Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Mercedes-Benz of North America, Inc. v. State Board of Equalization . . . (1982)

Tax Due on Vehicles Purchased by Subsidiary from Parent Corporation

A Delaware corporation that was a wholly-owned subsidiary of a German corporation was authorized to do business in California. It brought an action against the State Board of Equalization to recover use taxes paid on vehicles purchased from the parent corporation and another subsidiary. The trial court entered judgment in favor of the Board.

The court of appeal affirmed, rejecting plaintiff's contention it was denied equal protection of the law by being subjected to the tax on the basis of the price paid for the vehicles under section 6244 of the Revenue and Taxation Code and Sales and Use Tax Regulation 1669, while a California merchant that is merely a subdivision of a manufacturer, rather than a separate corporation, is taxed on the basis of the cost of the manufacturer's raw material. The court held there is a significant difference between wholly-owned but separate corporations, and divisions of a single corporation, and that if a business elects to use the device of separately incorporated wholly-owned subsidiaries in order to obtain the advantages of separate corporate entities, it must also suffer whatever disadvantages attach to that election. Mercedes-Benz of North America, Inc. v. State Board of Equalization (1982) 127 Cal.App.3d 871.