Opposition Brief — Mira Slovak Aerobatics, Inc. v. California State Board of Equalization

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No. 93-156

In The

Supreme Court of the United States

October Term, 1993

&

MIRA SLOVAK AEROBATICS INC.,

Petitioner,

V.

CALIFORNIA STATE BOARD OF EQUALIZATION,

Respondent.

’

On Petition For A Writ Of Certiorari

To The Court Of Appeal Of The State Of California

In And For The Second Appellate District,

Division Five

+

BRIEF OF RESPONDENT STATE BOARD

OF EQUALIZATION IN OPPOSITION TO

PETITION FOR A WRIT OF CERTIORARI

.

DANIEL E. LUNGREN

Attorney General of the

State of California

TimotHy G. LADDISH

Assistant Attorney General

CLARA L. SLIFKIN

Deputy Attorney General

(Counsel of Record)

300 South Spring St., Suite 500-N

Los Angeles, California 90013

Telephone: (213) 897-2476

Attorneys for Respondent

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

© BEST AVAILABLE COPY

te ow:

QUESTION PRESENTED

Does California’s use tax as applied to lessors of

Mobile Transportation Equipment impose an impermis-

sible tax on the United States government as lessee?

il

TABLE OF CONTENTS

Page

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TABLE GCF AUTISORITIRG © 2600 0s cccccvenesscnheves iii

STATUTORY PRAT Ns osc cccivdeetasessasambens 2

SUPPLEMENTAL STATEMENT OF THE CASE..... 2

pt ee | | err rreerrrrr cer rr er rT ee et 4

I. THE CALIFORNIA TAX REGARDING LEASED

MOBILE TRANSPORTATION EQUIPMENT IS

A USE TAX SOLELY UPON THE LESSOR .... 4

II. THIS COURT’S RECENT PRECEDENTS FULLY

SUPPORT THE CALIFORNIA HOLDING THAT

APPLICATION OF THE USE TAX TO MIRA

SLOVAK WAS CONSTITUTIONAL............ 6

III. CALIFORNIA’S USE TAX DOES NOT DIS-

CRIMINATE AGAINST BUSINESSES THAT

LEASE MOBILE TRANSPORTATION EQUIP-

MENT TO THE UNITED STATES GOVERN-

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CUPIVR LARA 05 kes wucsselew bu awen pa eee 10

APPENDIX

California Revenue and Taxation Code sections 6006,

6009, 6010, 6023, 6051, 6201, 6202, 6203, 6244(d).... Al

Stipulation of Facts. .... «0.65 ssccccnasae eee Bl

ee

iii

TABLE OF AUTHORITIES

California Revenue and Taxation Code § 6202... 2, 4,

California Revenue and Taxation Code of : See 7

Page

CASES

United States v. California _ US. anh 2hO Be

TVS is bas oss ch esses icccesncuciés 7, 8, 10

United States v. Cal. State Bd. of Equalization, 650

gE |) 8

United States v. New Mexico 455 U.S. 720 (1982)

Se 6, 7, 8, 10

STATUTES

California Revenue and Taxation Code § 6006...2, 4, 5

California Revenue and Taxation Code § 6009...2, 5, 6

California Revenue and Taxation Code § 6010...... 2, 5

California Revenue and Taxation Code = GG25...2, 3, 5

California Revenue and Taxation Code § 6051...... 2, 4

California Revenue and Taxation Code § 6201...... 2, 4

5

4

6

California Revenue and Taxation Code § 6244(d)... 2, 3,

No. 93-156

¢

In The

Supreme Court of the United States

October Term, 1993

r

MIRA SLOVAK AEROBATICS INC.,

Petitioner,

CALIFORNIA STATE BOARD OF EQUALIZATION,

Respondent.

¢

On Petition For A Writ Of Certiorari

To The Court Of Appeal Of The State Of California

In And For The Second Appellate District,

Division Five

+

BRIEF OF RESPONDENT STATE BOARD

OF EQUALIZATION IN OPPOSITION TO

PETITION FOR A WRIT OF CERTIORARI

*

Respondent State Board of Equalization of the State

of California (“the Board”) respectfully requests that this

Court deny the Petition for a Writ of Certiorari seeking

review of the judgment and opinion of the California

Court of Appeal, Second Appellate District, Division

Five, after the California Supreme Court denied review

on March 3, 1993.

STATUTORY PROVISIONS

Appendix “A” hereto contains the text of California

Revenue and Taxation Code sections 6006, 6009, 6010,

6023, 6051, 6201, 6202, 6203, 6244(d).

¢

SUPPLEMENTAL STATEMENT OF THE CASE!

The essential facts of this case as presented to the

trial court were undisputed and set forth as stipulated

facts; a copy of this stipulation is reproduced as Appen-

dix “B” hereto. In summary, Mira Slovak Aerobatics

(“Mira Slovak”) is a corporation in the business of buy-

ing, selling and leasing airplanes. (Resp. App. B1-B2.)2

Four airplanes, which are the subject of this refund

action, were purchased by Mira Slovak and immediately

leased to the United States government. The aircraft are

mobile transportation equipment (“MTE”) as defined by

California Revenue and Taxation Code section 6023.° An

audit of Mira Slovak’s records in October 1987 by the

State Board of Equalization (“the Board”), revealed a

deficiency in use tax for the tax period of July 1, 1984 to

June 30, 1987 for a total of $51,442.68. This assessment

was based on the purchase price paid by Mira Slovak for

1 Pursuant to Rule 15 of this Court, respondent Board states

that it does not agree with some of the petitioner’s abbreviated

Statement of Case.

2 Respondent’s Appendix “B” is hereinafter cited as “Resp.

App.”

3 All code references shall be to the California Revenue and

Taxation Code unless otherwise indicated.

four aircraft, because Mira Slovak did not choose the

election, provided by Revenue and Taxation Code section

6244(d), to use the fair rental value as a measure of the

use tax liability. (Resp. App. B2-B3.) This use tax is the

subject of this refund action by Mira Slovak.

There is no indication in the record that Mira Slovak

was actually reimbursed by the federal government for

the use tax in question. (See Resp. App. B4-B5.) Conse-

quently, the United States did not bear the economic

burden of this tax.

Petitioner’s Statement of Facts (Pet. 9-13) includes

some purportedly stipulated facts which were never

agreed to by the parties. It was stipulated that the aircraft

in question are mobile transportation equipment within

the meaning of section 6023 of the Revenue and Taxation

Code (Pet. 10), but contrary to the petitioner’s representa-

tion, there was no stipulation that mobile transportation

equipment “as such incur no sales tax when purchased.”

There also was no stipulation that “United States govern-

ment pilots took possession of these airplanes.” (Pet. 10.)

In addition, contrary to the petitioner’s representation,

there was no stipulation that “the case rested entirely on

an issue of Constitutional Law.” (Pet. 13.) (See Resp. App.

B1-B5.) The significance of these misstatements demon-

strates that the petitioner still does not understand how

the California scheme of taxation on MTE works.

Resolution of this case does not rest entirely on con-

stitutional law; rather, it rests on a full understanding of

California’s scheme of taxation on mobile transportation

equipment. The conclusion of the trial court and the

Court of Appeal, that the incidence of this tax rests on

Mira Slovak and not the federal government, is based on

a clear and correct discernment of California’s method of

taxing mobile transportation equipment. Once that deter-

mination has been made, the application of constitutional

law principles leads without question to a conclusion that

there has been no violation of the Constitution in this

case.

ARGUMENT

I.

THE CALIFORNIA TAX REGARDING LEASED

MOBILE TRANSPORTATION EQUIPMENT IS A

USE TAX SOLELY UPON THE LESSOR

The sales tax in California is an excise tax on the

privilege of selling tangible property at retail.4 Its com-

plementary tax, the use tax, is a similar type of tax

generally imposed on the use or consumption of such

property where the acquisition of the property by the

user or consumer was for certain reasons not subject to

the sales tax.> Although the use tax is imposed upon the

user or consumer, generally speaking the retailer is

authorized and required to collect the use tax from the

purchaser or user.®

By statutory definition, Revenue and Taxation Code

§ 6006 states that most leases are sales and purchases.

4 See Revenue and Taxation Code § 6051.

> See Revenue and Taxation Code §§ 6201 and 6202.

6 See Revenue and Taxation Code § 6203.

eee!

Listed as one of the exceptions to this general rule is the

leasing of MTE.” Thus the use, through leasing, of such

equipment by an individual or a business entity engaged

in the business of leasing equipment is taxed through a

use tax, and the receipts from the subsequent leasing of

the equipment are exempt from further taxation. Section

6202 provides that the consumer of tangible personal

property purchased in this state is liable for use tax

except where the retailer collects the tax from the con-

sumer and the consumer has a receipt so indicating. The

taxable event is the use of the property; the statutory

definition of use includes the owner’s (lessor’s) use of the

property by means of leasing it. Thus the taxable event

occurs when the owner first leases the property, because

the lease constitutes the owner’s exercise of a right of

ownership over the property.

In the case before this Court, the aircraft in question

are MTE which were leased to the United States govern-

ment. These leases are not sales by the lessor or uses by

the lessee, but uses by the lessor. According to sections

6006 and 6010, leases of MTE are neither sales nor pur-

chases, therefore the leases are uses by the lessor. Since

the lessor is the consumer, the lessor in this case, Mira

Slovak, is liable for the tax under section 6202. The planes

were purchased by Mira Slovak ex-tax, without paying

7 Revenue and Taxation Code § 6023 defines MTE as fol-

lows: “Mobile transportation equipment includes equipment

such as railroad cars and locomotives, buses . . . aircraft and

ships, and tangible personal property which is or becomes a

component part of such equipment... .”

8 See Revenue and Taxation Code § 6009.

sales tax reimbursement to the vendor or use tax to the

state. (Resp. App. B3-B4.) Therefore, the use? in this case

— the leasing of the airplane to the government - is the

taxable event, with the tax payable being based on either

the purchase price or the total fair rental value at the

election of the lessor, Mira Slovak. Here there was no

election; thus the tax was based on the purchase price

paid by Mira Slovak.'° The use tax in question was due

from Mira Slovak to the Board because of the manner in

which MTE is taxed in California.

Il.

THIS COURT’S RECENT PRECEDENTS FULLY

SUPPORT THE CALIFORNIA HOLDING THAT

APPLICATION OF THE USE TAX TO

MIRA SLOVAK WAS CONSTITUTIONAL.

In United States v. New Mexico, 455 U.S. 720, 102 S.Ct.

1371, 71 L.Ed.2d 580 (1982), this Court recognized the

constitutionality of a state tax which was imposed upon

federal contractors, even though the economic burden of

the tax was passed on to the United States. This Court

held that the contractors, as independent taxable entities,

are not protected by the Constitution’s guarantee of fed-

eral supremacy, and are subject to the state taxes in

question. The contractors used an advance funding pro-

cedure to meet the contractors’ costs, by which both their

creditors and their employees were paid with United

States Treasury funds; only federal funds were expended

9 See Revenue and Taxation Code § 6009.

10 See Revenue and Taxation Code § 6244(d); (Resp. App.

\

on the contractors’ obligations. Despite this close rela-

tionship, this Court did not find federal immunity from

taxation.

Most recently this Court reaffirmed the United States

v. New Mexico rule in United States v. California, __— US.

—~ 113 S.Ct. 1784, 123 L. Ed.2d 528 (1993), and addressed

the issue of sovereign immunity from state taxation. The

facts in that case involved United States contracts with

Williams Brothers Engineering Company (“WBEC”) to

manage oil drilling operations on federal land in Califor-

nia. The contracts provided that the United States would

reimburse (or fund in advance) the contractor for costs,

which included state taxes. The State Board of Equaliza-

tion assessed $14 million dollars in sales and use taxes

against WBEC for the years 1975 through 1981. The

United States filed suit seeking declaratory relief that

California had erroneously applied California law in clas-

sifying and taxing the engineering company as a con-

struction contractor.

This Court asserted that the limits of the immunity

doctrine are as significant as the rule itself and that

California did not tax the federal government under these

facts. Immunity is not conferred because a tax is paid

with funds of the federal government. “Tax immunity is

‘appropriate in only one circumstance: when the levy falls

on the United States itself, or on an agency or instru-

mentality so closely connected to the Government that

the two cannot realistically be viewed as separate enti-

ties.” (United States v. California, Id. at 1789, quoting

United States v. New Mexico, supra, 455 U.S. 720, 735.) With

this in mind, this Court held that even though the federal

government had in effect contractually indemnified

WBEC’s tax liability, the federal government's sovereign

immunity did not immunize WBEC from state taxation.

This Court in United States v. California, supra, 113

S.Ct. 1784, further clarifies sovereign immunity in tax

cases by stating:

“In United States v. New Mexico, we held that

the Federal Government is immune only from

state taxes imposed on it directly. [Citation.] In

so holding, we hoped to ‘forestall, at least to a

degree, some of the manipulation and wooden

formalism that occasionally have marked tax

litigation — and have no proper place in deter-

mining the allocation of power between co-

existing sovereignties.’” Id. at 1792, quoting

United States v. New Mexico, supra, 455 U.S. 720,

737.

In the case now before this Court, it has not been

demonstrated nor asserted that Mira Slovak is so closely

connected with the United States government, that Mira

Slovak can realistically be viewed as a part of the govern-

ment or that the two cannot be viewed as separate enti-

ties insofar as the activity being taxed is concerned. In

addition, there is no evidence that the tax imposed on the

four airplanes was a tax directly (or, under the facts of

this case, even indirectly) on the United States.'' In this

1 U.S. v. Cal. State Bd. of Equalization, 650 F.2d 1127 (9th Cir.

1981), is mistakenly relied upon by petitioner. That decision,

decided before this Court’s decision in United States v. New

Mexico, was based upon California sales tax provisions which

manifested a legislative intent that the lessee pay the sales tax

when the sales tax applied. 650 F.2d at 1131-32. No such provi-

sions apply to Mira Slovak’s lease transactions involving MTE,

hiaaeaenemnimininienanaiiiineeel

Court’s prior decisions in this area, it was established

that the United States bore the economic burden of the

state taxes. There is no such evidence in the present case.

Thus taxpayer Mira Slovak does not even have the color-

able argument which was presented by the taxpayers in

the prior cases.

Ill.

CALIFORNIA’S USE TAX DOES NOT DISCRIMINATE

AGAINST BUSINESSES THAT LEASE MOBILE

TRANSPORTATION EQUIPMENT TO THE

UNITED STATES GOVERNMENT

Petitioner argues that the MTE taxation scheme dis-

criminates against businesses that lease mobile transpor-

tation equipment to the United States government.

Petitioner gives no meaningful explanation of how this

tax discriminates against these businesses. The MTE

taxing scheme does not treat leases to the government

differently from other leases, and therefore there can be

no discrimination.

which involve only the use tax. In fact, the 1981 Ninth Circuit

opinion clearly is consistent with the California Court of Appeal

decision in the current case, for the Ninth Circuit specifically

recognized that “there is no constitutional violation if the state

levies a tax on a lessor to the United States and the lessor

recoups this tax payment by raising the lease price — increasing

the economic burden - to the United States. [Citations.]” Id. at

1131.

10

CONCLUSION

This case does not present an important question of

federal law nor any conflict with prior decisions of this

Court. After a careful review of the California taxing

scheme on mobile transportation equipment and an

examination of the law regarding tax immunity, it is clear

that petitioner’s arguments are unfounded.

As this Court ruled in the New Mexico case and

reaffirmed last term in United States v. California, tax

immunity is only appropriate when the state tax levy falls

on the United States itself, or on an agency or instru-

mentality that stands in the government’s shoes. Here the

tax levied on the four airplanes was levied on Mira

Slovak, not the United States; Mira Slovak and the gov-

ernment are separate entities for tax purposes. Since there

is no reason to grant this petition, respondent Board

respectfully requests that the Petition for a Writ of Cer-

tiorari be denied.

Dated: August 19, 1993.

Respectfully submitted,

DanieL E. LUNGREN

Attorney General of the State

of California

TimotHy G. LApDDISH

Assistant Attorney General

CLARA L. SLIFKIN

Deputy Attorney General

(Counsel of Record)

Attorneys for Respondent

|

INDEX TO THE APPENDIX

APPENDIX “A”

California Revenue and Taxation Code § 6006..... Al

California Revenue and Taxation Code § 6009..... A3

California Revenue and Taxation Code § 6010..... A3

California Revenue and Taxation Code § 6023..... A5

California Revenue and Taxation Code § 6051..... A6

California Revenue and Taxation Code § 6201..... Abo

California Revenue and Taxation Code § 6202..... A7

California Revenue and Taxation Code 5 Ga....... A7

California Revenue and Taxation Code § 6244(d)..A10

APPENDIX “B”

Stiplulation of Facts.............................. Bl

§ 6006. Sale

“Sale” means and includes:

(a) Any transfer of title or possession, exchange, or

barter, conditional or otherwise, in any manner or by any

means whatsoever, of tangible personal property for a

consideration. “Transfer of possession” includes only

transactions found by the board to be in lieu of a transfer

of title, exchange, or barter.

(b) The producing, fabricating, processing, printing,

or imprinting of tangible personal property for a consid-

eration for consumers who furnish either directly or indi-

rectly the materials used in the producing, fabricating,

processing, printing, or imprinting.

(c) The furnishing and distributing of tangible per-

sonal property for a consideration by social clubs and

fraternal organizations to their members or others.

(d) The furnishing, preparing, or serving for a con-

sideration of food, meals, or drinks.

(e) A transaction whereby the possession of prop-

erty is transferred but the seller retains the title as secu-

rity for the payment of the price.

(f) A transfer for a consideration of the title or

possession of tangible personal property which has been

produced, fabricated, or printed to the special order of

the customer, or of any publication.

(g) Any lease of tangible personal property in any

manner or by any means whatsoever, for a consideration,

except a lease of:

A2

(1) Motion pictures or animated motion pictures,

including television, films, and tapes.

(2) Linen supplies and similar articles when an

essential part of the lease agreement is the furnishing of

the recurring service of laundering or cleaning the arti-

cles.

(3) Household furnishings with a lease of the living

quarters in which they are to be used.

(4) Mobile transportation equipment for use in

transportation of persons or property as defined in Sec-

tion 6023.

(S) Tangible personal property leased in substan-

tially the same form as acquired by the lessor or leased in

substantially the same form as acquired by a transferor,

as to which the lessor or transferor has paid sales tax

reimbursement or has paid use tax measured by the

purchase price of the property. For purposes of this para-

graph, “transferor” shall mean the following:

(A) A person from whom the lessor acquired the

property in a transaction described in subdivision (b) of

Section 6006.5.

(B) A decedent from whom the lessor acquired the

property by will or the laws of succession.

(6) A mobilehome, as defined in Sections 18008 and

18211 of the Health and Safety Code, other than a

mobilehome originally sold new prior to July 1, 1980, and

not subject to local property taxation.

(7) Paragraphs (1) and (5) and Section 6094.1 shall

not apply to rentals or leases of video cassettes, video

A3

tapes, and video discs for private use under which the

lessee or renter does not obtain or acquire the right to

license, broadcast, exhibit, or reproduce the video cas-

sette, video tape, or video disc.

* * *

§ 6009. Use

“Use” includes the exercise of any right or power

Over tangible personal property incident to the owner-

ship of that property, and also includes the possession of,

or the exercise of any right or power over, tangible per-

sonal property by a lessee under a lease, except that it

does not include the sale of that property in the regular

course of business.

§ 6010. Purchase

“Purchase” means and includes:

(a) Any transfer of title or possession, exchange, or

barter, conditional or otherwise, in any manner or by any

means whatsoever, of tangible personal property for a

consideration. “Transfer or possession” includes only

transactions found by the board to be in lieu of a transfer

of title, exchange, or barter.

(b) When performed outside this state or when the

customer gives a resale certificate pursuant to Article 3

(commencing with Section 6091) of Chapter 2, the pro-

ducing, fabricating, processing, printing, or imprinting of

tangible personal property for a consideration for

consumers who furnish either directly or indirectly the

A4

materials used in the producing, fabricating, processing,

printing, or imprinting.

(c) A transaction whereby the possession of prop-

erty is transferred but the seller retains the title as secu-

rity for the payment of the price.

(d) A transfer for a consideration of tangible per-

sonal property which has been produced, fabricated, or

printed to the special order of the customer, or of any

publication.

(e) Any lease of tangible personal property in any

manner or by any means whatsoever, for consideration,

except a lease of:

(1) Motion pictures or animated motion pictures,

including television, films, and tapes.

(2) Linen supplies and similar articles when an

essential part of the lease agreement is the furnishing of

the recurring service of laundering or cleaning the arti-

cles.

(3) Household furnishings with a lease of the living

quarters in which they are to be used.

(4) Mobile transportation equipment for use in

transportation of persons or property as defined in Sec-

tion 6023.

(5) Tangible personal property leased in substan-

tially the same form as acquired by the lessor or leased in

substantially the same form as acquired by a transferor,

as to which the lessor or transferor has paid sales tax

reimbursement or has paid use tax measured by the

A5

purchase price of the property. For purposes of this para-

graph, “transferor” shall mean the following:

(A) A person from whom the lessor acquired the

property in a transaction described in subdivision (b) of

Section 6006.5.

(B) A decedent from whom the lessor acquired the

property by will or the laws of succession.

(6) A mobilehome, as defined in Sections 18008 and

18211 of the Health and Safety Code, other than a

mobilehome originally sold new prior to July 1, 1980, and

not subject to local property taxation.

(7) Paragraphs (1) and (5) and Section 6094.1 shall

not apply to rentals or leases of video cassettes, video

tapes, and video discs for private use under which the

lessee or renter does not obtain or acquire the right to

license, broadcast, exhibit, or reproduce the video cas-

sette, video tape, or video disc.

* * *

§ 6023. Mobile transportation equipment

“Mobile transportation equipment” includes equip-

ment such as railroad cars and locomotives, buses, trucks

(except “one-way rental trucks”), truck tractors, truck

trailers, dollies, bogies, chassis, reusable cargo shipping

containers, aircraft and ships, and tangible personal prop-

erty which is or becomes a component part of such equip-

ment. “Mobile transportation equipment” does not

include passenger vehicles as defined in Section 465 of

the Vehicle Code, trailers and baggage containers

designed for hauling by passenger vehicles, or “one-way

Aé

rental trucks” as defined and identified pursuant to Sec-

tion 6024.

* * *

§ 6051. Levy on retailers’ gross receipts; rate

For the privilege of selling tangible personal property

at retail a tax is hereby imposed upon all retailers at the

rate of 2'/2 percent of the gross receipts of any retailer

from the sale of all tangible perscnal property sold at

retail in this state on or after August 1, 1933, and to and

including June 30, 1935, and at the rate of 3 percent

thereafter, and at the rate of 2'/2 percent on and after July

1, 1943, and to and including June 30, 1949, and at the

rate of 3 percent on and after July 1, 1949, and to and

including July 31, 1967, and at the rate of 4 percent on

and after August 1, 1967, and to and including June 30,

1972, and at the rate of 3°/s percent on and after July 1,

1972, and to and including June 30, 1973, and at the rate

of 49/4 percent on and after July 1, 1973, and to and

including September 30, 1973 and at the rate of 3°/s per-

cent on and after October 1, 1973, and to and including

March 31, 1974, and at the rate of 4°/4 percent thereafter.

* * *

§ 6201. Levy; rate

An excise tax is hereby imposed on the storage, use,

or other consumption in this state of tangible personal

property purchased from any retailer on or after July 1,

1935, for storage, use, or other consumption in this state

at the rate of 3 percent of the sales price of the property,

and at the rate of 2'/2 percent on and after July 1, 1943,

A7

and to and including June 30, 1949, and at the rate of 3

percent on and after July 1, 1949, and to and including

July 31, 1967, and at the rate of 4 percent on and after

August 1, 1967, and to and including June 30, 1972, and at

the rate of 3°/s percent on and after July 1, 1972, and to

and including June 30, 1973, and at the rate of 4°/4 percent

on and after July 1, 1973, and to and including September

30, 1973, and at the rate of 33/4 percent on and after

October 1, 1973, and to and including March 31, 1974, and

at the rate of 43/4 percent thereafter.

+ * *

§ 6202. Liability for tax; extinguishment

Every person storing, using, or otherwise consuming

in this State tangible personal property purchased from a

retailer is liable for the tax. His liability is not extin-

guished until the tax has been paid to this State except

that a receipt from a retailer engaged in business in this

State or from a retailer who is authorized by the board,

under such rules and regulations as it may prescribe, to

collect the tax and who is, for the purposes of this part

relating to the use tax, regarded as a retailer engaged in

business in this State, given to the purchaser pursuant to

Section 6203, is sufficient to relieve the purchaser from

further liability for the tax to which the receipt refers.

* * *

§ 6203. Collection by retailer from purchaser; receipt

Except as provided by Sections 6292 and 6293, every

retailer engaged in business in this state and making sales

of tangible personal property for storage, use, or other

consumption in this state, not exempted under Chapter

A8

3.5 (commencing with Section 6271) or Chapter 4 (com-

mencing with Section 6351), shall, at the time of making

the sales or, if the storage, use, or other consumption of

the tangible personal property is not then taxable here-

under, at the time the storage, use, or other consumption

becomes taxable, collect the tax from the purchaser and

give to the purchaser a receipt therefor in the manner and

form prescribed by the board.

As respects leases constituting sales of tangible per-

sonal property, the tax shall be collected from the lessee

at the time amounts are paid by the lessee under the

lease.

“Retailer engaged in business in this state” as used in

this and the preceding section means and includes any of

the following:

(a) Any retailer maintaining, occupying, or using,

permanently or temporarily, directly or indirectly, or

through a subsidiary, or agent, by whatever name called,

an office, place of distribution, sales or sample room or

place, warehouse or storage place, or other place of busi-

ness.

(b) Any retailer having any representative, agent,

salesperson, canvasser, independent contractor, or solici-

tor operating in this state under the authority of the

retailer or its subsidiary for the purpose of selling, deliv-

ering, installing, assembling, or the taking of orders for

any tangible personal property.

(c) As respects a lease, any retailer deriving rentals

from a lease of tangible personal property situated in this

state.

AY

(d) Any retailer soliciting orders for tangible per-

sonal property by means of a telecommunication or tele-

vision shopping system (which utilizes toll free numbers)

which is intended by the retailer to be broadcast by cable

television or other means of broadcasting, to consumers

located in this state.

(e) Any retailer who, pursuant to a contract with a

broadcaster or publisher located in this state solicits

orders for tangible personal property by means of adver-

tising which is disseminated primarily to consumers

located in this state and only secondarily to bordering

jurisdictions.

(f) Any retailer soliciting orders for tangible per-

sonal property by mail if the solicitations are substantia!

and recurring and if the retailer benefits from any bank-

ing, financing, debt collection, telecommunication, or

marketing activities occurring in this state or benefits

from the location in this state of authorized installation,

servicing, or repair facilities.

(g) Any retailer owned or controlled by the same

interests which own or control any retailer engaged in

business in the same or a similar line of business in this

State.

(_h) Any retailer having a franchisee or licensee

operating under its trade name if the franchisee or

licensee is required to collect the tax under this section.

(i) Any retailer who, pursuant to a contract with a

cable television operator located in this state, solicits

A10

orders for tangible personal property by means of adver-

tising which is transmitted or distributed over a cable

television system in this state.

(j) Notwithstanding Section 7262, a retailer speci-

fied in subdivision (d), (e), (f), (g), (h), or (i) above, and

not specified in subdivision (a), (b), or (c) above, is a

“retailer engaged in business in this state” for the pur-

poses of this part and Part 1.5 (commencing with Section

7200) only.

§ 6244

* * =

(d) If the property is mobile transportation equip-

ment as defined in Section 6023, and the use is limited to

leasing the equipment, the purchaser may elect to pay his

use tax measured by the fair rental value, if the election is

made on or before the due date of a return for the period

in which the equipment is first leased. The election must

be made by reporting tax measured by the fair rental

value on the return for that period, or in such other

manner as the board may prescribe. Tax must thereafter

be paid with the return for each reporting period, mea-

sured by the fair rental value, whether the equipment is

within or without the state. The election may not be

revoked with respect to the equipment as to which it is

made.

Bl

JOHN K. VAN DE KAMP, Attorney General

of the State of California

EDMOND B. MAMER,

Supervising Deputy Attorney General

CLARA L. SLIFKIN, Bar No. 069413

Deputy Attorney General

3580 Wilshire Boulevard

Los Angeles, California 90010

Telephone: (213) 736-2994

Attorneys for Defendant

State Board of Equalization

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

MIRA SLOVAK AVIATION, INC. ) Case No.

Plaintiff, C 758 135

“ STIPULATION

OF FACTS

STATE BOARD OF )

EQUALIZATION, ;

Defendant. ’

)

MIRA SLOVAK AEROBATICS, INC., DBA MIRA

SLOVAK AVIATION, PLAINTIFF, AND DEFENDANT,

STATE BOARD OF EQUALIZATION, HEREBY STIPU-

LATE TO THE FOLLOWING FACTS FOR PURPOSES OF

THE ABOVE ENTITLED LITIGATION:

1. Mira Slovak Aerobatics, Inc. dba Mira Slovak

Aviation (“Aviation”) is a corporation duly formed and

existent pursuant to California law.

B2

2. Aviation purchased seven airplanes, hereinafter

listed, for the specific purpose and intent of leasing said

airplanes.

3. These airplanes are listed by identification

number with their purchase price as follows:

Aircraft Purchase Price

N4497U $150,250

N32PV $150,250

N39278 $146,972

N3832K $162,500

N44956 $185,136

N33PV $150,250

N44951 $150,250

4. Aviation is in the business of buying, selling and

leasing airplanes. Four of the seven airplanes, specifically

N4497U, N32PV, N39278 and N3832K were delivered and

leased in California. Under California law airplanes are

mobile transportation equipment (“MTE”) as defined by

California Revenue and Taxation Code, Section 6023.

5. The seven airplanes were purchased and six of

the seven were immediately leased to the United States

Government. Four of the seven airplanes i.e., N4497U,

N32PV, N39278 and N3832K were either delivered or

used in the State of California. Two of these seven air-

planes, i.e., N33PV and N44951 were purchased and

immediately leased to the United States Government,

being delivered and operated exclusively outside of the

State of California. One of the airplanes, i.e., N44956 was

purchased and leased to the State of New Mexico. The

peetttira Rr e:

yo

B3

first functional use of six of the airplanes, i.e., N4497U,

N32PV, N39278, N3832K, N33PV, and N44951 was by the

United States Government. The first functional use of one

of the airplanes, i.e., N44956 was by the State of New

Mexico.

6. On or about October 1987, Defendant, State

Board of Equalization (“the Board”) audited the records

of Plaintiff, Mira Slovak Aerobatics, Inc. and sent Plaintiff

a Notice of Determination under the sales and use tax

law, dated August 19, 1988, stating that a deficiency in

sales and use tax in the amount of $36,598.32 and interest

in the amount of $14,447.88 as of August 19, 1988, was

due, for the period commencing July 1, 1984 and ending

June 30, 1987 for the four airplanes which were operated

in California.

a. This assessment was based upon the

purchase price paid by Plaintiff for the follow-

ing four aircraft: N4497U; N32PV; N39278; and

N3832K. No use tax was assessed on three of the

aircraft because they were either delivered to

the United States Government or to the State of

New Mexico outside of the State of California

for use outside of the State of California.

b. Aviation did not elect to use the fair

rental value as the measure of the sales/use tax

liability.

7. On September 16, 1988, Plaintiff timely filed a

Petition for Redetermination with the Defendant request-

ing a hearing.

8. On January 23, 1989, a hearing officer of the

Board conducted a hearing on Aviation’s Petition for

Redetermination.

B4

9. On February 24, 1989 the hearing officer issued a

Decision and Recommendation denying the Petition for

Redetermination. Thereafter, Plaintiff requested an oral

hearing by the Board.

10. On November 14, 1989 an oral hearing before

the Board was held, where the Board adopted the Deci-

sion and Recommendation of the hearing officer and

ordered the tax redetermined without adjustment.

11. On January 12, 1990 Defendant mailed a Notice

of Redetermination to Plaintiff denying the Petition and

assessing a deficiency based on the use of airplanes

N4497U, N32PV, N39278 and N3832K in the amount as

follows:

a. Deficiency in sales and use taxes for the

period July 1, 1984 to June 30, 1987 of $36,598.32.

b. Interest on the deficiency from July 1,

1984 to August 31, 1988 of $14,844.36 for a total

assessment of $51,442.68.

12. On September 16, 1988 Plaintiff paid $36,598.32

the amount of the tax to Defendant, Board. On October 6,

1988 Plaintiff paid $14,844.36 the amount of interest to

Defendant. These payments constituted payment in full

pursuant to the deficiency assessment.

13. On October 18, 1988 Plaintiff filed a claim for

refund with Defendant in the amount of $51,442.68.

14. Defendant failed to act upon Plaintiff’s claim for

~efund within six months, therefore Plaintiff is entitled to

.onsider the claim as having been denied.

B5

15. Neither the whole nor any portion of the

amounts paid by Plaintiff as alleged above have been

refunded to, or applied for the benefit of Plaintiff.

DATED: 1-8-91

——

LAW OFFICES OF LEONARD E. ARON

By: /s/ Leonard Aron

Leonard E. Aron, Esq.

Attorneys for Plaintiff

DATED: 1/10/91

JOHN K. VAN DE KAMP, Attorney General

of the State of California

EDMOND B. MAMER,

Supervising Deputy Attorney General

CLARA L. SLIFKIN,

Deputy Attorney General

/s/ Clara L. Slifkin

CLARA L. SLIFKIN

Attorney for Defendant

State Board of Equalization