Opinion ID: 1382971
Heading Depth: 1
Heading Rank: 2

Heading: Wholesale sales of Chevrolets assembled at the in-city plant and shipped to dealers outside the City pursuant to orders placed at either in-city or out-of-city zone offices.

Text: In Carnation Co. v. City of Los Angeles (1966) 65 Cal.2d 36 [52 Cal. Rptr. 225, 416 P.2d 129] we held that the tax upon one engaged in the City in manufacturing and selling (as opposed to merely selling) under the provisions of L.A.M.C. sections 21.166 or 21.167 could be measured on the basis of the total gross receipts from the sale of the manufactured products wherever those sales occurred. Commenting upon this case in the course of our Shell decision we characterized the tax in question as fundamentally a tax upon the privilege of manufacturing and indicated that, whereas the inclusion of unapportioned total gross receipts in the tax base was constitutional and proper under Carnation when the products in question were wholly manufactured within the taxing jurisdiction, an apportionment of gross receipts might be required by the principles of Shell in a case involving products which were not wholly manufactured within the taxing jurisdiction. (4 Cal.3d at pp. 127-128, fn. 18 and accompanying text.) It is urged by General Motors, albeit with less than enthusiastic vigor, that the rule of Carnation is inapplicable to this case because the Chevrolets produced at the in-city assembly plant are not wholly manufactured there but rather are merely assembled out of parts and components many of which are manufactured at other General Motors plants. We reject this contention. (5a) Although we can conceive of instances in which the activity of assembling pre-manufactured components may play so small a part in the production of the finished article that a manufacturing tax based on total gross receipts from sales would demonstrably result in the taxation of significant extraterritorial values, this is not such a case. All human manufacturing involves the utilization of material components whose genealogy can usually be traced to a source beyond the borders of the taxing jurisdiction in which the finished product emerges. (6) It is only when the final operation yielding the finished product is inappreciable in comparison with the extraterritorial activities producing the component parts that a manufacturing tax based on unapportioned gross receipts may be said to reach significant extraterritorial values. (5b) We conclude that the automobiles here in question are wholly manufactured in the City within the meaning of Carnation and Shell, and the City may properly utilize the unapportioned gross receipts derived from the sale of those automobiles, wherever such sales be made, as a factor in General Motors' business privilege tax.