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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Court Decisions
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Davis Wire Corp. v. State Board of Equalization … (1976)
Sales of Manufacturing Plants Not "Occasional Sales"
Plaintiff purchased two manufacturing plants and agreed to be responsible for any sales tax ultimately found to be due on those transactions. Plaintiff paid the tax, and then sued for refund contending that the sales were exempt "occasional sales" as defined in Section 6006.5(a). This section defines an "occasional sale" as a sale of property not held by a seller in the course of activities for which he is required to hold a seller's permit. "Seller" is defined in Section 6014 as every person engaged in selling tangible personal property of a kind the gross receipts from the retail sale of which are required to be included in the measure of the sales tax. Section 6066 requires all sellers to hold seller's permits.
Plaintiff's vendors held seller's permits, but prior to the sales of the plants, all sales of manufactured products had been made to distributors for resale at retail. No prior sales of manufacturing equipment had been made. Plaintiff claimed that the vendors were not sellers within the meaning of the law and that the sales of the plants were therefore exempt occasional sales. Plaintiff relied on Glass-Tite Industries, Inc. v. State Board of Equalization (1968) 266 Cal.4th 691, in which a manufacturer was found not to be a seller.
The court upheld the Board, distinguishing Glass-Tite on the basis that the products in Glass-Tite were unsuitable for sale at retail and were not property of a kind the gross receipts from the retail sale of which were taxable. The products of plaintiff's vendors were of a kind the retail sale of which were taxable; thus, the vendors were sellers under the law. The sales of the plants were therefore sales of property held in the course of activities for which seller's permits were required, so they were not "occasional sales."
Plaintiff also argued that its vendors were not retailers and so were not subject to tax because Section 6051 imposes sales tax only on retailers. The court held, however, that the vendors were "retailers" under Section 6015, which defines "retailer" as including any seller who makes a retail sale. The court stated that Section 6019, which provides that a person making more than two retail sales in a 12-month period shall be considered a retailer, supplemented rather than replaced or constricted Section 6015. Davis Wire Corp. v. State Board of Equalization (1976) 17 Cal.3d 761.