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Southern Pacific Equipment Co. v. State Board of Equalization … (1971)

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Tax Applies to Sale to Common Carrier Acting in Dual Capacity as Purchaser and Carrier

Taxpayer had been assessed tax upon the sale of freight car wheels shipped to out-of-state points via the purchasing common carrier railroad. Shipment was made in technical compliance with Section 6385 of the Revenue and Taxation Code, which provides an exemption for certain sales of tangible personal property to common carriers, if the property is shipped by the seller via the purchasing carrier to out-of-state destinations. Prior to completing delivery of the wheels out-of-state, the railroad unloaded them at its shops in California and pressed them onto axles owned by it. The wheel-axle units were then shipped out of state.

The court, in holding that the tax had been properly assessed, stated that in order for the exemption in Section 6385 to apply, the role of the common carrier inside the state must be limited solely to its capacity as a common carrier transporting the purchased property, and that the purchaser-carrier had exercised sufficient dominion over the property in California so as to transform its capacity from that of common carrier to that of buyer. Southern Pacific Equipment Co. v. State Board of Equalization (1971) 16 Cal.App.3d 302.