Banken v. State Board of Equalization

This appeal is taken from a judgment of the trial court that adjudged that appellants are not entitled to a refund of sales taxes paid by them to respondent, for which taxes proper claim was filed and suit for refund instituted.

The stipulation of facts upon which the case was tried shows that appellants operate an establishment under the firm name and style of Western Dye House, which specializes in the dyeing of fabrics. In the operation of the business they have for many years dyed fabrics for the various motion picture studios in southern California. Some of the fabric dyed had previously been used by the studios, while some of it was new.

Respondent assessed the tax in controversy against appellants on the theory that the charges made by them for the dyeing of new fabrics was a part of their gross receipts from the sale of tangible personal property at retail within the meaning of section 6006(c) (formerly 6006(a)) of the Revenue and Taxation Code, which provides: “ ‘Sale’ means and includes: ...(c) The producing, fabricating, processing, printing, or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing, or imprinting.”

The material involved in this proceeding which the studios sent to appellants for dyeing had been acquired by such studios as a portion of purchases of large quantities of material made from time to time, some of which was in its natural state at the time of purchase, and some of it already dyed. It is agreed that the purchases by the motion picture companies were not made with the intent to use the material in any particular production or to have it dyed any particular color, that the method of purchasing by them was based upon economic expediency at the time the purchases were made and in anticipation of subsequent production needs, and that this method of doing business was in operation before the effective date of the California Retail Sales Tax Act.

It is not contended that the act is unconstitutional and

We think appellants’ arguments are more properly addressable to the Legislature than to the courts. Certainly the language of the act is broad enough to authorize the imposition of the tax under the circumstances of this case, for it is admitted that there was a processing of the goods for a consideration, which goods were furnished by the consumer. No such exceptions as we are asked to recognize appear in the act itself, nor do we believe that they can be read into it, with reason. Nor does the fact that the board has not seen fit to apply the act to used materials furnish adequate ground for holding that the plain language of the statute is not to be applied in this case, as there is always the possibility that the board erred in making the exception rather than that it erred in applying the law to the processing of new materials.

While the record before us does not contain any historical material bearing upon the reasons for the enactment of the statute- in its present form, various amendments of same in

No such exceptions as appellants urge have been written into the measure, though the statute as construed by the board apparently had been applied by it to similar transactions prior to the amendments. Before the amendment of 1939, a decision had been rendered by the Superior Court of Sacramento County in Bosqui v. Johnson, involving the application of the sales tax to the charges of a printer for adding to printed matter furnished by the consumer the names and addresses of certain of its agents or sub-agents. That court held that the charge for imprinting the additional matter did not constitute a sale within the act as it then read. In the amendment of 1939, the words printing or imprinting were added, indicating that the Legislature intended either to clarify the act or to amend it so as to cover just such'a transaction.

Also, prior to the codification of the act in 1941, the Supreme Court had rendered a decision in the ease of Bigsby v. Johnson (Cal.), 99 P.2d 268 , 270-272 (Feb., 1940), in which it had held, contrary to the contentions of appellant, that where the owner of paper material furnished such material to a printer and the latter for a consideration furnished the mate

Furthermore, the exceptions which appellants would read into the act, that is, that it should not be applied in cases where, as they say, “the circumstances are such as to permit the conclusion that in the normal course of events there would have been two separate transactions, irrespective of the sales tax,” and where there was no intention to avoid the tax, would render its effective application practically impossible from an administrative standpoint. The tax is exacted from the consumer originally by the seller—in this case the dyer— and if the exceptions urged by appellants were to be made, in order to know whether to include the tax in his charges to his customer the dyer would have to inquire into the circumstances under which the materials had been acquired and determine whether there had in fact been two transactions so separated by time and circumstances as to justify a conclusion on his part that he should not include the tax as a part of his charge, and whether his customer was or was not attempting to avoid the tax; and if he failed to include it and the board differed from his conclusion as to what the circumstances and the intent of his customer were, he would be liable for the tax personally. One need go no further with this line of reasoning to see that such an exception would render the section practically unworkable.

The judgment is affirmed.

Thompson, J., and Schottky, J. pro tem., concurred.