Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Standard Oil Co. of California v. State Board of Equalization . . . (1974)

Delivery of Liquefied Petroleum Gas by Hose from Vendor's Tank Truck to Buyer's Storage Tank Is Not Exempt Delivery of Gas Through Mains, Lines, or Pipes

Plaintiff sought a refund for use tax that it had paid with respect to liquefied petroleum gas (LPG). The LPG had been transported by a vendor's tank truck to plaintiff's storage facility and had been delivered by passing it from the truck to plaintiff's container through the vendor's flexible high pressure tube or hose. Plaintiff based its claim on Section 6353 of the Revenue and Taxation Code, which exempts from tax the use of "gas, electricity, and water when delivered to consumers through mains, lines or pipes." Plaintiff claimed that LPG is a gas, even though delivered in liquid form, and that the delivery from the truck to the storage tank was through a main, line, or pipe.

The Board had long construed Section 6353 as not including within its exemption the sale or use of substances emptied from vendors' vehicles by means of hoses.

The court of appeal reversed the trial court judgment and upheld the Board's interpretation of the statute. The court held that the Board's construction was entitled to great weight and was not to be overturned unless clearly erroneous or unauthorized. Then, using dictionary definitions, the court found that mains, lines, and pipes did not ordinarily include hoses, and that a later amendment of the statute indicated that the Legislature in its use of the words "mains, lines, and pipes" meant fixed conduits such as those which ordinarily provide a particular geographical area with utility services.

Finally, noting that statutes granting exemptions from taxation must be reasonably, but strictly, construed against the taxpayer, the court found that the Board's construction was neither clearly erroneous nor unauthorized. The court distinguished a 1943 opinion of the Attorney General that held exempt the sale of gas through installations placed by a public utility on the premises of its customers on the basis that in that situation there were as many as 24 customers connected to each installation, the pipes were owned by the customers, the tanks and their contents were owned by the utility, there was continuous delivery of gas from the tank, and the flow was through the utility's meter into the customer's pipe and gas consumption devices. The court found it unnecessary to decide whether the LPG was a gas within the meaning of Section 6353. Standard Oil Company of California v. State Board of Equalization (1974) 39 Cal.App.3d 765.