Sutter Packing Co. v. State Bd. of Equalization

• Decision Date: 19 March 1956
• Citation: 294 P.2d 1083,139 Cal.App.2d 889
• Court: California Court of Appeals Court of Appeals
• Parties: SUTTER PACKING COMPANY, a Corporation, Plaintiff and Appellant, v. STATE BOARD OF EQUALIZATION of the State of California, et al., Defendants and Respondents. Civ. 16609.

Page 1083

294 P.2d 1083

139 Cal.App.2d 889

SUTTER PACKING COMPANY, a Corporation, Plaintiff and Appellant, v. STATE BOARD OF EQUALIZATION of the State of California, et al., Defendants and Respondents.

Civ. 16609.

District Court of Appeal, First District, Division 2, California.

March 19, 1956.

Hearing Denied May 15, 1956.

Orrick, Dahlquist, Herrington & Sutcliffe, San Francisco, for appellant.

Edmund G. Brown, Atty. Gen., James E. Sabine, Asst. Atty. Gen., Ernest P. Goodman, Deputy Atty. Gen., for respondent.

KAUFMAN, Justice.

Plaintiff appeals from a judgment rendered in favor of defendant in an action for a refund of sales tax. On June 1, 1949, appellant made a sale of all of its furniture, fixtures, machinery and other equipment to a single purchaser for a price of $700,000, subject to sales tax, and it is this tax which appellant sought to recover in the present suit.

The action was tried on a stipulation of facts and no additional evidence was introduced. Sutter, a California corporation, was engaged in the business of processing, packing, selling and distributing canned fruits and vegetables for resale. During the period beginning September 1, 1945 and ending March 31, 1949, appellant made several retail sales of used equipment and various supplies on which sales tax was paid. In the fourth quarter of 1945 it sold all of its equipment for the sum of $264,819.72, paying the sales tax thereon. During the period beginning in August, 1933 and ending March 31, 1949, Sutter held a seller's permit from the State Board of Equalization as required of any person making retail sales. Rev. & Tax.Code, Sec. 6066. On April 15, 1949, Sutter obtained a cancellation of its seller's permit to be effective March 31, 1949.

Having decided to discontinue operations on or about March 15, 1949, Sutter entered into negotiations with a non-affiliated company. On March 26, 1949, it transferred its entire inventory of finished goods and goods in process to an affiliated company for a purchase price of $2,799,235.93, receiving a resale certificate therefor. On May 4, 1949, the sale of the equipment, furniture and fixtures to a non-affiliated company was completed for a consideration of $700,000. The transfer of these assets took place on June 1, 1949. Sutter does not contend that the assets involved in this latter sale were sold for resale.

The trial court adopted the Partial Stipulation of Facts as Findings of Fact. It further found that every allegation in the complaint not included in said Stipulation or admitted by the answer was untrue. As inferences from the Stipulation the court found that Sutter was a retailer at time of the sale here in question; that the sale was one of a series of retail sales made in the period, September 1, 1945 to and including June 1, 1949; that said sale was part of a series of retail sales sufficient in number, scope and character to constitute plaintiff a retailer; that the property involved in the sale was held and used by plaintiff in the course of an activity for which a seller's permit was required.

Appellant contends that it was not a retailer at the time it sold its cannery equipment. Section 6051, Revenue and Taxation Code, imposes a tax for the privilege of selling tangible personal property at retail, and section 6015 of the same code defines a 'retailer' as a person 'engaged in the business of making retail sales * * * of tangible personal property owned by the person or others.' Appellant admits that it made retail sales of obsolete equipment and incidental supplies prior to March 21, 1949, but contends that it was not a retailer on June 1, 1949, because more than two months earlier it had terminated the business which theretofore had made it a retailer. It is to be noted that it was not appellant's principal business, operating a cannery, which had made it a retailer, for the food processing business is exempt from the sales tax. Rev. & Tax.Code, sec. 6359. It was the incidental sales of supplies and obsolete equipment for which it had held a seller's permit. In the last quarter of 1948, appellant made ten retail sales. The last sale (prior to the sale here in question), the sale of an obsolete printing press, had occurred in the first quarter of 1949, the quarter in which it was decided to discontinue business and in which negotiations were begun which culminated in the sales agreement of May 4, 1949, involving furniture, fixtures, machinery, equipment, repair supplies, tools, etc., in the plant. This transfer was completed on June 1, 1949, by delivery of a bill of sale, and the buyer removed the aforesaid equipment from the plant prior to the close of 1949. It will be recalled that inventory of goods in process, finished goods, shipping and packing supplies, had been sold on March 26, 1949, to an affiliated company.

Appellant maintains that the above stipulated facts conclusively establish that it was not on June 1, 1949, engaged in the business of making sales at retail. The agreement was, however, actually made on May 4, 1949, and negotiations leading to the sale had apparently commenced before appellant on April 15, 1949, mailed in its seller's permit for cancellation. These facts would allow the inference which was drawn by the trial court that this sale was part of a series of retail sales made by appellant in the period September 1, 1945 to and including June 1, 1949. The fact that appellant did not hold a seller's permit at the time that the sale was completed would be of no significance, since if the sale is a retail sale covered by the act, the seller is liable for the tax whether or not he holds a seller's permit.

Appellant contends that the sale of all the remaining assets of a business is distinguishable from the prior retail sales made by it. The series of earlier sales were incidental and a by-product of its principal, non-retailing, non-taxable operations. They were generally sales of pieces of obsolete equipment, or supplies sold to farmers. The sale of June 1, 1949, was a sale in termination of a business rather than in pursuance of a business. The sales tax, it is argued, is a tax upon the privilege of conducting a retail business. Western Lithograph Co. v. State Board of Equalization, 11 Cal.2d 156, 164, 78 P.2d 731, 117 A.L.R. 838; National Ice & Cold Storage Co. of California v. Pacific Fruit Express Co., 11 Cal.2d 283, 79 P.2d 380; Bigsby v. Johnson, 18 Cal.2d 860, 862, 118 P.2d 289. The federal cases have noted the distinction between cases of retail sales made in the course of conducting a business, and those made in liquidation of a business. State Board of Equalization of State of California v. Boteler, 9 Cir., 131 F.2d 386; California State Board of Equalization v. Goggin, 9 Cir., 191 F.2d 726, 729, 27 A.L.R.2d 1211. In the Goggin case in which the trustee in bankruptcy had made a sale of certain trucks, the court stated that 'the sale was not made in the course of conducting a business but in the process of putting an end to a business.' The cases where the tax has been held applicable are those made while the seller was conducting a business. Northwestern Pac. R. Co. v. State Board of Equalization, 1943, 21 Cal.2d 524, 133 P.2d 400, sale of used rolling stock; Bigsby v. Johnson, 1941, 18 Cal.2d 860, 118 P.2d 289, sale of used printing equipment by printing establishment; Los Angeles City High School Dist. v. State Board of Equalization, 1945, 71 Cal.App.2d 486, 163 P.2d 45, sales of miscellaneous equipment no longer needed for school purposes.

While it is true that the cases cited above, decided by the courts of this state, were cases in which the retail sales were all made by sellers still engaged in their principal business activity, none of those cases dealt with the issue now before the court, and shed no light on the problem. As to the views expressed by the federal courts in the cases cited, supra, they are not controlling in the state courts. These cases were recently discussed in Market Street Ry. Co. v. California State Board of Equalization, 137 Cal.App.2d 87, 290 P.2d 20, 27, the court there stating that 'It is possible that these cases can be...