Rhodes & Jamieson, Limited v. California State Bd. of Equalization

• Decision Date: 14 March 1962
• Citation: 201 Cal.App.2d 343,20 Cal.Rptr. 218
• Court: California Court of Appeals Court of Appeals
• Parties: RHODES & JAMIESON, LTD., H. W. Gentry Building Materials Company and Walnut Creek Aggregates Company, Plaintiffs and Respondents, v. The CALIFORNIA STATE BOARD OF EQUALIZATION, Defendant and Appellant. Civ. 10263.

Page 218

20 Cal.Rptr. 218

201 Cal.App.2d 343

RHODES & JAMIESON, LTD., H. W. Gentry Building Materials Company and Walnut Creek Aggregates Company, Plaintiffs and Respondents, v. The CALIFORNIA STATE BOARD OF EQUALIZATION, Defendant and Appellant.

Civ. 10263.

District Court of Appeal, Third District, California.

March 14, 1962.

Rehearing Denied April 4, 1962.

Hearing Denied May 9, 1962.

Stanley Mosk, Atty. Gen., by Ernest P. Goodman and Harry W. Low, Deputies, Atty. Gen., for appellant.

Nebeker, Stoops & Hoge, Oakland, for respondents.

PIERCE, Justice.

The question on this appeal is whether a buyer who hauls purchased cement in his own truck from a place of manufacture to place of use and receives a credit from the seller in an amount (fixed by the latter) based upon what the seller regards to be the buyer's cost of transportation is making a 'specific charge for transportation' (which makes the transaction taxable) or is merely receiving a 'price differential.'

The trial court held it was the latter and that the transaction was not taxable under the California Motor Vehicle Transportation License Tax Law. We agree with that conclusion.

Said law imposes a license tax measured by the gross receipts (Rev. & Tax. Code, sec. 9651) of operators of motor vehicles for hire or compensation for the transportation of persons or property upon any public highway in this State, either directly or indirectly (Rev. & Tax.Code, sec. 9603, subd. (a)), but section 9603.3, subd. (a) of said code excludes from the definition of an 'operator':

'(a) Any person transporting his own property in a motor vehicle owned or operated by him unless he makes a specific charge for the transportation * * *.' (Emphasis added.)

Respondents, who sell cement in the Bay area, purchase their product from various manufacturers in northern California. All of these manufacturers have adopted a sales policy known as 'variable mill prices,' under which, to meet competition, and overcome the advantage otherwise enjoyed by rival cement plants located closer to consumer markets, a credit is allowed by the seller on the price f. o. b. mill. This credit, fixed by the seller is nevertheless determined by, and varies in proportion to, the weight of the product and the distance from the mill to the ultimate delivery point. Thus, in effect, the seller absorbs what he deems to be the transportation costs. The credit applies only if the buyer hauls in his own trucks. But if the cement is hauled by a contract carrier the seller pays the latter's bill. Under the facts peculiar to this case, the invoices set forth the credit as a separate item, the problem in subtraction being performed on the face of the invoice. Appellant board decided to, and did, tax the buyer under the law above mentioned. In cases where the invoices did not separately show the credit, no tax was imposed. Respondent sued for a refund--and in the meantime also promptly persuaded its seller to perform their arithmetic elsewhere than on the invoice. Since then no tax has been assessed. The logic of a position whereby taxability depends on the piece of paper on which a computation is made eludes us. We agree with the trial court's well-reasoned opinion in which it is stated:

'It appears to this Court that the action of the State in imposing the tax here was based on a bookkeeping procedure adopted by the manufacturer, a system over which the plaintiff had, of course, no control. The mere fact that the manufacturer in its billing elected to set forth so-called freight allowance to reduce the gross price rather than billing on the basis of an established price differential does not justify the defendant in determining that the plaintiff made a specific charge and hence, became liable for the tax.'

Moreover, a 'credit' is not a 'charge.' It is the opposite of a 'charge.' Webster's Third New International Dictionary (unabridged) defines 'charge' (in the sense to which we refer to it here) as 'The price demanded for a thing or service; a debit to an account.' It is stated in 14 C.J.S. Charge at page 402: 'In what may be deemed a commercial sense, [charge is] the price required or demanded for service rendered, or * * * for goods supplied.' When a buyer receives cash checks, trading stamps or any other form of price discount on a purchase of an item of goods, he is not making a charge to the merchant who sells it. This is so whether the discount is allowed only when the merchant does not deliver the goods to the buyer's home, or is a discount for cash or for a volume purchase.

We have referred above to the allowance as a 'price discount.' In Consolidated Rock etc. Co. v. State of California, 57 Cal.App.2d 959, 966-969, 135 P.2d 699, 703 (the counterpart of this case, except that there the seller made a transportation charge; here the buyer receives a transportation credit) the charge was called, by the court, a 'differential in price.' There the sellers transported the goods sold...