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District Court of Appeal, Third District, California.


Civ. 6302.

Decided: June 25, 1941

Harry A. Encell, of San Francisco, for appellant. Earl Warren, Atty. Gen., and R. L. Chamberlain, Deputy Atty. Gen., for respondent.

The plaintiff has appealed from a judgment rendered against it in a suit to recover license taxes which were paid under protest for the years 1935 and 1936, for transportation of property over public highways in California. A rebate from the taxes paid during that period of time, in the sum of $2,016.63, was claimed, on charges for “loading and unloading” and for “pick–up and delivery” of goods, as services separate and distinct from actual transportation of property on the highways. The suit was brought under section 9 of the act authorizing the license tax for transportation of property upon the highways of California. Stats.1933, p. 928, and amendments thereto; 1 Deering's Gen.Laws of Cal. of 1937, p. 2160, Act 5130d.

The plaintiff is duly licensed and extensively engaged as a common carrier in conveying household goods and other personal property over the highways of California, by means of motor vehicles. Its principal place of business is at Los Angeles. All license taxes levied and assessed against the plaintiff pursuant to the statute above mentioned have been fully paid. Verified reports were regularly filed with the board of equalization, as required by section 4 of the act, showing the gross receipts of the business in which deductions were separately made and claimed for charges for “loading and unloading goods” and for “picking up and delivering packages” as distinguished from strictly highway transportation charges. In the years of 1935 and 1936, the taxes on the last–mentioned deductions amounted in the aggregate to $2,016.63. After an investigation, accounting and hearing, at which the plaintiff was represented, the board disallowed the deductions and levied and assessed against plaintiff the last–mentioned sum as a part of its regular license tax for that period of time. That sum was promptly paid under protest. This suit was then commenced.

The essential facts of this case are undisputed. The Bekins Van Lines, Incorporated, was assessed as a licensed tax for conducting a transportation business under the statute on the basis of all gross receipts without credit for any portion thereof received for services in assembling goods, in preparation for hauling, loading or unloading or separate pick–up and delivery of the goods as distinguished from actual conveyance over the highways outside of incorporated cities.

Reports were regularly filed with the board pursuant to law in which receipts for compensation for different classes of services were separately itemized. Several waybills were received in evidence which distinctly show the custom of segregating charges for “pick–up and delivery services” separate from actual conveyance of the goods on the highways. The evidence is undisputed that 56 per cent of the time and labor necessarily employed in transporting goods is consumed in assembling, packing, preparing for shipment, removing goods from the houses to the trucks, loading and unloading and pick–up services. The remaining 44 per cent is consumed in actual transportation on the highways. For the purpose of fixing rates to be charged, it is the custom of the railroad commission to allow 40 per cent for such preparation services. Mr. Reed J. Bekins, who has served as vice–president and general manager of the plaintiff company for many years, testified in detail regarding the customary services rendered in transporting household goods and other personal property. He described the method of packing books, dishes and fragile articles, the removal of mirrors from chiffoniers, pictures from the walls, the legs from pianos, and taking down and setting up beds, together with the manpower, time and equipment necessary to transport such property from upper stories of apartment houses or from ordinary dwelling houses, to the trucks. He explained the care with which the property is packed and protected by pads in the vans, and the frequent necessity of rendering separate pick–up and delivery services. He said: “A large majority of our business consists of assembling or pooling small lots of household goods * * * into one load going to a certain destination; * * * that lot of goods will be picked up from the residence, will be hauled to our warehouse, where they are unloaded, listed, packed, and set aside for assembly with other lots; and then they are reloaded onto a line haul truck and sent on to destination. At destination the reverse process may be taken * * * and then delivered to the residence with a pickup truck.”

In ascertaining the amount to be charged for transportation, Mr. Bekins said they followed the rule established by the railroad commission to segregate the time consumed in preparing the goods for shipment, from the time actually employed in traveling on the highways. In computing compensation, the custom was followed to charge a fixed rate per hundred weight, to which 40 per cent was added, under the railroad commission's rule, for the actual distance traveled on the highway. It was estimated that one man could ordinarily handle about 375 pounds of household goods per hour. The charges varied according to the time consumed in preparing goods for shipment and in loading and unloading as well as the distance to be traveled on the highways.

The trial court held that the charges for loading and unloading and for picking up and delivering goods, although such services are not performed on the highways of California, are, nevertheless, incidental to the business of hauling goods upon the highways, and that they should, therefore, be included as a part of the gross receipts which constitute the basis for computing the three per cent license tax authorized by law to be collected. Judgment was accordingly rendered against the plaintiff to the effect that it take nothing by this action. From that judgment this appeal was perfected.

It is apparent from the entire act that it was not the intention of the legislature to fix the amount of tax to be paid for transportation, estimated at three per cent of the gross receipts, upon all services performed by the companies, both incidental to and in the direct process of hauling goods upon the highways. It is true that section 4 requires the operator to file with the board verified reports “showing the gross receipts from operation of said operator”. It provides that “A license tax equal to three per cent of gross receipts from operation derived” shall be levied. But the term “gross receipts” upon which the amount of taxes is to be estimated is defined in section 1(d) of the act, which clearly indicates that it is based on the mileage actually traveled on public highways within the state of California outside of incorporated cities. The statute specifically excludes from consideration the proceeds derived from mileage covered within incorporated cities, and it also excludes receipts from mileage covered outside of cities where “no portion of the public highway * * * is traversed”. Section 14 reads in that regard: “This act shall not apply to motor vehicles operated exclusively within incorporated cities or towns, nor shall it apply to such vehicles operating between incorporated cities or towns where no portion of public highway outside of the corporate limits of said cities or towns is traversed in said operation.”

The preceding section clearly indicates that the tax is to be computed on the basis of the mileage traversed over and upon public highways only and when such highways are outside of incorporated cities and towns. This section positively refutes the theory that the taxes are to be computed on the entire gross receipts of a transportation company regardless of the nature of the services performed, or of the source of revenue derived from the business. It has been definitely determined that the statute was enacted for the purpose of compelling transportation companies to contribute their fair proportion of the necessary costs of maintaining public highways over which their vehicles travel. Bacon Service Corp. v. Huss, 199 Cal. 21, 248 P. 235; In re Bush, 6 Cal.2d 43, 56 P.2d 511. In the Huss case, supra, it is said in that regard at page 29 of 199 Cal., at page 238 of 248 P.: “An examination of the entire statute discloses that the obvious and only purpose of the act was to provide a revenue with which to maintain and repair the public highways of the state outside of incorporated cities, and that such revenue was to be obtained by the imposition of a license or privilege tax on the business of operating motor vehicles for hire over such public highways.”

In the Bush case, supra, it is likewise said at page 53 of 6 Cal.2d, at page 515 of 56 P.2d: “We are satisfied that the purpose of the enactment of the License Tax Act of 1933 was to secure a fair return to the state for the use of its public highways.”

From the foregoing authorities and from an examination of the transportation act in question, we assume it was adopted to raise revenue for the maintenance of public highways, and not to regulate traffic on the highways. The provisions of the Vehicle Code, St.1935, p. 93, were evidently intended to cover the regulation of traffic on the highways. Regulatory licenses of occupations are imposed under the police power of the state to protect the health, morals and general welfare of the public, as distinguished from statutes enacted for the chief purpose of raising revenue. 33 Am.Jur. 336, sec. 17. In construing a license tax statute, courts are governed by the disclosed purpose of the act rather than the mere technical language employed. When a doubt exists regarding the meaning or application of the statute, the uncertainty is to be resolved in favor of the taxpayer. Pioneer Express Co. v. Riley, 208 Cal. 677, 687, 284 P. 663, 667; 33 Am.Jur. 329, sec. 4; 37 C.J. 180, sec. 21.

In the Riley case, supra, it is said in that regard: “In every case involving ‘the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the government, and in favor of the citizen.’ ”

Applying the foregoing rule of construction to the language of the statute in question we are satisfied the legislature did not intend to require the procuring of an occupational license tax based on the entire gross receipts of the carrier's business, regardless of the necessary costs of assembling goods for the purpose of shipping, the charges for loading and unloading the vehicles or the expense incident to a separate “pick–up and delivery service”. We are of the opinion section 4 of the act, which provides for a tax of “three per cent of gross receipts from operation” should be construed to mean three per cent of the gross receipts from operation on the public highways. Section 1(d) of the act reinforces the preceding conclusion. It provides that “the term ‘gross receipts from operation’ shall include all receipts from the operation of such motor vehicle or motor vehicles. The italicized language from the last–quoted section clearly excludes receipts derived from sources other than that of operating the vehicles. Likewise section 2 of the act provides that the license shall be procured by each operator who desires to transport persons or property for compensation “upon or over any public highway within this State”. Moreover, section 1(d) of the act specifically declares that the estimated taxes shall be “based upon the proportion of the mileage within this State to the entire mileage over which such business is done”. Section 14 (now section 22 of the amended act) excludes from consideration in estimating the taxes due, transportation within incorporated cities or towns, and roadways outside of such cities and towns other than public highways. It is significant that the act does not mention, directly or inferentially, the necessity of including within gross receipts the compensation received from services performed in packing or assembling goods, in loading or unloading them or for “pickup and delivery” charges. The very purpose of the act would seem to exclude such services for clearly they do not tend to injure the public highways in any manner whatever. Indeed, a similar tax levied for highway purposes only, which did include such services might be deemed to be unreasonable and void, for the undisputed evidence in this case is that more than one–half of the time and labor employed in the business of transporting household goods and other property, commonly conducted by such companies or individuals, is necessary to assemble, pack, carry by hand to the vehicles, load and unload the property. Recognizing that fact, the Railroad Commission uniformly makes an allowance of forty per cent of the time and labor of transporting goods for such preparation, in fixing the rates which may be charged by common carriers of this nature. If the legislature had intended to include in the definitions of “transportation” or “gross receipts” such services it would have been very easy to have clearly done so. It seems quite significant that they failed to do so.

In support of its contention that the act includes all such services as incidental to the business of transporting goods, the respondent cites several cases based on the Interstate Commerce Act. Pletcher v. Chicago, R. I. & P. Ry. Co., 103 Kan. 834, 177 P. 1; Lehigh Valley R. Co. v. United States, 3 Cir., 188 F. 879, 884; 42 Words and Phrases, Perm.Ed., 359. It appears to us those cases are not applicable to the present suit. They are clearly distinguishable from this case. They are founded on a specific definition of the term “transportation” as it is used in the Interstate Commerce Act, 49 U.S.C.A. § 1(3), which declares that: “The term ‘transportation’ as used in this chapter shall include * * * all services in connection with the receipt, delivery, elevation, and transfer in transit * * * and handling of property transported.”

No such services are included in the definitions used in the transportation act of California. To read such services into the present statute would violate the established rule of construction recognized by uniform authorities and expressed in the Riley case, supra, prohibiting an extension of the provisions of an act, which, in case of uncertainty, should be interpreted favorably to the taxpayer and not the state.

For the foregoing reasons we are convinced the highway carrier's license should not be computed and levied on the basis of all gross receipts of the company, but, on the contrary, should be confined to receipts derived from actual mileage covered in transporting goods on public highways outside of incorporated cities and towns.

The judgment is reversed and the trial court is directed to render judgment for the plaintiff as prayed for.

THOMPSON, Justice.

We concur: PULLEN, P. J.; TUTTLE, J.

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