Opinion ID: 1382971
Heading Depth: 2
Heading Rank: 3

Heading: transactions in issue

Text: There are four categories of sales transactions whose proper treatment for purposes of the City's business privilege tax is here in issue. Of these, three categories are comprised of transactions whose gross receipts the City includes in toto within the tax base: (1) 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; [6] (2) wholesale sales of Chevrolets assembled at out-of-city plants and shipped to dealers within the City pursuant to orders placed at the in-city zone office; and (3) retail sales of GMC trucks delivered from the out-of-city retail outlet to customers within the City after in-city solicitation of orders but out-of-city (retail outlet) consummation of transactions. The remaining category is comprised of transactions whose gross receipts the City includes within the tax base to the extent of 15 percent. This category includes (4) wholesale sales of Chevrolets assembled at out-of-city plants and shipped to out-of-city dealers within the Los Angeles zone pursuant to orders placed at the in-city zone office. The City's position as to each of these categories of transactions is based upon its City Clerk's Ruling No. 14. The content and history of Ruling 14 are thoroughly set forth in our recent opinion in City of Los Angeles v. Shell Oil Co. (1971) 4 Cal.3d 108, at pages 112-118 [93 Cal. Rptr. 1, 480 P.2d 953], and need not be repeated here. For present purposes it suffices to recite a summary of the operation of Ruling 14 which appears in Shell : Ruling 14 ... essentially sets up a rigid distinction between, on the one hand, receipts derived from sales of goods which are shipped from or into the City, and on the other hand, receipts derived from sales of goods which are not shipped from or into the City. Paragraph 1(c) of the Ruling, which deals with receipts in the former category, provides that all receipts from sales of goods `which are in any manner attributable' (italics added) to in-city business functions and which are shipped from or into the City `shall be considered directly attributable to the business engaged in within the City'  and therefore shall be included in the measure of the tax. In contrast, paragraph 1 (d) of the Ruling provides that if a taxpayer has receipts attributable to both in-city and out-of-city activities, and those receipts result from the sale of goods which are not shipped from or into the City, either 15 or 25 percent  according to the presence or absence in the City of certain specified elements of the selling process ...  of those gross receipts shall be considered `directly attributable' and therefore properly included in the measure of the tax. (Fns. omitted.) (4 Cal.3d at pp. 124-125.) Paragraphs 1(c) and 1(d) of Ruling 14 apply by their terms only to a person engaged in such business [i.e., a business subject to tax under sections 21.166 or 21.167, L.A.M.C.] [who] owns, leases, occupies or otherwise maintains within the City a place or premises upon which or from which he engages in such business. Thus those paragraphs are applicable by their terms to transaction categories (1), (2), and (4) set forth above, [7] but they are inapplicable to transaction category (3)  i.e., retail sales of GMC trucks delivered from the out-of-city retail outlet to in-city customers. [8] However, the parties seem to agree that paragraph 1(b) of Ruling 14 (which paragraph is set forth in the margin), [9] along with City Clerk's Ruling No. 13 (also set forth in relevant part in the margin) [10] require that the tax on transactions in this category be based on all gross receipts derived therefrom. [11]