California use and storage tax on telephone and telegraph
company in respect of equipment, apparatus, materials and supplies
purchased outside and shipped into the State in operation,
maintenance and repair of its interstate system held
constitutional, upon the authority of Southern Pacific Co. v.
p. 306 U. S. 167
23 F. Supp. 197 affirmed.
Appeal from a decree of a three-judge district court refusing a
permanent injunction and dismissing the bill in a suit to restrain
enforcement of the California Use Tax. The court below had at first
overruled a motion to dismiss and granted an interlocutory
Page 306 U. S. 186
MR. JUSTICE REED delivered the opinion of the Court.
This case involves the same questions as Southern Pacific
Co. v. Gallagher, ante,
p. 306 U. S. 167
appellant sought to restrain the State Board of Equalization of the
California, its members, and the Attorney General of the state from
enforcing the Use Tax of 1935, St.Cal.1935. A three-judge court
granted an interlocutory injunction. Later, it denied a permanent
injunction and dismissed the appellant's bill *
for the reasons
stated in Southern Pacific Co. v. Corbett,
23 F. Supp.
The appellant, a California corporation, operates a telephone
and telegraph system in interstate and intrastate commerce. The
same plant, facilities and organization are devoted to both
interstate and intrastate business. In the necessary operation,
maintenance, and repair of its system, the appellant purchases
outside California large amounts of equipment, apparatus,
materials, and supplies which are shipped to it in interstate
commerce at various points within the state. The tangible
Page 306 U. S. 187
personal property which the appellees threaten to tax is of two
general classes: specific order and standby equipment. The first
consists of central office switchboards, frames, cable racks, large
private branch exchange switchboards, large underground cables,
switches, central office cable, wire, protectors and other
component parts of telephone and telegraph lines, which are
purchased on specific order for installation at a particular place
in the system. The second comprises goods bought from time to time
for holding as standby supplies to meet fluctuating demands and
emergencies and to make repairs.
The specific order equipment is shipped to the appellant at the
place of use. Its representative receipts for the goods at the dock
or breaks the seal of the railroad car, and its employees unload
the goods from the dock or car into its trucks. In most instances
the trucks are driven directly to the building where the equipment
is to be installed; in some, to distributing centers for reloading
into other trucks which are driven to the place of installation.
Occasionally, private branch exchange switchboards must be held by
the appellant until the place of installation is ready. There is no
holding in warehouses. The standby supplies, which constitute a
reserve to meet current requirements, are replenished by monthly
orders. The appellant's trucks pick them up at the dock or railroad
depot and carry them to storage places at points on the system
suitable for prompt distribution. When needed, the standby
facilities are taken out of the stores and installed.
The appellant exercises two rights of ownership in California --
retention and installation -- after the termination of the
interstate shipment and before the use or consumption on its mixed
interstate and intrastate telephone system. We see no material
distinction between the contentions of the appellant and those
disposed of in Southern Pacific Co. v. Gallagher, ante,
306 U. S. 167
Page 306 U. S. 188
The decree of the lower court dismissing the appellant's bill
MR. JUSTICE McREYNOLDS and MR. JUSTICE BUTLER dissent.
MR. JUSTICE ROBERTS took no part in the consideration or
decision of this case.
* Pacific Tel. & Tel. Co. v. Corbett,
23 F. Supp.