SANTA FE TRANSPORTATION COMPANY, a corporation, Plaintiff and Respondent, v. STATE BOARD OF EQUALIZATION of The State of California, Defendant and Appellant.*
This is an appeal by the defendant State Board of Equalization from a judgment in favor of the plaintiff for refund of taxes and interest thereon assessed by the board under the provisions of the California Motor Vehicle Transportation License Tax Law (Revenue and Taxation Code §§ 9601–10505) which were paid under protest by the plaintiff.
There is no serious dispute with reference to the facts; the question being whether the gross receipts of the respondent upon which the tax was assessed constitute ‘gross receipts derived from the transportation of * * * property wholly within incorporated cities or between incorporated cities * * * where no portion of the public highway outside the corporate limits of the cities * * * is traversed in such operation’ within the meaning of section 9653 of the Revenue and Taxation Code.
Respondent is a wholly owned subsidiary of the Santa Fe Railway Company. It is a common carrier engaged in the transportation of freight and passengers within the State of California and is authorized by the Public Utilities Commission of the State as a highway common carrier to transport less than carload general commodities moving on the billing of the railway company between San Francisco and Los Angeles and over points intermediate thereto on the main and branch lines of the railway company with certain exceptions not necessary to be here noted. It is also licensed by said commission to operate as a city carrier (Public Utilities Code, §§ 3941, 3942) in all incorporated cities of the State in which it is authorized to serve as a highway common carrier.
By separate agreements with the railway company in effect during the period with which we are here concerned, respondent agreed to perform two types of services for the former; (1) the transportation of passengers and freight between stations of the railway company and (2) pickup and delivery. The pickup and delivery services rendered by the respondent pursuant to one of these contracts are described in the findings ‘as the transportation from local freight depots of plaintiff in California to customer's warehouse or place of business in the vicinity of such depots and from customer's warehouse or place of business (pickup point) to such local depots, of goods moving on bills of lading of the Railway Company which were either theretofore or thereafter transported by plaintiff under the same bills of lading of the Railway Company from one station to another station over public highways outside the corporate limits of cities.’ The railway bills of lading required the railroad to make pickup and delivery of such goods from point of origin to point of destination. The railway company did not use the respondent exclusively for pickup and delivery services; pickup and delivery operations at and around some 21 stations to which respondent transported goods for the railway company were carried on by highway carriers other than respondent and at a few such stations respondent performed some of such pickup and delivery operations while others performed the balance.
In the performance of the services required of it under these agreements, respondent used several types of vehicles. In general heavey duty tractors and 24 foot or 35 foot trailers were used for line haul or city to city movements and smaller vehicles consisting of ton and one-half trucks and small trailers were used for pickup and delivery. On occasions, however, line haul vehicles were used for pickup and delivery; a survey of the tonnage handled in 1952, which it was agreed was a representative year, discloses that approximately 8.8 per cent of the freight handled by pickup and delivery services for the railway company was pickup or delivery in line haul vehicles. It also appears that the employees of the line haul equipment belonged to a different union from those employed in pickup and delivery movements but such line haul drivers did loading and unloading where they made pickups or deliveries.
The pickup and delivery charges were registered by the railway agents within those respective territories the pickup and delivery occurred and forwarded to the respondent by them. Monthly summaries were kept by the respondent and payment was remitted monthly by its agents. These charges or records covered all such operations without reference to whether or not they took place wholly within an incorporated city, and included as well pickup and delivery operations as were performed by line haul drivers or vehicles.
Separate records were maintained of the operations of the pickup and delivery services showing the receipts derived therefrom separately from those derived from respondent's line haul operations although the records of the former included receipts from pickup operations which extended beyond the limits of incorporated cities as well as those confined to the limits of such cities. It is the tax which was assessed against the latter that we are alone concerned with here.
The exemption from tax of such receipts, if existent, is to be found in section 9653 of the Revenue and Taxation Code, which during the times here involved read as follows:
‘§ 9653. Operators and receipts exempted. This part does not apply to operators of motor [sic] vehicles operated exclusively within incorporated cities or between incorporated cities or incorporated cities and private property where no portion of the public highway outside the corporate limits of the cities is traversed in such operation.
‘* * * The tax does not apply to the gross receipts derived from the transportation of persons or property wholly within incorporated cities or between incorporated cities or incorporated cities and private property or wholly on private property where no portion of the public highway outside the corporate limits of the cities or private property is traversed in such operation.’
The interpretation of this statute at a time when it read substantially as quoted above was involved in California Motor Transport Co. v. State Board of Equal., 1947, 31 Cal.2d 217, 187 P.2d 745. The respondent contends that the trial court seemingly agreed that the instant case is ruled by the decision in that case. The facts there were these: The plaintiff California Motor Transport Company a subsidiary of the California Motor Express, Ltd., was a highway common carrier operating between the express company's terminal depots in San Francisco and Oakland and its terminal depot in Los Angeles. Under separate contracts with the express company the transport company transported for the former express matter between these terminals and also rendered pickup and delivery services in the three cities; the transport company also being licensed as a city carrier pursuant to statutes of 1935, chapter 312 now Public Utilities Code, section 3941. The transport company rendered bills to the express company for its pickup and delivery services separate and apart from the bills rendered by it for its line haul operations. The transport company also kept distinct records of the income from each of the two services although such records were not maintained in physically separate volumes. The vehicles used by the transport company in its pickup and delivery operations were lighter and different from those employed in its line haul operations and those used in such pickup and delivery operations were not used in highway transportation and did not operate outside of the corporate limits of Los Angeles and Oakland.
Upon these facts the Supreme Court held that the receipts derived by the transport company from its pickup and delivery operations were exempt from tax under the statute hereinbefore quoted; this holding being predicated upon the conclusion that the transport company was engaged in two separate and distinct businesses: one, that of a highway common carrier and the other that of a city carrier.
Appellant contends that the decision in the California Motors case is not applicable here for various reasons.
First, reference is made to the fact that in the cited case it appeared that in its pickup and delivery operations the transport company utilized separate equipment which was not used in its intercity operations, whereas the evidence in the case at bar is to the effect, as previously noted, that a portion (8.8 per cent) of the total tonnage handled by respondent here in its pickup and delivery operations was transported in line haul vehicles. We see no point of distinction between the two cases in this. The character of the operations as pickup and delivery is not dependent upon the type of the vehicles used in the transportation. We see nothing in the opinion in the California Motors case to suggest that if in some instances the plaintiff there had used some of its intercity equipment to make a pickup and delivery within incorporated cities that a different result would have followed.
Next it is argued that in the case at bar, unlike the situation in the California Motors case, respondent's pickup and delivery contract with the railway company was not limited to intracity operations but included all pickup and delivery whether it involved going outside city limits or not. This fact, however, does not serve to compel a finding that the respondent was not engaged in the capacity of a city carrier in making pickup and delivery within the boundaries of incorporated cities. No question is involved here as to the taxability of the proceeds derived by respondent from pickup and delivery movements which were beyond city boundaries. Respondent concedes that such receipts are taxable and the tax thereon has been paid by it.
Further, it is stated that in the California Motors case the transport company rendered bills to the express company on the basis of intercity and intracity operations, while in the case at bar the separate billing was on the basis of pickup and delivery operations and line haul movements. However it is conceded that the bills which the respondent rendered and the records which were maintained of such services readily disclose those which were confined to the limits of incorporated cities and those which involved intercity operations. To the extent that respondent's pickup and delivery operations extended beyond the corporate limits of the city, it was not acting in its capacity as a city carrier, but this does not serve to establish that the respondent was not engaged in two separate types of operations, one as a highway carrier and the other as a city carrier operating pickup and delivery services within the limits of incorporated cities.
Finally, the appellant contends that the instant case is distinguishable from the California Motors case because of the fact that in the latter it appears that, in its capacity as a common highway carrier, it was not authorized to render pickup and delivery service within the limits of incorporated cities whereas, so it is stated, the respondent here as a common highway carrier was so authorized without being licensed as a city carrier by virtue of the provisions of section 1063 of the Public Utilities Code. We seen nothing in this section or any other provision of the law which has been called to out attention which suggests that a common highway carrier, although authorized to render pickup and delivery service within incorporated cities may not be separately licensed by the Public Utilities Commission as a city carrier. The fact that the respondent was so licensed implies a recognition by the commission that a common highway carrier can be separately licensed as a city carrier, which suggests that it may operate two separate types of business in the same manner as the Supreme Court determined in the California Motors case.
Appellant places principal reliance upon Bekins Van Lines, Inc., v. Johnson, 1942, 21 Cal.2d 135, 130 P.2d 421. It must be admitted that language is to be found in the opinion in that case which seems to be at variance with the result reached in the California Motors case. However, the Bekins case was considered and distinguished in the latter. Basically it is appellant's contention, and this appears to have been the thesis of the Bekins decision, that the pickup and delivery service of the respondent constitutes an inseparable part of the entire contract of transportation entered into between the railway company and the shipper under bills of lading of the railway company issued pursuant to published tariffs covering door to door delivery. In this respect, however, there is no difference between the relationship existing between the railway company and its shippers from that which existed between the express company and its customers in the California Motors case. Likewise the relationship between the railway company and respondent is the same as that which existed between the transport company and the express company. In the case at hand the respondent as a highway common carrier transports the goods from station to station as did the transport company, and the latter, as well as the respondent here, in connection therewith performed the pickup and delivery. Moreover, as previously noted, the respondent here did not perform pickup and delivery services for the railway company at all stations. At some 21 of these, such services were rendered by other city carriers, and we do not understand the appellant to contend that the receipts derived by such city carriers for these services are subject to tax under the statute in question. Yet, such pickup and delivery services are as much a part of the contract of transportation entered into between the railway company and its shippers calling for door to door delivery as is the case where the pickup and delivery was performed by respondent.
Substantially the identical contention as that here urged by the appellant was advanced by it in the California Motors case1 and rejected by the Supreme Court. It also appears from the briefs filed in that case that the appellant there sought without success to show that it could not be distinguished from the Bekins case upon substantially the same grounds as it undertakes to do in the case at bar.2
In distinguishing the Bekins case the Supreme Court in the California Motors case said: (31 Cal.2d at pages 222–223, 187 P.2d at page 748)
‘By contrast, plaintiff in the instant case is not moving the goods of its own customers in intercity operations whereof the pick-up and delivery service forms an integral part of a unitary operation, but is rather, as found by the trial court, engaging in two separate and distinct businesses, severally authorized by a certificate of public convenience and necessity and by a permit to operate as a city carrier, in which it renders to an express company, which alone deals with the general public, separate services under separate contracts and with separate and independent bills rendered therefor. Manifestly, the fact that the same goods were the subjects of both intracity and intercity transportation does not establish that as a matter of law there was but a single business operation.’ And it then concluded as follows (31 Cal.2d at page 224, 187 P.2d at page 749): ‘Unless we are to hold that as a matter of law one operator who conducts both a highway common carrier business and a city carrier business cannot segregate the two operations, however separate in fact, for tax purpose, the judgment of the trial court must be sustained. We are satisfied that the true test for tax liability in this case rests in the character of the operation and fact of segregation and not in the identity of the operator.’
The foregoing language is equally applicable to the case at bar and we deem it controlling here.
The judgment is affirmed.
1. In the appellant's opening brief in the California Motors case (p. 10) the following appears: ‘The pick-up and delivery of merchandise is as inseparable a part of its transportation as is its movement to the sidewalk for the purpose of loading. Respondent was engaged in transporting merchandise from terminal to terminal. It acquired a business which enabled it to pick up goods at a store door and deliver them at the customer's direction to any point in another city. It expanded its transportation activities. It did not enter into any new business, or any different business.’ And at page 14 of the same brief it is said: ‘In keeping its books plaintiff treated the income from the pick-up and delivery separately. It entered into separate contracts with California Motor Express for the two portions of its business, but the contracts were complementary and taken together in effect constitute a single contract. Its original permit obtained from the Railroad Commission prohibited it from doing the pick-up and delivery business, but the later permit authorized it to e engage in that business. The permits, taken together, authorized it to engage in a complete service from store-door to store-door. The controlling fact however, is that plaintiff was rendering the complete service, from store-door to store-door. Certainly there is no reason why plaintiff could not have rendered the complete service under a single contract with the California Motor Express and under a single permit from the Railroad Commission. Many line haul carriers have permits authorizing them to operate from store-door to store-door and plaintiff no doubt would have obtained such a permit but for this tax.’
2. Thus in its answer to the petition for hearing in the Supreme Court we find the following: ‘In the Bekins case as here there was one corporation doing both intercity hauling and pick-up and delivery in connection with that intercity hauling. * * * (p. 4.) ‘No valid distinction has been pointed to between the facts of this case and the facts of the Bekins case. Some point is made of the fact that the plaintiff held one certificate from the Railroad Commission (now the Public Utilities Commission) for the intercity carriage and another certificate for the pick-up and delivery service. It is to be noted that these permits, taken together, authorized plaintiff to engage in a complete service from store door to store door and the controlling fact is that plaintiff did render such service. * * * (p. 4.) ‘Some point also is made of the fact that separate billing was made for the pick-up and delivery service. This s element also was present in th Bekins case. * * * (p. 5.) ‘It also is suggested that the use of separate equipment in the pick-up and delivery service should distinguish this case from the Bekins case. But, again in the Bekins case we find that a portion of the pick-up and delivery service there was performed by separate equipment. * * * (p. 5.) ‘There is no difference of substance between the Bekins case and this case which would justify the application of the tax in the Bekins case and not here.’ (p. 6.)
PATROSSO, Justice pro tem.
SHINN, P. J., VALLEÉ, J., concur.