International Business Machines v. State Board of Equalization

Defendant State Board of Equalization (hereafter Board) appeals from a judgment awarding plaintiff International Business Machines (hereafter IBM) a sales tax refund of $735,196.27 for taxes paid by IBM during 1965-1967. 1 The Board contends that the trial court erred in concluding that certain lease receipts were exempt from taxation under a “grandfather clause” contained in Assembly Bill No. 1 of the 1965 First Extraordinary Session, hereafter referred to as the 1965 Tax Lease Law.

As we shall explain, we concur in the Board’s position, concluding that in light of the statutory language, the legislative history, and the applicable principles of statutory construction, the Board’s administrative construction of the 1965 Tax Lease Law was both reasonable and persuasive. Thus, we hold, the lease antedating the 1965 law could attain tax exemption only if the parties had been unconditionally bound *927 to continue the lease at a rental that had been fixed prior to the effective date of the law. Because under this construction IBM’s leases fail to win exemption, the judgment should be reversed.

1. Statement of facts and proceedings below.

Before 1965, receipts from a lease…