U.S. Industries, Inc. v. State Bd. of Equalization
| Decision Date | 08 January 1962 |
| Citation | 198 Cal.App.2d 775,18 Cal.Rptr. 171 |
| Court | California Court of Appeals Court of Appeals |
| Parties | U. S. INDUSTRIES, INC., The Noslexa Company, Mostum, Inc., Doncliff, Inc., Plaintiffs and Appellants, v. STATE BOARD OF EQUALIZATION of the State of California, Defendant and Respondent. Civ. 25175. |
Richards, Watson, Smith & Hemmerling, Los Angeles, for appellants.
Stanley Mosk, Atty. Gen., Dan Kaufmann, Asst. Atty. Gen., and Jay L. Shavelson, Deputy Atty. Gen., for respondent.
This appeal is by the plaintiffs from a judgment rendered in favor of the defendant in an action for refund of sales tax. The action for refund of sales tax was pursuant to section 6933 of the Revenue and Taxation Code. 1
The question presented is whether the sale by a manufacturer (in this case several manufacturers) of the entire business, including office furniture and machinery used as part of the manufacturing operation, is subject to sales tax, and if so, whether it is constitutional.
The cause was submitted to the trial court on a stipulation of facts and the facts as set forth therein, and found by the court to be true, are in pertinent part as follows:
'1. U. S. Industries, Inc., is a Delaware corporation and is the successor to Pressed Steel Car Co., Inc., a Pennsylvania corporation * * * For convenience, U. S. Industries, Inc. and Pressed Steel Car Co., Inc., are hereinafter referred to as 'USI'.
'2. The Noslexa Company was a California corporation * * * whose former name was Axelson Manufacturing Company. For convenience, Axelson * * * and the Noslexa Company are hereinafter referred to as 'Noslexa'. Prior to the sale of its business and assets to USI pursuant to the contract of sale referred to in Paragraph 5 of this Stipulation, and without any interruption of its business prior to said sale, Noslexa was engaged in manufacturing and selling machine tools, oil well equipment, and aircraft components, and held a permit with respect to such manufacturing and selling under Article 2 of Chapter 2 of the Sales and Use Tax Law of California . The net receipts from sales of said manufactured goods by Noslexa, not including returns and discounts, between April 1, 1950, and October 8, 1952, the period of the closing audit by the California State Board of Equalization, was $34,512,642.19. Many hundreds of said sales during this period, of a net amount of $6,313,090.36, not including returns and discounts, were retail sales, i. e., for purposes other than resale in the regular course of business, and sales taxes were duly paid by Noslexa to the State of California upon said sales. Said taxable sales of manufactured goods between January 1, 1952, and October 8, 1952, the closing date specified in the aforesaid contract of sale, not including returns and discounts, totaled $1,958,025.82.
'3. Mostum, Inc., was a California corporation whose * * * former name was Southern Pipe & Casing Company. For convenience, Southern Pipe & Casing Company and Mostum, Inc., are hereinafter refered to as 'Mostum'. Prior to the sale of its business and assets to USI pursuant to the contract of sale referred to in Paragraph 6 of this Stipulation, and without any interruption of its business prior to said sale, Mostum was engaged in manufacturing and selling coated and uncoated steel pipe, and held a permit with respect to such manufacturing and selling under Article 2 of Chapter 2 of the Sales and Use Tax Law of California . The net receipts from sales of said manufactured goods by Mostum, not including returns and discounts, between July 1, 1952, and October 24, 1955, the period of the closing audit by the California State Board of Equalization, was $30,066,309.51. Many hundreds of sales during this period, of a net amount of $12,212,278.60, not including returns and discounts, were retail sales, i. e., for purposes other than resale in the regular course of business, and sales taxes were duly paid by Mostum to the State of California upon said sales. Said taxable sales of manufactured goods by Mostum during the period between January 1, 1955, and October 24, 1955, the closing date specified in the aforesaid contract of sale, not including returns and discounts, totaled $3,952,287.01.
'4. Doncliff, Inc. was a California corporation whose * * * former name was Western Design & Manufacturing Corp. For convenience, Western Design & Manufacturing Corp. and Doncliff, Inc., are hereinafter referred to as 'Doncliff'. Prior to the sale of its business and assets to USI pursuant to the contract of sale referred to in Paragraph 7 of this Stipulation, and without any interruption of its business prior to said sale, Doncliff was engaged in manufacturing and selling aircraft components and electronic devices, and held a permit with respect to such manufacturing and selling under Article 2 of Chapter 2 of the Sales and Use Tax Law of California . The net receipts from sales of said manufactured goods by Doncliff, not including returns and discounts, between December 1, 1953, and August 15, 1956, the period of the closing audit by the California State Board of Equalization, was $2,491,321.27. Nine of said sales during this period, of a net amount of $5,766.66, not including returns and discounts, were retail sales, i. e., for purposes other than resale in the regular course of business, and sales taxes were duly paid by Doncliff to the State of California upon said sales. * * *
'5. On September 2, 1952, USI entered into a written contract with Noslexa pursuant to which USI acquired as of October 8, 1952, the closing date specified in said contract, all of the business, properties and assets of Noslexa in exchange for the issuance and delivery to Noslexa as of October 8, 1952, 537,930 shares of common stock of USI. As of June 30, 1952, the capital structure of USI was as follows:
"Common stock 1,045,500 shares
"Preferred stock
($50 par) 77,855 shares
Said capital structure remained substantially unchanged until the issuance of 537,930 additional shares of common stock, pursuant to said contract, on or about October 8, 1952. There did not exist at any time prior to October 8, 1952 any affiliation of any kind between USI and Noslexa, nor any common ownership of the stocks or bonds of or any other interest in the said two corporations. As a part of the transaction USI assumed and agreed to pay all liabilities, obligations and commitments whatsoever of Noslexa, whether known or unknown. During the period between the execution of said contract and October 8, 1952, Noslexa continued to conduct its business in the customary manner, and subsequent to October 8, 1952, Noslexa was dissolved.
'6. On October 24, 1955, USI entered into a written contract with Mostum pursuant to which USI acquired as of November 1, 1955, the closing date specified in said contract, all of the business, properties and assets of Mostum in exchange for $200,000.00 plus the issuance and delivery to Mostum of convertible subordinated debentures of USI in the principal amount of $3,715,000.00 (convertible into USI common stock at the rate of one share of common per $13.93 of principal amount). As of December 31, 1954, the capital structure of USI was as follows:
"Common stock .............. 1,583,249 shares
"Preferred stock
($50 par) ............... 63,355 shares
"Convertible subordinated
debentures convertible
into common at the
aforementioned rate ..... $5,293,000
Said capital structure remained substantially unchanged until the issuance of $3,715,000.00 in additional debentures pursuant to said contract, on or about November 1, 1955. There did not exist at any time prior to November 1, 1955, any affiliation of any kind between USI and Mostum, nor any common ownership of the stocks or bonds of or any other interest in the said two corporations. As a part of the transaction, USI assumed and agreed to pay all liabilities, obligations and commitments whatsoever of Mostum, whether known or unknown. During the period between the execution of said contract and November 1, 1955, Mostum continued to conduct its business in the customary manner, and subsequent to November 1, 1955, Mostum was dissolved.
'7. On July 31, 1956, USI entered into a written contract with Doncliff pursuant to which USI acquired, as of August 15, 1956, the closing date specified in said contract, all of the business, properties and assets of Doncliff in exchange for $75,000.00, plus the issuance and delivery to Doncliff of shares of common stock of USI having an aggregate market value as of said closing date equal to $525,000.00, i. e., 30,882 shares. As of December 31, 1955, the capital structure of USI was as follows:
"Common stock ................ 1,802,981 shares
"Preferred stock
($50 par value) ........... 55,246 shares
"Convertible subordinated
debentures (convertible
into USI common stock
at the rate of one share
of common per $13.93
of principal amount) ...... $7,795,300
'Said capital structure remained substantially unchanged until the issuance of said 30,882 shares of common stock pursuant to said contract on or about August 15, 1956. There did not exist at any time prior to August 15, 1956, any affiliation of any kind between USI and Doncliff, nor any common ownership of the stocks or bonds of or any other interest in the said two corporations. As a part of the transaction, USI assumed and agreed to pay all liabilities, obligations, and commitments whatsoever of Doncliff, whether known or unknown. During the period between the execution of the contract and August 15, 1956, Doncliff continued to conduct its business in the customary manner, and subsequent to August 15, 1956, Doncliff was dissolved.
'8. During the period of twelve...
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