Santa Fe Energy Co. v. State Bd. of Equalization
| Decision Date | 20 September 1984 |
| Citation | 160 Cal.App.3d 176,206 Cal.Rptr. 499 |
| Court | California Court of Appeals Court of Appeals |
| Parties | SANTA FE ENERGY COMPANY, Plaintiff and Appellant, v. The BOARD OF EQUALIZATION OF the STATE OF CALIFORNIA, Defendant and Respondent. Civ. B003699. |
Plaintiff Santa Fe Energy Company (Santa Fe) appeals from a summary judgment
granted in favor of defendant California Board of Equalization (Board) and from the denial of its own motion for summary judgment.
On September 9, 1976, Santa Fe Industries, Inc. (Santa Fe Industries), plaintiff's parent company, entered into an agreement of sale with Westates Petroleum Company (Westates). Westates was engaged in the business of exploration, development and production of crude oil. Santa Fe Industries purchased all of Westates' assets with the exception of certain excluded assets and assets and properties located outside North America.
The agreement of sale provided that Santa Fe Industries could assign any or all of its rights and duties under the contract to one or more of its wholly-owned subsidiaries, and Westates would render performance of its obligations to the subsidiaries. Prior to the closing of the transaction, Santa Fe Industries did assign all of its rights and duties pertaining to California to Chanslor-Western Oil and Development Company (Chanslor-Western), a wholly-owned subsidiary. Plaintiff is the successor-in-interest, by statutory merger, of Chanslor-Western.
Westates' assets included tangible personal property. Initially, Westates paid no California sales tax on the transfer of those assets. Following an audit, the Board notified Westates that a deficiency in sales and use taxes in the amount of $125,643.48 and interest in the amount of $27,146.75 were due for the period commencing July 1, 1975, and ending January 21, 1977.
On February 6, 1979, Santa Fe paid the Board $147,819.27, the amount attributed by the Board to the California tangible personal properties sold by Westates.
Prior to the sale of its assets to Santa Fe Industries, Westates had neither sold personal property at retail nor consumed any of the crude oil it produced; rather all crude oil produced was sold for the purpose of refining or processing into gasoline, fuel oil or other petroleum products.
Santa Fe filed suit against the Board to recover the sales tax. Both Santa Fe and the Board sought summary judgment. Santa Fe's motion was denied; the Board's motion, however, was granted.
Plaintiff contends that Westates' sale of assets was an occasional sale pursuant to Revenue and Taxation Code Section 6367 and that as such, the receipts of the sale were entitled to an exemption from the sales tax.
Plaintiff essentially contends that the Board was not entitled to collect sales tax on the receipts of the sale of Westates' assets. We disagree.
Revenue and Taxation Code section 6051 provides "For the privilege of selling tangible personal property at retail a tax is hereby imposed upon all retailers at the rate of ... of the gross receipts of any retailer from the sale of all tangible personal property sold at retail in this state ...." 1 Thus, it is apparent that all retailers must pay sales tax for the privilege of selling tangible personal property. In order to settle the instant dispute, therefore, we must determine (1) whether Westates was a retailer, (2) whether the sale of Westates' personal property was a retail sale and (3) whether Westates' property was tangible personal property. An affirmative answer to all three inquiries will demonstrate the propriety of the trial court's determination.
The second inquiry is most easily answered, for in its brief to this court plaintiff stated, Thus, plaintiff clearly has conceded that the sale of Westates' assets was a "retail sale." (Estate of Kretschmer (1965) 232 Cal.App.2d 789, 790, 43 Cal.Rptr. 121.)
The third inquiry is also easily answered. Tangible personal property is defined as "personal property which may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses." ( § 6016.) Inasmuch as crude oil, the assets sold by Westates, can surely be "seen, weighed, measured, felt [and] touched," there can be no doubt that the property sold was tangible personal property within the meaning of the Revenue and Taxation Code.
Finally, in order to determine the existence of the first criterion, whether Westates was a retailer, a "seller who makes any retail sale or sales of tangible personal property...." ( § 6015; emphasis added), we must know whether Westates was a "seller" and whether Westates sold tangible personal property. Because the latter inquiry has already been settled in the affirmative, we turn to the determination of whether Westates was a "seller" and, therefore, a retailer. According to section 6014, a "seller" is "every person engaged in ... selling tangible personal property of a kind the gross receipts from the retail sale of which are required to be included in the measure of the sales tax."
Plaintiff cites Davis Wire Corp. v. State Bd. of Equalization (1976) 17 Cal.3d 761, 132 Cal.Rptr. 133, 553 P.2d 229 in support of its assertion that Westates was not a "seller" and, therefore, not a "retailer." Plaintiff's reliance is misplaced, however. In Davis Wire, our supreme court determined that the sale of the capital assets of two paper mills was a sale subject to the imposition of the sales tax. There, as here, the parties had agreed that the goods sold in the contested transaction had been sold at retail. As here, neither mill had previously engaged in retail sales. The court concluded, however, that both mills were "sellers" within the meaning of section 6014 inasmuch as the assets sold "were suited to retail sale." (Id., at p. 764, 132 Cal.Rptr. 133, 553 P.2d 229, emphasis original.) The court stressed that "section 6014 requires only that the goods be 'of a kind ' that their retail sale would be taxable; it does not require that the goods must actually have been sold at retail by the manufacturer or, for that matter, by anyone else." (Id., at p. 764-765, 132 Cal.Rptr. 133, 553 P.2d 229, emphasis original.)
We reject plaintiff's assertion that Davis Wire establishes two distinct tests for the identification of a party as a "seller." Plaintiff contends the test requires both that the products sold be of a kind which has any conceivable retail use and that the vendor be engaged in the sale of taxable or non-taxable goods. Plaintiff seeks to avoid the appellation "seller" by relying on the fact that Westates sold its crude oil at wholesale and not at retail. We direct plaintiff's...
To continue reading
Request your trial