineering Corporation, Appellants, v. The STATE of Washington, Respondent. |
Skeel, McKelvy, Henke, Evenson & Uhlmann, Bradley F. Henke, Seattle, for appellants.
John J. O'Connell Atty. Gen., Henry W. Wager, James A. Furber, Asst. Attys. Gen., Olympia, for respondent.
What does the state revenue code mean by the expression Gross proceeds of sales when applied to a company that rebuilds automobile parts and engines and takes in the used or worn-out parts in partial payment for the newly rebuilt parts?
Tam Engineering Corporation and Engine Rebuilders, Inc., at their plants in Tacoma, rebuild motor vehicle engines, component units thereof, and separate parts. Their enterprise, running to thousands of transactions annually, involves reconstruction of entire engines and such complicated components as carburetors, distributors, fuel pumps, transmissions, along with simple unit parts such as brake shoes. Nearly all of their business is with repair garages and automobile dealers who do repair work for their own customers. Because their continuous operations depend largely upon a steady supply of used parts, Tam and Engine Rebuilders request a like automotive part in exchange for every part that they sell. As an inducement, they offer a substantial premium price for such used items--and allow this price as a credit on the rebuilt part or engine. The used or exchanged item is referred to in the trade, whether it be an entire engine, a component such as a carburetor or transmission, or a simple brake shoe, as a Core, and in the sales catalogue the price which the rebuilders will pay on such an exchange is designated as a Core deposit.
Here are sample listing taken at random from Tam's catalogue which show the price to dealers and the allowance made them if they turn in a usable core:
Core Price With Price
Deposit Core Without Core
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1960 Ford Engine (passenger) $ 90.00 $179.00 $260.00
1960 Ford/w sodium valves 140.00 427.00 560.00
1948 Crankshaft kit 5.00 25.50 30.50
1949 Ford brake shoe .45 1.00 1.45
1961 Clutch plate .50 7.31 7.81
1957 Carburetor 3.00 6.50 9.50
1960 Ford automatic transmission 100.00 118.00 218.00
1961 Ford fuel pump 1.50 7.15 8.65
Appellants allow their customers full listed core deposits on all usable items turned in on rebuilt parts, components or engines. If the customer does not have an exchange part or core, he pays the core deposit plus the catalogue price. Damaged or cracked parts receive no credit. Because a usable core or part is not always exchanged on the rebuilt core, or because some of them may be damaged or unusable, appellants buy 10 per cent of their large cores and 2 to 4 per cent of the smaller ones on the open market--all for a much lower price than is listed in their catalogue under core deposits. But the open market is decisively inadequate to supply appellants with used parts, components and engines. Appellants depend largely on the turn-ins or core deposits for their requirements.
Asserting that the core deposit allowances are arbitrarily fixed by them at a figure high enough to insure exchanges and provide them with a steady supply of engine parts and components for rebuilding, appellants urge that the catalogue prices allowed in exchange on core deposits, being far in excess of market value, should not be included in the measure of their business and occupation tax for either wholesaling (RCW 82.04.270) or manufacturing (RCW 82.04.240).
Purchases of used parts on the open market to meet the 10 per cent deficit on exchanged engines and the 2 to 4 per cent deficit on smaller parts and components, demonstrate the core deposit to be two to three times greater than the price on the open market. The open market cost to Tam and Engine Rebuilders averages a little more than 30 per cent of the core deposit. Appellants say they could not operate without fixing the core deposits at an artificially high level, a price fictitiously high enough to induce buyers to surrender their used parts, components and engines.
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