CALIFORNIA MOTOR TRANSPORT CO., LTD. (a Corporation), Respondent, v. STATE BOARD OF EQUALIZATION, Appellant, 31 Cal. 2d 217

SCHAUER, J.

Defendant Board of Equalization appeals from a judgment, rendered by the court sitting without a jury, in favor of plaintiff corporation in its suit to recover payments made by it under protest, of sums which had been demanded by defendant as additional taxes and interest thereon due from plaintiff for the period of October 1, 1940, to December 31, 1942, under the California Motor Vehicle Transportation License Tax Law (see Stats. 1933, p. 928, as amended, Stats. 1935, p. 2176; Deering’s Gen Laws, 1937, Act 5130d), which was amended and transferred in 1941 (effective July 1, 1943) to the Revenue and Taxation Code (§§ 9601-10501).

Inasmuch as the 1941 amendments did not materially alter those provisions of the law which are here involved,

section numbers hereinafter cited will, unless otherwise specifically indicated, refer to the Revenue and Taxation Code. The law provides for the licensing of operators of motor vehicles who for compensation transport persons or property upon any public highway within the state (§ 9701), and imposes upon such operators a license tax at the rate of 3 per cent of their gross receipts from the operations included within the law (§ 9651).

The tax does not apply to “operators of motor vehicles operated exclusively within incorporated cities . . . [nor] to the gross receipts derived from the transportation of . . . property wholly within incorporated cities . . . where no portion of the public highway outside the corporate limits of the cities ... is traversed in such operation.” (§ 9653.) For the reasons hereinafter stated, we have concluded that the trial court must be sustained in its determination that the taxes and interest here sought to be retained by defendant board were assessed and collected by it upon receipts which are exempt under the provisions of the

section last above cited and that plaintiff is entitled to the refund decreed. The record discloses that plaintiff is a highway com- . mon carrier as defined in sections 2% and 50% of the Public Utilities Act of California (Stats. 1915, p. 115; 2 Deering’s Gen.

Laws, Act 6386), and as such, operates under certificates of public convenience and necessity which restrict plaintiff’s common carrier operations to the transportation of express matter of California Motor Express, Limited, a corporation (hereinafter referred to as the express company), between the latter’s terminal depot located at Los Angeles and its terminal depots in San Francisco and Oakland, and which prohibit plaintiff from operating any pickup and delivery service in any of the three cities as part of its intercity operations.

Plaintiff concedes that its gross receipts from the intercity operations, as distinguished from pickup and delivery service, are subject to the license tax, and no part of such receipts is here involved. Prior to May 1,1941, pickup and delivery service in the city of Los Angeles had been rendered to the express company by one James C. Coughlin, an individual, with equipment owned by him; and in Oakland and San Francisco, it had been rendered by Bedline Transfer Company, a copartnership (hereinafter referred to as Bedline), with equipment which the latter oAvned.

On or about May 1, 1941, plaintiff purchased from Coughlin and Bedline, respectively, the equipment with which they had rendered the Los Angeles and Oakland pickup and delivery services, and thereupon under a permit issued to plaintiff on April 7, 1941, by the Railroad Commission (now the Public Utilities Commission) of California to operate as a city carrier (Stats. 1935, eh. 312), plaintiff undertook with its newly acquired equipment to furnish for the express company the same pickup and delivery service in Los Angeles and Oakland which Coughlin and Redline had theretofore performed.

Redline continued to render that service in San Francisco. The taxes which defendant now seeks to uphold were assessed upon the receipts from pickup and delivery services rendered by plaintiff in Los Angeles and Oakland, and also upon a 20 per cent portion of the receipts of Redline’s San Francisco service which defendant claimed was attributable to plaintiff because of occasional use by Red-line, without payment therefor to plaintiff, of certain of plaintiff’s equipment.

However, defendant now agrees in its brief that plaintiff was entitled to judgment ordering refund of the amount paid as taxes measured by Redline receipts, and confines itself to arguing the point that “the judgment should be reversed to the extent that it gives respondent [plaintiff] a refund of taxes on the receipts from its Los Angeles and Oakland pickup and delivery business. ’ ’ It is conceded that neither Coughlin nor Redline had ever paid or been required to pay taxes under the law here involved upon their receipts from any of the described pickup and delivery services.

Plaintiff rendered the services under written contracts with the express company which covered only the pickup and delivery work and which were separate from the written contracts between plaintiff and the express company covering the intercity and interterminal services. Plaintiff’s evidence is to the further effect, and the trial court found, that plaintiff as “a city carrier . . . had separate equipment, lighter and different than that which it employed in its capacity of highway carrier.

That the vehicles used by plaintiff in said pickup and delivery service have not been and are not used in highway transportation, and have not and do not operate outside the corporate limits of Los Angeles or Oakland. It confined its business as a city carrier strictly within the limits for which it was licensed, and intruded in no particular within the field of the highway carrier. It . . . rendered separate and independent bills to California Motor Express, Ltd., for said city carrier services. The plaintiff as a highway common carrier did likewise.

Its equipment never deviated from its devotion to the service for which it was licensed. It kept accounts restricted to its character as a highway carrier. . . . That plaintiff is both a highway carrier and a city carrier and it exists in each of these characters by separate authority. Each business [of plaintiff] has a separate license or certificate. . . . The businesses were not confused or entangled and did not overlap.

The Court finds that the two operations, that of a city carrier and that of a highway carrier, are just as separate and distinct for all purposes of this case as if the two operations had been conducted by separate and distinct corporations or legal entities.” The court further found that “plaintiff has at all times kept separate and distinct books and records covering said pickup and delivery service and entirely independent of books and records covering its intercity operations. ’ ’ In support of its position that the assessments upon the receipts of pickup and delivery service performed by plaintiff were lawfully made, defendant relies in particular upon the case of Bekins Van Lines, Inc., v.

Johnson (1942), 21 Cal.2d 135 [130 P.2d 421]. The situation in that case, however, does not coincide with that now before us. There it was not proven and found by the court, as here, that the plaintiff conducted two separate and distinct business operations, each of which performed distinct and different services under contracts separately executed with the recipient of the services.

Bather, the plaintiff there argued that before the tax rate was applied, it was entitled to deduct from its gross receipts for the hauling of goods from its customers’ dwellings in one city to those in other cities an amount computed as attributable to services rendered in loading and unloading such goods between house and sidewalk, as well as amounts “separately indicated on its waybills received from pick-up and delivery service within municipalities. ’ ’ In its opinion this court continued (p. 139 of 21 Cal.2d), “In intercity hauls of small consignments the plaintiff found it more convenient to pick up and deliver with the use of smaller trucks between the point of pick-up or delivery and the larger truck or van which was to transport or which had transported the goods over the public highways.

In other intercity hauls, the van or truck received and discharged the load directly at the door.

The plaintiff contends that receipts from such separate pick-up and delivery service within municipalities in connection with intercity hauls should be excepted from assessment under the act because that service is conducted entirely within municipalities and does not employ any part of the public highways.” The trial court rendered judgment against plaintiff in its suit to recover taxes paid under protest upon the receipts which it claimed should be exempted as described above, and thereafter counsel for the respective parties waived findings of fact and conclusions of law.

There was no contention that the evidence was insufficient to support any essential, implied finding.

In that state of the record this court presumed, as it was bound to do and as it emphasized, “that every fact essential to the support of the judgment was proved and found by the court . . . [and] that the proof showed and that the court found and concluded that the services out of which the disputed tax arose were so much a part of the business of plaintiff, were so customarily rendered in that connection, and so directly contributed to the transportation which was the plaintiff’s principal business, that money derived therefrom must be regarded as part of the ‘gross receipts from operations of said operator’ and taxable as such” (p. 137 of 21 Cal. 2d) and affirmed the judgment.

It is to be noted, also, that the court in its opinion in the above-cited case points out (p. 142 of 21 Cal.2d) that “receipts from intra-city business as excepted from the act [Rev. & Tax. Code, § 9653] were not included [by the Board of Equalization] in the computation of gross receipts from operation as defined by the act.

Nor were charges for labor furnished for the purpose of packing and crating goods, or warehousing, included in the gross receipts subject to taxation,” and that (p. 138) in its return to the board for the years in question “the plaintiff reported its gross receipts from all transportation business in the state exclusive of hauls excepted by

section 14 [now § 9653] of the act,” but claimed deductions therefrom as described above. It thus appears that only receipts from those services which were found to be integral parts of the single operation of moving goods from a dwelling, over the public highways, to their destination outside of the city in which the moving operation originated, were held subject to the tax.

By contrast, plaintiff in the instant case is not moving the goods of its own customers in intercity operations whereof the pickup and delivery service forms an integral part of a unitary operation, but is rather, as found by the trial court, engaging in two separate and distinct businesses, severally authorized by a certificate of public convenience and necessity and by a permit to operate as a city carrier, in which it renders to an express company, which alone deals with the general public, separate services under separate contracts and with separate and independent bills rendered therefor.

Manifestly, the fact that the same goods were the subjects of both intracity and intercity transportation does not establish that as a matter of law there was but a single business operation. In truth, the plaintiff in its capacity of highway carrier was, as previously noted, prohibited from rendering pickup and delivery service in any of its terminal depot cities and, hence, could carry intercity only the identical goods which were the subject of pickup and delivery by some other operation or agency.

Defendant attacks as being without support in the evidence the finding, quoted hereinabove, that “plaintiff has at all times kept separate and distinct books and records covering said pick-up and delivery service and entirely independent of books and records covering its intercity operations.” On this point plaintiff’s auditor testified that the revenues from the two services are “set up separately in the accounts of the Transport Company.

In other words, one under revenue derived from line haul service and the other derived from city carrier service,” that the revenue accounts were not kept in physically separate books or “even separate pages; just columns on the page would indicate the line haul and the other.” It is thus apparent that the evidence indicated that plaintiff kept separate and distinct records of the income from each of the two services, even though such records were not maintained in physically separate volumes, and that the two businesses were operated, as separate enterprises.

It is further apparent that the receipts from one of such enterprises—the pickup and delivery work which was performed entirely within incorporated cities—is expressly exempted from taxation under the Motor Vehicle Transportation License Tax Law. This court has recently reiterated that (Edison California Stores v. McColgan (1947), 30 Cal.2d 472, 476 [183 P.2d 16]) “Persons may adopt any lawful means for the lessening of the burden of taxes which in one form or another may be laid upon properties or profits. (Pioneer Express Co. v.

Riley, 208 Cal. 677, 687 [284 P. 663].) It was also reiterated in that case that courts, in interpreting statutes levying taxes, may not extend their provisions, by implication, beyond the clear import of the language used, nor enlarge upon their operation so as to embrace matters not specifically included.

In case of doubt, construction is to favor the taxpayer rather than the government.” That plaintiff’s segregation of its operations may contribute to effecting a tax saving furnishes no ground for attack upon it where, as the trial court here found, “there is no evidence of fraud or bad faith.” Unless we are to hold that as a matter of law one operator who conducts both a highway common carrier business and a city carrier business cannot segregate the two operations, however separate in fact, for tax purpose, the judgment of the trial court must be sustained.

We are satisfied that the true test for tax liability in this case rests in the character of the operation and fact of segregation and not in the identity of the operator. For the reasons above stated the judgment appealed from is affirmed. Shenk, J., Edmonds, J., and Carter, J., concurred.