BEKINS VAN LINES INC v. STATE BOARD OF EQUALIZATION

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District Court of Appeal, Second District, Division 1, California.

BEKINS VAN LINES, INC., a corporation, and Bekins Van & Storage Co., a corporation, Plaintiffs and Respondents, v. STATE BOARD OF EQUALIZATION, a State agency of the State of California, and George R. Reilly, John W. Lynch, Paul R. Leake, Richard Nevins, and Alan Cranston, as members of and constituting said State Board of Equalization, Defendants and Appellants.

Civ. 27513.

Decided: March 25, 1964

Stanley Mosk, Atty. Gen., and Dan Kaufmann, Asst. Atty. Gen., for defendants and appellants. Gibson, Dunn & Crutcher, and John L. Endicott, Los Angeles, for plaintiffs and respondents.

In this action for refund of motor vehicle transportation license taxes, judgment was for plaintiffs for $27,606.17. Defendants appeal from the judgment.

Defendant State Board of Equalization had made a deficiency determination that certain amounts were due from plaintiffs as transportation license taxes on their gross receipts from transportation operations during a period of time beginning in 1955 and ending in 1958.

Plaintiffs objected to the deficiency determination on the ground that their receipts pertaining to ‘storage in transit,’ to warehouse handling of the goods, and to delivery after ‘storage in transit,’ were not subject to tax. Plaintiffs paid the alleged deficiency amounts and filed a claim for refund. After the denial of the claim, this action was filed.

Plaintiff Bekins Van & Storage Co., a corporation, is engaged in the business of storing household goods and the local moving thereof. It owns warehouses for use in its storage operations. Plaintiff Bekins Van Lines, Inc., a corporation, is a wholly owned subsidiary of Bekins Van & Storage Co., and is engaged in long distance moving of such goods in intrastate and interstate commerce. It does not own a warehouse or storage facilities.

Under the Motor Vehicle Transportation License Tax Law (Rev. & Tax.Code, Div. 2, Pt. 4, §§ 9601–10505) the word ‘Operator’ includes: ‘Any person engaging in the transportation of persons or property for hire or compensation by or upon a motor vehicle upon any public highway in this State, either directly or indirectly.’ Section 9603.

Section 9651 of the Revenue and Taxation Code provides: ‘A license tax is hereby imposed upon operators at the rate of 3 percent of the gross receipts of the operators from operations to and including December 31, 1957, and thereafter at the rate of one and one-half per cent (1 1/2%) of their gross receipts from operations.’

Section 9606 of said code provides: “Gross receipts' include all receipts from transportation operations entirely within this State and a proportion, based upon the proportion of the mileage within this State to the entire mileage over which such operations extend, of the receipts from operations passing through, into, or out of this State, or partly within and partly without this State. * * *'

Section 9653, subdivision (b), of said code provides: ‘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.’

Rule 1403 of Title 18 of the California Administrative Code provides: ‘Gross receipts include all compensation derived from motor vehicle transportation operations and for all services performed incident thereto, as for example sorting, handling, loading, unloading, pick-up and delivery, * * * storage in transit and waiting or standby time. Gross receipts means the total consideration charged for the transportation service, including all receipts * * *.’

Rule 1404 of said Administrative Code provides: ‘Transportation is the act of carrying or conveying persons or property from one place to another and includes all services in connection with the receipt, movement and delivery of property transported from the place where the property is tendered the operator for transportation or the place where the operator customarily takes delivery of the property to a designated place of delivery or place where the operator customarily delivers the property.’

On many occasions, during the period of approximately three years involved herein, plaintiffs transported goods from places outside California to Los Angeles and then stored the goods in Bekins' warehouse pending notification by the owners as to when they wanted the goods delivered to their homes in Los Angeles. The goods were transported (1) pursuant to service orders which recited that the rate of charge was the ‘Storage in Transit Rate’ and which recited the tariff under which the transportation was made; and (2) pursuant to through bills of lading which recited the charges for storage in transit and for warehouse handling and delivery in connection with storage in transit. The plaintiffs paid the California transportation taxes on their gross receipts derived from transporting the goods from the California boundary to the warehouse in Los Angeles, but did not pay any transportation tax on their receipts for such storage or warehouse handling or delivery to the home. It appears that in some instances when the owners, at places outside California, placed the orders for the transportation to Los Angeles and when the bills or lading were prepared, the owners did not know where they would reside in Los Angeles; and it appears that in other instances, even if they knew where they were to reside, they would not be ready to reside there when the goods arrived in Los Angeles. In such instances, where the owners did not know the specific address of their new residences or where they were not ready to occupy their new residences, the owners and plaintiffs made the arrangements (as indicated by the service orders and bills of lading) for such storage in Los Angeles and for the later delivery of the goods to the ultimate destination, the new home in Los Angeles.

The parties made written stipulations regarding the facts herein. They also stipulated that if H. D. Abbott, the director of the Transportation Tax Division of the Board of Equalization, were called as a witness by defendants he would testify regarding the board's administrative interpretation of ‘gross receipts' (as specifically set forth in the stipulation).

The stipulations included statements which would indicate a typical transaction illustrating gross receipts as involved in this case, as follows: A customer in Cleveland, Ohio, who wanted his household goods moved to Los Angeles, entered into an agreement with a Bekins' agent, which agreement was entitled ‘Order for Service.’ The customer specified therein a definite delivery address (his new home) but, knowing at that time that he would be unable to accept the goods when they arrived in Los Angeles, he ordered storage in transit. At the time the order was made, the charge rate was inserted on the order as the ‘Storage in Transit Rate’; and the order referred to the specific tariff under which the transportation was to be performed. After the order for service was completed, Bekins picked up or loaded the goods at the pickup address (or home) of the customer. Upon loading the van an inventory of the goods was taken by the driver, and a copy of the inventory (which was also a receipt for the goods) was given to the customer. The load was weighed somewhere enroute to Los Angeles and the weight-certificate ticket and other shipping papers were sent to a Bekins' office and a ‘Combination Standard Household Goods Bill of Lading and Expense Bill’ was forwarded to the Bekins' agent in Los Angeles for presentation to the customer upon delivery. The bill of lading defines the rights and obligations of the parties in performance of the services pursuant to the applicable tariff. All charges for storage in transit and warehouse handling in connection with the storage in transit were entered on the bill of lading. When the goods arrived in Los Angeles they were unloaded and placed in the warehouse, and the customer was advised of their arrival. Subsequently and within the time authorized by the tariff and upon order of the customer the goods were delivered by Bekins from the warehouse to the customer's residence. An additional charge pursuant to Bekins' tariff was made for the final step of the delivery. Upon delivery the driver presented a final bill and obtained payment of all charges.

In some instances storage in transit was not ordered initially but was ordered either while the goods were enroute or after they arrived in Los Angeles and prior to the tender of the goods to the customer for delivery. The delivery address was given either at the time the order was completed or prior to the expiration of the period of storage in transit and prior to delivery of the goods to such address.

The maximum duration of storage in transit is limited by the carrier's tariff under the particular shipment—under the Public Utilities Commission tariffs, the maximum storage in transit period is 60 days; and under the Interstate Commerce Commission tariffs, the maximum period for some carriers is 60 days and for others it is 360 days. If the goods in transit remain in storage beyond the maximum period provided for in the tariff, a warehouse receipt is issued and thereafter they are held in regular storage but not under the carrier's tariff. Such warehousing beyond the maximum period, authorized by the tariff, is not subject to regulation as to rate by the Public Utilities Commission or the Interstate Commerce Commission. All the receipts attributable to storage in transit arose within the period authorized by the applicable tariff.

At all times when the goods involved herein were in possession of the plaintiffs (Bekins), the plaintiffs were under a carrier's liability.

The order for service states, in part: ‘The carrier shall be liable for physical loss of or damage to any articles from external cause while being carried or held in storage in transit [with certain listed exceptions] * * *.’

The bill of lading states, in part: ‘The carrier shall be liable for physical loss of or damage to any articles from external cause while being carried or held in storage in transit [with certain listed exceptions] * * *.’

The court found that: The storage of the goods was not an integral or any part of the transporting of the goods from the point of origin to the ultimate destination. Such storage did not contribute to such transportation. A separate charge was made by plaintiffs for such storage which was separate from any charge made for the transportation of the goods, and that charge was separately stated on the invoices which were paid by the customers. The warehouse handling of the goods was not an integral or any part of the transporting of the goods. Such warehouse handling did not contribute to such transportation, but did contribute to the storage of the goods. A separate charge was made by plaintiffs for such handling, and that charge was separately stated on the invoices which were paid by the customers. Neither the storage or warehouse handling of the goods was essential to the transportation of the goods. Neither such storage or warehouse handling was an inseparable or any part of the transportation of the goods. The transportation of the goods from the point of origin to a warehouse for storage was a separate and distinct movement of said goods and was not a part of the transportation from the warehouse to the ultimate destination. The transportation of the goods, which commenced with the pickup of the goods at the point of origin, terminated when the goods were stored, and a new and separate movement commenced when the goods were transported from storage to the ultimate destination. The receipts from delivering the goods from storage to the ultimate destination were derived from the transportation of property within the incorporated limits of the same municipality or contiguous municipalities, and the charges for such service were separate and apart from and in addition to the charges made for the transportation from the point of origin to the place of storage. Said charges were separately stated on the invoices paid by the customers.

Appellants contend that the gross receipts were derived from transportation operations of plaintiffs and were subject to tax under the transportation license tax law. They assert further that their contentions are based upon undisputed facts which show that the gross receipts were attributable to through bills of lading which were issued pursuant to the tariffs of plaintiffs, and that both the tariffs and bills of lading provided for storage in transit; and that the plaintiffs assumed carrier responsibility for the transported property; that under the law all receipts for transportation operations are includable in the taxable receipts unless specifically excluded, and no such exclusion appears in the law with respect to these receipts; and that a rule of the Administrative Code recites that receipts from storage in transit are included in gross receipts. Appellants also assert that the receipts attributable to pickup from storage and delivery to the ultimate destinations were not derived from the transportation of property wholly within incorporated cities. They state further in effect that since there were stipulations of facts, only issues of law are presented on appeal.

Respondents (plaintiffs) contend that the revenue derived from storing goods in a warehouse is not revenue derived from a ‘transportation operation’ whether the paper work relating to such storage consists of a bill of lading or a warehouse receipt; that the storage here involved constitutes a break in the transportation of the goods, and that the subsequent delivery from storage to the new residence is a separate and distinct movement from the original transportation (from outside California to the warehouse in Los Angeles) and such delivery is entitled to municipal exemption (being wholly within municipalities). It is respondents' further position that the stipulations consist primarily of evidentiary matter, and that the findings are based upon permissible inferences.

Both sides cite Bekins Van Lines, Inc. v. Johnson, 21 Cal.2d 135, 130 P.2d 421. In that case the plaintiff, in its report of gross receipts from transportation business, claimed a deduction of a portion of the receipts which it considered was derived from loading and unloading operations between the house and the sidewalk (but no deduction was claimed for such operations between the sidewalk and the truck). The plaintiff contended therein that only the portion of the gross receipts derived from actual transportation activities over the highways was subject to the tax. The court held that the claimed deduction was not proper (i. e., for loading and unloading operations between the house and the sidewalk). The court said (21 Cal.2d p. 140, 130 P.2d p. 424): ‘The plaintiff concedes that the words ‘operation of motor vehicles' * * * include loading and unloading activities at the sidewalk. However, the goods must be taken to and from the sidewalk as an inseparable preparatory activity connected with the loading and unloading operations. * * * The preparatory activities sought to be excepted are just as much a part of and essential to transportation, and therefore to operation of motor vehicles, as are actual loading and unloading operations which are also preparatory to the rolling of the vehicle along the highways.’ It was also said therein (21 Cal.2d p. 142, 130 P.2d p. 425): ‘Nor were charges for labor furnished for the purpose of packing and crating goods, or warehousing, included in the gross receipts subject to taxation.’

Apparently, appellants cite that case for the reason, among others, that the court held that something other than actual traveling on the highway (i. e., the loading and unloading activities between the house and sidewalk) was subject to tax as a part of the gross receipts.

Respondents assert that in that case the Supreme Court recognized that not all services performed by an operator in connection with the movement or referred to in a tariff were transportation operations, for example, that charges for packing and crating services were not taxed since this was not an essential or inseparable preparatory activity. They (respondents) also assert that the court in that case recognized that warehousing was not a taxable service,—such recognition being indicated by the court's comments as follows (21 Cal.2d pp. 140 and 142, 130 P.2d pp. 424 and 425): (1) “Gross receipts from operation of motor vehicles' is language sufficiently plain. It was undoubtedly intended to be limited to the transportation activities of a company which might also be engaged in warehousing, selling, or other business not strictly related to transportation of goods or persons.' (2) ‘Nor were charges for labor furnished for the purpose of packing and crating goods, or warehousing, included in the gross receipts subject to taxation.’ Respondents state further that the Supreme Court made no mention therein that the loading and unloading services were referred to in a tariff or charged for on a bill of lading; that the court looked to the substance (nature of the services giving rise to the revenue) and was not looking to the form of the transaction (i. e., the paper work pertaining to the services); that the test, as established by that court, is whether those services and activities are customary and essential in the matter of transporting goods, and not whether the services are authorized by a tariff or performed pursuant to a bill of lading.

In the present case, it appears that the customer is charged the same amount for the transportation from a place outside California to Los Angeles irrespective of whether the goods are delivered (1) directly to his home in Los Angeles, or (2) delivered to a warehouse in Los Angeles for regular storage, or (3) delivered to a warehouse in Los Angeles for storage in transit. If the goods are put in storage (regular or in transit) they will not be moved again without the payment of an additional charge. The maximum time goods may remain in storage in transit is 60 days or 360 days. The charge for storage in transit is an amount in addition to the charge for transporting the goods to the warehouse. According to appellants, this additional charge for storage, which might cover a period of two months or approximately a year, should be included in the gross receipts upon which the transportation tax for use of the highway is computed.

It appears that the findings of the trial court were proper determinations of the matters involved.

The judgment is affirmed.

WOOD, Presiding Justice.

FOURT and LILLIE, JJ., concur.

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