American Hospital Supply Corp. v. State Board of Equalization

This is an appeal from a judgment granting respondent, American Hospital Supply Corporation, a refund of sales taxes paid to appellant State Board of Equalization (Board) in connection with the sale of certain menus to hospitals. We have concluded that the trial court failed to apply the correct standard in determining whether the taxes were properly collected and find that under the appropriate standard, the Board should prevail.

The matter was tried on a stipulated set of facts, plus the testimony of one witness. Respondent sells various items to hospitals including a variety of menus, some reusable, some nonreusable. The sales which gave rise to the present lawsuit took place between April 1, 1974, and December 31, 1977. They involved paper menus described in the stipulated facts as follows: “The Menus typically measure SVi x 14 inches. One side of the menu contains a decorative design and usually has an informative dietary message imprinted on it. The reverse side of the Menus contains three columns or sections designated ‘breakfast,’ ‘luncheon,’ and ‘dinner.’ The paper is perforated so that the sections can be easily separated. The three columns are imprinted with…