Safeway Stores, Inc. v. State Bd. of Equalization
| Decision Date | 05 February 1957 |
| Citation | 148 Cal.App.2d 299,306 P.2d 597 |
| Court | California Court of Appeals Court of Appeals |
| Parties | SAFEWAY STORES, Incorporated, a corporation, Plaintiff and Respondent, v. STATE BOARD OF EQUALIZATION of the State of California, and George R. Reilly, James H. Quinn, Herold L. Seawell, William G. Bonelli, and Thomas H. Kuchel, individually and as members of, and as constituting, the State Board of Equalization of the State of California, Defendants and Appellants. Civ. 8869. |
Edmund G. Brown, Atty. Gen., by James E. Sabine and Irving H. Perluss, Asst. Attys. Gen., for appellants.
Orrick, Dahlquist, Herrington & Sutcliffe, San Francisco, for respondent.
Respondent is engaged in the retail grocery business and in the related business of manufacturing and packing the grocery products sold by it through its retail outlets. During the period from July 1, 1945 to June 30, 1947, there was a severe paper shortage and respondent was unable to obtain an adequate supply of paper bags. At various times during this period respondent purchased from sellers in the State of California certain empty cardboard cartons which were suitable for use in the packaging and delivery of groceries to retail customers. The cartons were purchased through the Douglas Paper Company, an unincorporated division of respondent for which separate books were kept. At the time of purchase a resale certificate was given to the seller of the cartons and no sales tax was paid.
After purchasing the cartons the Douglas Paper Company Division delivered them to various other units of respondent's operations. These operating units placed retail grocery items such as canned goods in these cartons and delivered the cartons and their contents to respondent's retail grocery stores. There the contents were removed from the cartons and placed on open shelves. The empty cartons were then placed at or near the check-out counters in the stores and were used for the packaging of grocery products purchased by retail customers. Substantially in excess of 80% of such cartons were used for packaging and delivery of groceries purchased by retail customers. The remainder were not used for delivery to retail customers because cause the cartons had been damaged.
Appellants concluded that the sales of cartons to respondent's Douglas Paper Company Division had been subject to sales tax and that the resale certificates should not have been given. Accordingly, appellants assessed sales taxes against respondent. Respondent paid the taxes under protest and filed a claim for refund, which was denied. Respondent then filed an action for a refund of said sales taxes, and following a trial judgment was entered in respondent's favor for the sum of $7,145.87 with interest. This appeal is from said judgment.
The relevant portions of the Revenue and Taxation Code here involved are as follows:
* * *'
§ 6364. There are exempted from the taxes imposed by this part, the gross recipts from sales of and the storage, use, or other consumption in this State of:
'(a) Nonreturnable containers when sold without the contents to persons who place the contents in the container and sell the contents together with the container. * * *'
Appellants contend that the sale of the cartons to Safeway was for a 'purpose other than resale' within the meaning of section 6007; that Safeway used the cartons far more than by merely placing 'the contents in the container and sell[ing] the contents together with the container' within the meaning of section 6364(a); and that because Safeway gave the seller of the cartons resale certificates and because Safeway used the cartons in its business, such use was a taxable retail sale under section 6094.
Appellants argue that it is settled law in California that the eventual resale of personal property by a person who has purchased such property for use will not prevent the original sale of such property from being a retail sale subject to tax. They cite Kirk v. Johnson, 37 Cal.App.2d 224, 99 P.2d 279, in which it was held that sales of cows to dairymen for the purpose of producing milk were not sales for resale merely because the purchaser ultimately intended to market the cows as beef. They also cite People v. Puritan Ice Company, 24 Cal.2d 645, 151 P.2d 1, in which it was held that the sales of ice to shippers and packers of vegetables during shipment were retail sales subject to sales tax, although the purchasers of the vegetables were billed separately for the ice, since the ice was used by the shippers and packers as a preservative prior to the resale.
Respondent in reply points out that from 1936 to the present it has been recognized in appellants' regulations (see California Administrative Code, Title 18, sec. 1989) that sales of containers are not 'retail sales' if the purchaser places goods in the containers and sells the contents together with the containers. In the case of Coca-Cola Co. v. State Board of Equalization, 25 Cal.2d 918, 156 P.2d 1, appellants argued that this administrative construction was in excess of their own powers under the statute. The court held that the construction was reasonable and authorized by the statute. In that case the Coca-Cola Company had purchased wooden barrels and kegs in which...
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...is to preserve the produce by means of refrigeration ..." (24 Cal.2d at pp. 651-652, 151 P.2d 1.) In Safeway Stores v. State Bd. of Equal. (1957) 148 Cal.App.2d 299, 306 P.2d 597, the plaintiff purchased cardboard containers which were used for package and delivery of canned goods to retail......
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