Dell, Inc. v. Superior Court

Several consumers brought actions contesting the imposition of sales and use taxes on optional service contracts sold with computers. In this action, plaintiffs sued Dell for unfair and deceptive business practices for collecting tax on the service contracts, and Dell cross-complained against the California State Board of Equalization (SBE) for a refund of the disputed taxes Dell remitted to the tax agency. (Bus. & Prof. Code, § 17200; Civ. Code, § 1770; Rev. & Tax. Code, § 6901.) The parties agreed to a bench trial on the discrete issue of whether the sales of service contracts to plaintiffs were subject to California sales or use tax. The trial court concluded that the sales were not subject to tax. Dell and the other defendants petitioned this court for a writ of mandate. Defendants asked us to review and to reverse the trial court’s decision.

We have reviewed the decision and, following briefing and oral argument, conclude that the trial court correctly found that the sales were not taxable. California taxes the retail sale and use of tangible personal property but not the sale or use of intangible personal property or the performance of services. (Rev. & Tax. Code,…