DAVIS WIRE CORPORATION v. STATE BOARD OF EQUALIZATION (1976)

Respondent Davis Wire Corporation paid under protest a sales tax (Rev. & Tax.Code, § 6051¹ ) assessed by appellant California State Board of Equalization (Board), following its purchase at retail pursuant to written agreement dated April 23, 1968 (Agreement), from sellers North American Wire Mills (Wire Mills) and North American Mills (Paper Mills) of the manufacturing machines and equipment² used by assumed under Agreement liability for any sales tax due.

After payment of the assessed tax respondent exhausted, without result, its administrative remedies for recovery of the tax and then filed this action against Board for a refund of the tax plus interest and recovered judgment. Board appeals.

Wire Mills, a corporation, by the use of its machines and equipment manufactured woven wire mesh products, including stucco and pipe netting; and Paper Mills, a partnership, manufactured impregnated paper products. All of the products manufactured were tangible personal property. They were used primarily in the building construction industry, and had been sold at wholesale by each entity for some years prior to the closing date of the sale, to wit, April 29, 1968, usually to distributors who in turn sold them at retail to various contractors. Each of the Mills at all times held a seller's permit but neither Mill had ever sold any of its respective products at retail. The products of each Mill are not embraced in Agreement and were not the subject of the sale here involved.³ Neither Mill had at any prior time made a sale of any of their assets at either wholesale or retail.

The facts summarized above were stipulated and the judgment is predicated upon findings of fact which are in all respects consistent with the stipulation.

In a cryptic minute order sustained by the findings the trial court said: ‘The sale here qualifies as an ‘occasional sale’ as defined by Rev. & Tax. Sec. 6006.5(a). If there was any doubt, Rev. & Tax. Sec. 6109 [sic, 6019] resolves same.‘

The relevant code sections reveal: A ‘seller’ is ‘every person engaged in * * * selling tangible personal property of a kind of gross receipts from the retail sale of which are required to be included in the measure of the sales tax.’ (§ 6014.) Sellers as well as retailers must apply for a permit. (§ 6066.) A sales tax is imposed on retailers for the privilege of selling tangible personal property at retail. (§ 6051.) Tangible personal property is defined in section 6016 as ‘personal property which may be seen, weighed, measured, felt, or touched * * *.’ A ‘retail sale’ is a ‘sale for any purpose other than resale in the regular course of business in the form of tangible personal property.‘ (§ 6007.) A retailer as defined by section 6015(a) is ‘Every seller who makes any retail sale or sales or tangible personal property * * *.’

An ‘occasional sale’ is defined by section 6006.5(a):

‘A sale of property not held or used by a seller in the course of activities for which he is required to hold a seller's permit * * * provided such sale is not one of a series of sales sufficient in number, scope and character to constitute an activity for which he is required to hold a seller's permit * * *.’

Applying the code definitions as fortified by the case of Glass-Tite Industries, Inc. v. State Bd. of Equalization (1968) 266 Cal.App.2d 691, 72 Cal.Rptr. 244, we conclude that the sale at bench was ‘occasional.’ Glass-Tite purchased the going business of Saegertown Glasseals, Inc. (Saegertown). The sale included all of the assets of Saegertown. The nature of the products fabricated by Saegertown was such that each of the products had to be assembled and integrated by Saegertown's customers before they could be resold at retail or used. The Glass-Tite court treating the sale as ‘occasional’ said:

‘If the single transaction constitutes and occasional sale, as the court decided it does, it is not taxable. Occasional sale is defined, so far as relevant to this case, as ‘A sale of property not held or used by a seller in the course of an activity for which he is required to hold a seller's permit, provided such sale is not one of a series of sales sufficient in number, scope and character to constitute an activity requiring the holding of a seller's permit.’ (Rev. & Tax.Code, § 6006.5, subd. (a).) The essence of this intricate statute is that if there have been sales in a series, the precise number and quality of which are not defined, a particular sale may be taxable. It may be taxable even though the final sale is one of the entire business and all of its property. (Marker Street Ry. Co. v. California State Board of Equalization, 137 Cal.App.2d 87, 290 P.2d 20 * * *; Sutter Packing Co. v. State Board of Equalization, 139 Cal.App.2d 889, 294 P.2d 1083 * * *; Pacific Pipeline Constr. Co. v. State Board of Equal., 49 Cal.2d 729, 321 P.2d 729 * * *; U.S. Industries, Inc. v. State Board of Equal. 198 Cal.App.2d 775, 18 Cal.Rptr. 171 * * *.)

‘* * *.

‘Here, there was no retail sale except the one described above. The sale, therefore, may be considered an occasional one provided there be satisfied the condition contained in section 6006.5, that the company be not required to hold a seller's permit. The company did hold such a permit, which is a factor to be considered. (U. S. Industries, Inc. v. State Board of Equalization, supra, at p. 788, 18 Cal.Rptr. 171.) But the fact that the company actually held a permit is by no means conclusive that it was required to do so. * * *

‘* * *.

‘The interpretation of the statute, and in particular of the italicized words, will answer the question whether Saegertown was obliged by law to have a sales tax permit. Appellant contends that the purpose of the amendment was ‘to provide assurance that all personal property which is not exempt from the sales tax would be subject to the tax prior to its ultimate consumption.’ We may accept this as a fair statement. But the property must be of such kind that escape from taxation might be effected if the permit were not required. Appellant would have it that the permit is required of everyone who sells anything, whether at retail or for resale, except items which are wholly exempt, such as, to give appellant's example, the services of a dry-cleaning establishment. Respondent argues that in order to be ‘of a kind’ which is taxable, more is required than simply the qualities of either not being the sale of a product (but of a service only), or being a sale which is within the exemptions expressly provided by statute.' (266 Cal.App.2d at pages 694–696, 72 Cal.Rptr. at page 246.)

We conclude therefore that although each Mill was a retailer as defined in section 6015, the sale made by each was not subject to tax because it was an ‘occasional sale‘ as defined in section 6006.5(a).

We hold, too, that neither Mill was a retailer under the specific terms of section 6019.

Section 6019 defines a ‘retailer‘ as ‘Every individual, firm, copartnership, joint venture, trust, business trust, syndicate, association or corporation making more than two retail sales of tangible personal property during any 12-month period, including sales made in the capacity of assignee for the benefit of creditors, or receiver or trustee in bankruptcy, shall be considered a retailer within the provisions of this part * * *.‘ (Emphasis added.) It should be noted that section 6019 does not use the word ‘seller.’ It reaches any person or entity making more than two retail sales in a 12-month period whether or not they are a seller. Hotel Del Coronado Corp. v. State Board of Equalization (1971) 15 Cal.App.3d 612, 92 Cal.Rptr. 456, is not in point. The facts in Coronado show more than two sales in a given 12-month period in a number of years.

The judgment is affirmed.

FOOTNOTES

1.  All references herein to code sections are to the California Revenue and Taxation Code unless otherwise noted.

2.  Article II of Agreement provides:‘At the closing Buyer shall acquire, on the terms and conditions set forth herein, all tangible assets of Wire and of Paper including but not limited to those assets listed in Exhibit ‘A’ hereto and all inventories of Wire and Paper on hand at the Closing Date together with all jigs, fixtures, tooling, molds, dies, tools, test equipment, replacement parts, technical data, drawings, sketches, diagrams, blueprints, plans and specifications, maintenance records, and any other documents, data or information relating to the design, construction, assembly, operation, maintenance, repair, replacement or modification of any of such assets. The term ‘tangible assets' does not include those assets described in Exhibit ‘B’ hereto.‘

3.  There is noting in the stipulation of facts or in Agreement (see footnote 2) or in the Findings of Fact which supplies any evidence to support a finding that the products manufactured by each Mill were embraced in the sale.

ROTH, Presiding Justice.

FLEMING and COMPTON, JJ., concur.