Opinion
12-1-1958
GOUGH INDUSTRIES, INC., a corporation, Plaintiff and Respondent, v. STATE BOARD OF EQUALIZATION, an agency of the State of California, Defendant and Appellant. * Civ. 9421.
Edmund G. Brown, Atty. Gen., by Ernest P. Goodman, Deputy Atty. Gen., and James E. Sabine, Asst. Atty. Gen., for appellant. Pillsbury, Madison & Sutro, Sigvald Nielson, Francis N. Marshall and Frank M. Bowen, Jr., San Francisco, for respondent.
GOUGH INDUSTRIES, INC., a corporation, Plaintiff and Respondent,
v.
STATE BOARD OF EQUALIZATION, an agency of the State of California, Defendant and Appellant. *
Dec. 1, 1958.
Rehearing Denied Dec. 26, 1958.
Hearing Granted Jan. 28, 1959.
Edmund G. Brown, Atty. Gen., by Ernest P. Goodman, Deputy Atty. Gen., and James E. Sabine, Asst. Atty. Gen., for appellant.
Pillsbury, Madison & Sutro, Sigvald Nielson, Francis N. Marshall and Frank M. Bowen, Jr., San Francisco, for respondent.
VAN DYKE, President Justice.
Plaintiff and respondent, Gough Industries, Inc., herein frequently referred to as Gough, brought this action to recover sales tax and interest in the sum of $1,921.81 from defendant and appellant, State Board of Equalization, herein frequently referred to as the board. From a judgment awarding Gough a refund in the sum specified, the board has taken this appeal.
The case was tried on a stipulation of facts. No other oral or documentary evidence was presented to the court.
The issue presented is whether the State of California may validly include in the measure of the sales tax assessed against Gough sales of tangible personal property made by Gough in this state under the following circumstances: Title to the goods passed to the purchasers at the time the goods were delivered by Gough at Wilmington, California, to a firm, referred to herein as packer, designated by the purchasers which packed the goods for shippment abroad; packer then held the goods awaiting purchaser's shipping instructions and available shipping space when packer arranged for the transportation of the goods to the dock for overseas shipment. It is the position of the board in this action that when the goods were delivered to packer they were merely being prepared for exportation and had not become exports; that, therefore, the export-import clause of the federal Constitution afforded them no immunity from taxation at the moment of transfer, that is, the moment of delivery to packer. Respondent contends to the contrary and also contends that even if the goods had not at the time of transfer attained immunity their transfer was not taxable because of certain provisions of the Sales and Use Tax Law and of board rulings in force at the time of transfer.
The stipulation of facts may be summarized in the following manner: Respondent Gough is a California manufacturer and seller of electrical products. During 1949 Gough sold goods to Arabian American Oil Company and Trans-Arabian Pipe Line Company for use in Saudi Arabia. The essential steps by which the goods made the journey from Los Angeles to Saudi Arabia were these: The first step was the purchaser's request for price quotations. These requests sent to Gough and other suppliers sought bids based upon export terms. Bidders were informed that all purchases were made strictly for direct export to scenes of operations in foreign countries and that it was anticipated bidders' quotations would show export prices or export discounts applicable. Bidders were informed that landing and receiving conditions in Arabia were such that specialized packing was required and that if they could not fulfill these specialized packing requirements with their own facilities, then they should indicate such to be the fact. The second step was Gough's quotation of prices for delivery of the goods to the export packer's plant, with the notation 'export packing extra at cost'. The third step was the purchaser's submission of an export purchase order requiring that the packages be marked 'Ras El Misha'ab', the port of entry in Saudi Arabia. The export purchase order stated that ocean transportation had been arranged for and that proof of export would be furnished. The order also stated a required date of export, a special export, a special export license number and contained the following condition: 'The property hereunder is for export and is to be delivered by you directly to a carrier or forwarding agent for shipment to a point outside the United States, in accordance with shipping instructions hereafter to be furnished you.' The fourth step occurred when the goods were ready for delivery. In accordance with the terms of the contract, purchasers instructed Gough to deliver the goods 'To Trans-Arabian Pipeline Co., Saudi Arabia, c/o Foreign Trade Export Pack. Co., 445 Figueroa St., Wilmington, Calif. for export packing and forwarding.' Gough, as directed, sent the goods to packer, which specially packed and crated them for overseas shipment according to the purchaser's specifications. Packer then received notice from the purchasers to forward the goods 'To Trans-Arabian Pipeline Co., Ras El Misha'ab, Saudi Arabia, c/o Isthmian SS Co., * * * for Thomas Sim Lee. For export.' The ocean carrier received the goods from a truck carrier and delivered them to Saudi Arabia.
The trial court found that the export journey started when the goods left the seller's plant in Los Angeles; that it was a continuous journey from Los Angeles to Saudi Arabia; that there was no stoppage in transit or attempt to cause one or any delay for an unreasonable length of time; that any delay (if any there was) did not break the continuous stream of foreign commerce; and that all packing and crating by the export packer was an incidental part of the total export journey rather than the primary station of commencement of such a journey. On the basis of these findings, the court concluded that the sales in question were exempt from state taxation under the federal Constitution, art. 1, § 9, cl. 5; art. 1, § 10, cl. 2, and that plaintiff was entitled to judgment.
The pivotal point upon which the decision of this case must turn is the validity of the trial court's findings that the export journey began when the goods left Los Angeles en route from the seller to the packer. If so, then the transfer occurred after the goods had attained immunity. If, on the other hand, the journey from the seller's plant to point of delivery at packer's plant was not a part of the export journey of the goods, then the goods had not attained immunity and did not do so until at least they left the packer's plant en route to the docks.
Of course it cannot be gainsaid that when the purchasers agreed to buy the goods from the seller they intended to transport the goods to Saudi Arabia for their use there and it stands admitted that this plan was carried out; that the plan included the delivery of the goods by the seller to the packer's plant, the packaging of the goods there, and the subsequent transportation of the goods to the docks for overseas carriage. But the adoption of such a plan and its carrying out is not decisive. Those conditions existed in Empresa Siderurgica, S. A. v. County of Merced, 337 U.S. 154, 69 S.Ct. 995, 93 L.Ed. 1276, and in many other cases that might be referred to in which it was held that notwithstanding such conditions the goods in question, not having been delivered to an interstate carrier, had not entered the stream of export and attained immunity. We think the decisive facts are these and nothing more. The purchasers bought the goods from the seller and had them delivered to packer under a contract with packer to prepare the goods for export. Therefore, nothing occurred which can be said to have placed the goods in export until the packer had finished with them pursuant to the purchaser's orders and had delivered them to a truck carrier for delivery to the ocean carrier. Therefore, when the goods were delivered to packer and both title and possession passed immunity had not been achieved and the transfer was taxable.
Respondent contends that the sales were exempt from taxation under California statutes and administrative regulations. At the time here involved Section 6352 of the Revenue and Taxation Code read as follows: 'There are exempted from the taxes imposed by this part the gross receipts from the sale of and the storage, use, or other consumption in this State of tangible personal property the gross receipts from the sale of which, or the storage, use, or other consumption of which, this State is prohibited from taxing under the Constitution or laws of the United States or under the Constitution of this State.'
There was also in effect an administrative ruling issued by the State Board of Equalization which in material part read as follows: 'Sales tax does not apply to sales of property which is: '* * * '(c) shipped to a point outside this State, pursuant to the contract of sale, by delivery by the retailer to such point by means of '(1) facilities operated by the retailer, '(2) delivery by the retailer to a carrier for shipment to a consignee at such point, or '(3) delivery by the retailer to a customs broker or forwarding agent for shipment outside this State.'
Respondent argues that the purchase orders expressly contemplated packer as the forwarding agent to whom the seller was to deliver the goods and therefore the transactions were exempt as coming within the rule.
We have said that the transactions here involved were not within the constitutional ban on state taxation. If that be so, then the board rule could not grant an exemption. Exemptions require legislative action. Market Street Railway Co. v. California State Bd. of Equalization, 137 Cal.App.2d 87, 100-101, 290 P.2d 20. In any event the rule does not help respondents. Packer was not a forwarding agent, but was merely engaged in packaging goods preparatory to shipment out of the country.
In 1955 the legislature added Section 6387 to the Revenue and Taxation Code, which provides as follows: 'There are exempted from the computation of the amount of the sales tax the gross receipts from sales of tangible personal property purchased for use solely outside this State and delivered to a forwarding agent, export packer, or other person engaged in the business of preparing goods for export or arranging for their exportation, and actually delivered to a port outside the continental limits of the United States prior to making any use thereof.'
No retroactive application can be given to this section, for to do so would bring about gifts of public money. Calif. Const. Art. IV, Sec. 31; In re Estate of Stanford, 126 Cal. 112, 54 P. 259, 58 P. 462, 45 L.R.A. 788. It is argued that the section was merely a clarification of Section 6352 of the code, hereinbefore quoted, which exempts from taxation transactions which the state is prohibited from taxing. If these goods never entered export before becoming subject to taxation, Section 6352 has no application, for neither the state laws nor the federal laws nor the federal Constitution then prohibits their taxation. Furthermore, it is a well established rule of statutory construction that the enactment of a new statute indicates an intention on the part of the legislature to change the prior law rather than to merely interpret or clarify it. Whitley v. Superior Court, 18 Cal.2d 75, 113 P.2d 449; Young v. Three for One Oil Royalties, 1 Cal.2d 639, 36 P.2d 1065; Loew's, Inc., v. Byram, 11 Cal.2d 746, 82 P.2d 1. We think the new section was new legislation exempting, after it took effect, some transactions that he been taxable under the existing law.
For the reasons given, the judgment appealed from is reversed, with instructions to the trial court to enter a judgment in favor of appellant.
SCHOTTKY and PEEK, JJ., concur. --------------- * Opinion vacated 336 P.2d 161.