Ladd v. State Bd. of Equalization

• Decision Date: 08 March 1973
• Citation: 31 Cal.App.3d 35,106 Cal.Rptr. 885
• Court: California Court of Appeals Court of Appeals
• Parties: George W. LADD, Plaintiff and Appellant, v. The STATE BOARD OF EQUALIZATION of the State of California, Defendant and Respondent. Civ. 40193.

Page 885

106 Cal.Rptr. 885

31 Cal.App.3d 35

George W. LADD, Plaintiff and Appellant, v. The STATE BOARD OF EQUALIZATION of the State of California, Defendant and Respondent.

Civ. 40193.

Court of Appeal, Second District, Division 1, California.

March 8, 1973.

Clyde R. Maxwell, Los Angeles, for plaintiff and appellant.

Evelle J. Younger, Atty. Gen., and Mark W. Jordan, Deputy Atty. Gen., for defendant and respondent.

THOMPSON, Associate Justice.

This is an appeal from a judgment denying recovery in a suit for refund of sales and use taxes paid by appellant pursuant to Revenue and Taxation Code section 6933. We affirm the judgment.

The matter at bench reaches us on stipulated facts. Appellant is engaged in the construction and rental of powered houseboats, tangible personal property within the meaning of the Sales and Use Tax Law. Prior to August 1, 1965, appellant constructed houseboats from raw materials purchased by him. As required by the then applicable provisions of the Sales and Use Tax Law, appellant either paid sales tax reimbursement to the suppliers of raw materials to him or, pursuant to an option in the law, paid a use tax measured by the sales price of raw materials used by him in the construction of the boats. All houseboats here involved were completed and rented to appellant's customers prior to August 1, 1965. A lease of tangible personal property was not then a taxable 'sale' so that lease or rental income was not includable in the measure of sales tax, and possession of rented property was not a taxable use.

Effective August 1, 1965, Revenue and Taxation Code section 6006 was amended. As amended, the section reads: '(Taxable) (s)ale means and includes: . . . (g) Any lease of tangible personal property in any manner or by any means whatsoever, for a consideration, except a lease of: . . . (5) Tangible personal property leased in substantially the same form as acquired by the lessor . . . as to which the lessor . . . has paid sales tax reimbursement pursuant to Section 6052 or has paid use tax measured by the purchase price of the property. . . .' ¹ Beginning August 1, 1965, appellant followed the mandate of the amended statute and paid a 'use' tax measured by his receipts from the rental of houseboats. He did not, as required by the Revenue and Taxation Code, collect use tax from his customers. From August 1 1965 onward, appellant purchased materials for the construction, repair, and maintenance of houseboats for resale, paying no sales tax reimbursement or use tax as a result of those purchases.

On November 8, 1966, appellant filed a claim for refund for use tax paid by him subsequent to August 1, 1965, measured by receipts from the rental of houseboats constructed of materials on which appellant had previously paid sales or use tax. The claim is based upon the theory that the taxes so measured and paid constituted a forbidden 'doublt taxation.' On August 23, 1967, appellant filed a second claim for refund of the same and subsequently paid taxes, on the theory that their imposition was discriminatory and unconstitutional and a denial of his right to retain and use personal property.

The claims for refund were denied. Appellant filed the complaint which commenced the case at bench on January 4, 1968. The complaint alleges 'double taxation,' and that the tax as imposed upon appellant is discriminatory in that his competitors, who lease property in the same form as appellant, are exempt from tax on rental receipts. Neither the stipulation of fact nor evidence adduced at trial in any way deals with the manner of taxation of appellant's competitors. The trial court found against appellant. On this appeal, appellant has abandoned his theories at trial. He does not argue a concept of 'double taxation.' Neither does he claim that the tax paid by him placed him at a competitive disadvantage. For the first time in the course of the litigation appellant contends that Revenue and Taxation Code section 6006, subdivision (g)(5), as amended, unconstitutionally discriminates upon lessees and renters of personal property who lease or rent personal property in a different form than that in which it was acquired by the lessor. He argues that those persons are required to pay use tax whereas no taxable sale or use occurs if personal property is rented or leased from a lessor who acquired the property in substantially the same form and paid sales tax reimbursement or use tax measured by the purchase price to the lessor. Thus appellant asserts that his customers have been denied equal protection of the law. ²

We find no denial of equal protection of the law in Revenue and Taxation Code section 6006, subdivision (g)(5), considered in the context of the entire Sales and Use Tax Law. (A) distinction in tax statutes between parties does not violate the equal protection clause if such distinction rests upon a rational basis. (The United States Supreme) court has said, 'Neither due process nor equal protection imposes upon a state any rigid rule of the equality of taxation. . . . A legislature is not bound to tax every member of a class or none. It may make distinctions of degree having a rational basis, and when subjected to judicial scrutiny they must be presumed to rest on that basis if there is any conceivable state of facts which would support it. " (Franklin Life Ins. Co. v. State Board of Equalization, 63 Cal.2d 222, 233, 45 Cal.Rptr. 869, 877, 404 P.2d 477, 485, quoting Carmichael v. Southern Coal Co., 301 U.S. 495, 509, 57 S.Ct. 868, 81 L.Ed. 1245, 109 A.L.R. 1327; see also Clark v. City of San Pablo, 270 Cal.App.2d 121, 126, 75 Cal.Rptr. 726.)

Here there is a rational basis for the distinction drawn by Revenue and Taxation Code section 6006, subdivision (g)(5), between the manner of assessing sales and use tax upon transactions involving the lease of property in the form in which it was acquired by the lessor, and those involving the lease of property which is rented after its form has been changed.

The general statutory scheme of the Sales and Use Tax Law imposes a tax upon the privilege of selling tangible personal property at retail within the state computed as a percentage of the gross receipts of the retailer (Rev. & Tax.Code, § 6051), and a companion tax upon the storage, use, or consumption within California of tangible personal property purchased from a retailer (Rev. & Tax.Code, § 6201) in a transaction not subject to sales tax. (Rev. & Tax.Code, § 6401.) ³ The retailer who must include gross receipts from sales within the measure of sales tax assessed against him is required to collect sales tax reimbursement from his customer. (Rev. & Tax.Code, § 6052, 6052.5.) A retailer doing business in California, making sales subject to use tax, must collect the tax from the customer. ⁴ (Rev. & Tax.Code, § 6203.) The amount so collected is a debt due from the retailer to the state (Rev. & Tax.Code, § 6204), as is an amount in lieu of what should have been collected if the retailer fails in his statutory duty. (Bank of America v. State Board of Equalization, 209 Cal.App.2d 780, 799, 26 Cal.Rptr. 348.) A purchase or sale for resale is excluded from the definition of 'retail sale' and hence from the measure of sales or use tax. (Rev. & Tax.Code, § 6007.)

While a lease of tangible personal property has, since August 1, 1965, been included within the definition of a sale (Rev. & Tax.Code, §§ 6006, subd. (g) (5), and 6010, subd. (e)(5)), the order of...