DELL, INC. v. THE SUPERIOR COURT

Filed 1/31/08

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR

Story continued from Part I

The taxation of warranties and service contracts

A warranty may be defined as [a] written statement arising out of a sale to the consumer of a consumer good pursuant to which the manufacturer, distributor, or retailer undertakes to preserve or maintain the utility or performance of the consumer good or provide compensation if there is a failure in utility or performance. (Civ. Code,  1791.2, subd. (a)(1).) A service contract generally means a contract in writing to perform, for an additional cost, over a fixed period of time or for a specified duration, services relating to the maintenance, replacement, or repair of a consumer product. (Civ. Code,  1791, subd. (o).)

An express warranty is both a representation of fitness and an agreement to repair. (Gavaldon v. DaimlerChrysler Corp. (2004) 32 Cal.4th 1246, 1258.) A service contract is an agreement to repair. (Ibid.) Both warranties and service contracts generally obligate the seller to furnish parts, materials, and labor necessary to maintain a consumer product for a specified period of time. (Civ. Code,  1791, subd. (o), 1791.2, subd. (a)(1), 1794.4, subd. (b); Cal. Code Regs., tit. 18,  1546, subd. (b)(3)(B), 1655, subd. (c)(3).) Warranties and service contracts may be mandatory or optional. They are mandatory when the buyer, as a condition of the sale, is required to purchase the warranty or service contract from the seller. (Cal. Code Regs., tit. 18, 1546, subd. (a)(3)(A),  1655, subd. (c)(1).) A warranty or service contract is optional when the buyer is not required to purchase the warranty or service contract from the seller, i.e., the buyer is free to contract with anyone he or she chooses. (Ibid.)

In California, and in every state that imposes a sales tax, mandatory warranties are taxed as incidental to the sale of tangible property. (Cal. Code Regs., tit. 18,  1546, subd. (b)(3)(B), 1655, subd. (c)(2); L. Blatt, When are Warranties and Service Contracts Subject to Sales Tax?, supra, 59 CCH State Tax Review No. 12, at p. 1; Hellerstein, State Taxation, supra,  15.04[4][a][i], p. 10; see Gavaldon v. DaimlerChrysler Corp., supra, 32 Cal.4th at p. 1258, fn. 3 [express warranties are an integral part of the purchase of a product].) A manufacturer who purchases replacement parts (tangible personal property) to fulfill its mandatory warranty obligations does not pay sales tax on those parts; it is a reseller of the parts to the consumer who has effectively prepaid the tax when it paid tax on the warranty. (Cal. Code Regs., tit. 18,  1546, subd. (b)(3)(B), 1655, subd. (c)(2); Hellerstein, State Taxation, supra,  15.04[4][a][iii], p. 12.)

Optional warranties receive different tax treatment. Most of the states with state-wide sales tax, including California, do not tax optional warranties. (Cal. Code Regs., tit. 18,  1655, subd. (c)(3); 2A State Bd. of Equalization, Bus. Taxes Law Guide, Sales & Use Tax Annots. (1998) Annot. No. 120.0009 [all further Annotation citations are to this guide]; Hellerstein, State Taxation, supra,  15.04[4][b][i], p. 12; L. Blatt, When are Warranties and Service Contracts Subject to Sales Tax?, supra, 59 CCH State Tax Review No. 12, at pp. 1, 3.) A manufacturer who provides replacement parts to fulfill its optional warranty obligations pays tax on the parts as a consumer of the parts furnished. (Cal. Code Regs., tit. 18,  1546, subd. (b)(3)(C), 1655, subd. (c)(3).)

A number of states tax repair services but do not tax optional warranties on the theory that an optional warranty constitutes the purchase of an intangible right, not the purchase of services: [p]erforming repair services does not include the act of entering into a contractual commitment to provide in the future and on a contingent basis repair services. (Covington Pike Toyota, Inc. v. Cardwell (Tenn. 1992) 829 S.W.2d 132, 135; see generally Hellerstein, State Taxation, supra,  15.04[4][b][i], pp. 12-13.) Other states that tax repair services have construed optional warranties as a purchase of taxable services. (E.g., South Central Utah Tel. Assoc., Inc. v. Auditing Div. of the Utah State Tax Comm. (Utah 1997) 951 P.2d 218, 224-225.) California has had no need to conclusively classify optional warranties as either intangibles or services because neither is taxable here. Thus, it has been sufficient for California taxing authorities to state that [a] contract for optional [computer] hardware maintenance is not a contract for the sale of tangible personal property and no sales or use tax applies to the charge. (Annot. No. 120.0009.)^[1]

The taxation of Dell service contracts

Dell computers are warranted against defects in materials and workmanship for a specified period of time, at no additional cost to the consumer. The warranties are return to facility warranties requiring the consumer to mail the defective product or part to Dell for repair or replacement. At issue here are optional warranties that extend the basic warranty for a longer period of time, and optional service contracts that provide on-site computer repair by a service technician.^[2]

SBE concedes that Dell service contracts are optional and, if sold alone, are not taxable. SBE also concedes that Dell service contracts, if sold with computers, are not taxable provided that the charge for the service contract is separately stated on the sales invoice or other contract of sale. It is SBEs position that the absence of a separate statement of the charge for optional service contracts render them taxable. While SBEs interpretation of the laws it enforces is entitled to consideration, the ultimate resolution of legal questions rests with the courts. (Yamaha Corporation of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 12-15 (Yamaha); Culligan Water Conditioning v. State Bd. of Equalization, supra, 17 Cal.3d at p. 93.) We respect SBEs interpretation of the tax laws as applied to the Dell transactions but we cannot endorse it.

The fundamental starting point is the recognition that California imposes a tax on the retail sale or use of tangible personal property ( 6051, 6201), but not on the sale or use of intangible personal property or services. (Navistar, supra, 8 Cal.4th at p. 874.) Dell service contracts are not tangible personal property, as all the parties agree. The parties debate only whether Dell service contracts are properly classified as services (as Dell and SBE argue) or intangible property (as plaintiffs argue). As Dell observes, classification is difficult because the service contracts share characteristics of each: the contracts provide an apparent service of telephone technical support, and an arguably intangible right to future repair. Resolution of the classification debate is unnecessary here because neither services nor intangibles are taxable.

SBE concedes that service contracts generally are not taxable and justifies its taxation of Dell service contracts on the fact that the service contracts are sold without a separate statement of the value of the contracts on the sales invoice. It is the so-called bundled sale of computers (tangible personal property) with service contracts (intangibles or services) that render the latter taxable, according to SBE. Dell and plaintiffs likewise construe the subject transactions as bundled sales of taxable and nontaxable items. In this respect, all parties err, and that error has misdirected the analysis of the taxation issue.

The subject transactions are not bundled sales, but rather mixed transactions. As noted above, a mixed transaction involving separately identifiable transfers of goods and services can and should be distinguished from a bundled transaction involving goods and services that are inextricably intertwined in a single sale. (Hellerstein, State Taxation, supra,  12.08[1], p. 7[c] &  19A.04[2][a][iv], pp. 1-3.). So, too, is a mixed transaction involving separately identifiable transfers of tangible and intangible property distinguishable from a bundled sale of intertwined property. Dells sale of computers with service contracts is not, properly speaking, a bundled sale.

The service contracts are readily separable from the computers Dell sells. Dell, for marketing purposes, presents particular product configurations to its customers but these configurations are not fixed. Dell proudly advertises: At Dell, you can custom-build your dream system from the ground up. As a Dell tax manager explained in her declaration submitted at trial: Dell typically offer[s] to their customers various models of Dell-branded computer systems. Each different model is often available in a basic configuration of computer components (which may include, for example, a microprocessor, memory, hard drive, monitor, warranty, service contract, etc.) sold for a single, total price for the basic configuration. Dell customers typically have the option to customize a computer model by upgrading or downgrading various computer components in exchange for an increase or decrease in the single, total price for the customers order.

Customization includes a customers option to purchase a computer without a service contract in exchange for a reduction in the overall price for the customers order. The variability of the sales price based on the customers selection of items to include or exclude from the basic product configuration shows that the sale is not an intertwined, bundled transaction. As the drafters of a proposed uniform state tax law recognize, a bundled transaction  does not include the sale of any products in which the sales price varies, or is negotiable, based on the selection by the purchasers of the products included in the transaction.  (Hellerstein, State Taxation, supra,  19A.04[2][a][iv], p. 3, quoting the Streamlined Sales and Use Tax Agreement, App. C, pt. I (2007).)

It is also clear that the computer and service contract are each significant aspects of the transaction, and not one incidental to the other. Dell touts its award-winning service, as well as its computer equipment, and the cost of service contracts is far from de minimus. In plaintiff Mohans purchase of a computer and service contract, for example, the service contract was valued at over 20 percent of the total price of the transaction. In Advance Schools, Inc., supra, 2 B.R. at 237, where the court severed tuition paid for nontaxable education services from taxable lesson materials, the court found that materials valued at close to 20 percent of the total tuition charged could not be deemed an insignificant aspect of the transaction.

We conclude that the proper approach under California law is to tax the computer (tangible personal property) and not the service contract (service or intangible property). As other courts have recognized, when there is a fixed and an ascertainable relationship between the value of the article and the value of the services rendered, and each is a consequential element capable of a separate and distinct transaction, then the elements must be analyzed as separate transactions for tax purposes. (Clark, supra, 624 A.2d at p. 301.)

Dell service contracts are not  a part of the sale  of computers

SBE correctly observes that the total taxable amount for which property is sold includes [a]ny services that are a part of the sale. ( 6011, subd. (b)(1), 6012, subd. (b)(1).) We will assume, for purposes of argument, that SBE is also correct in classifying Dell service contracts as services rather than intangible personal property. But we cannot accept SBEs assertion that Dell service contracts are  a part of the sale  of computers. As we noted above, it is with intertwined bundled transactions, where the purchasers true object is to obtain a finished product and services are incidental, where services may be considered  part of the sale  of tangible property and thus subject to sales or use tax. ( 6011, subd. (b)(1), 6012, subd. (b)(1); Cal. Code Regs., tit. 18,  1501; Culligan Water Conditioning v. State Bd. of Equalization, supra, 17 Cal.3d at p. 97; Rylander, supra, 11 S.W.3d at p. 487.) Dells sale of service contracts with computers is not an intertwined bundled transaction. Computers may be purchased without service contracts, and the transaction price is reduced by a specified sum if the service contract is declined. Dell service contracts are not part of the sale of computers, but a separate object of the transaction at a readily ascertainable value.

Dell service contracts are not taxable even without separate invoicing

SBE and Dell maintain that it is proper to treat Dell service contracts as taxable because the value of the contracts is not separately stated on an invoice. SBE contends that, in a concurrent sale of tangible personal property and services, the generally nontaxable service element is taxable unless its purchase is optional and its value is separately stated on an invoice. SBE and Dell present the so-called separate statement rule as a general principle or general rule in sales and use tax administration, and argue that it should be upheld because it promotes the efficient administration of the tax code.

While tax administrators may properly apply the separate statement rule in a number of contexts, this is not one of them. The primary sources of the separate statement rule are tax statutes that expressly require separately stated charges. In California, the sales price of tangible personal property, upon which tax is imposed, is defined to exclude [s]eparately stated charges for transportation. ( 6011, subd. (c)(7).) Other states statutorily exclude various charges from taxation if separately stated or identified. (E.g. Tex. Tax Code Ann.  151.007; see generally Hellerstein, State Taxation, supra,  17.01[1], quoting the Streamlined Sales and Use Tax Agreement definition of sales price.) As SBE conceded at trial, there is no California statute or regulation that requires service contract charges to be separately stated to avoid taxation.

Another alleged source of the separate statement rule is the administrative enforcement of statutes carrying a presumption of taxability. ( 6091, 6241.) [T]he burden of proof concerning the right to a tax exemption is on the taxpayer because the taxpayer is in the best position to create and maintain records of his transactions and to destroy or conceal such records. (Pope v. State Bd. of Equalization (1988) 202 Cal.App.3d 73, 84.) When property and services are purchased together, separate invoices or separate itemization on the same invoice are useful in meeting the taxpayers evidentiary burden of proving tax exemption for the service item in the transaction. In many transactions, separate itemization may be the only practical means of proof. But no statute or regulation demands a separate statement of a service contracts value on an invoice as the exclusive means of meeting the taxpayers evidentiary burden. In the unusual situation presented here, the value of Dell service contracts is readily ascertainable without an itemized invoice, as discussed above.

SBE maintains, however, that it has reasonably and consistently interpreted the tax laws to require that the value of services be separately stated on an invoice to avoid taxation where, as here, services are sold concurrently with tangible personal property. SBE says it may insist upon an itemized invoice as the only acceptable proof of a services value and tax exemption, and that its interpretation of tax laws to require an invoice with a separately stated value for services is entitled to judicial deference. The presumption of taxability was the express basis for SBEs reliance on the separate statement rule in the trial court. On appeal, SBE says the separate statement rule is implicit in provisions assessing tax on services that are part of the sale of tangible personal property. ( 6011, subd. (b)(1), 6012, subd. (b)(1).) We do not understand SBE to argue that the form of invoicing dictates the taxability of services (a service is or is not a part of taxable property depending on whether the service is separately priced) but to argue for a presumption of taxability (a separate statement of value is necessary for SBE to determine whether a service contract is optional, and thus not taxable, as SBE phrases the point on appeal.) As SBE expressed the point at trial, [t]he separately stated requirement is an evidentiary rule that allows the parties to the transaction, and SBE, to determine easily whether the service is or is not part of the sale of the tangible property.

Dell supports SBEs reliance on the separate statement rule, and maintains that SBE routinely uses such a separately-stated rule to determine the taxability of services sold with tangible property. Both SBE and Dell rely on a series of tax annotations to support their claim of a consistent administrative construction of the tax laws to require that the value of services sold with property be separately stated on an invoice.

Tax annotations are summaries of opinions by SBE attorneys of the business tax effects of a wide range of transactions. (Yamaha, supra, 19 Cal.4th at p. 4.) [T]he summaries are prompted by actual requests for legal opinions by the Board, its field auditors, and businesses subject to statutes within its jurisdiction. The annotations are brief statementsoften a sentence or twopurporting to state definitively the tax consequences of specific hypothetical business transactions. (Id. at pp. 4-5.) Annotations do not have the force and effect of law. (Cal. Code Regs., tit. 18,  5200, subd. (a)(1).)^[3]

The California Supreme Court has considered what legal effect courts must give to the Boards annotations when they are relied on as supporting its position in taxpayer litigation. (Yamaha, supra, 19 Cal.4th at p. 6.) The court concluded that [a]n agency interpretation of the meaning and legal effect of a statute is entitled to consideration and respect by the courts; however, unlike quasi-legislative regulations adopted by an agency to which the Legislature had confided the power to make law, and which, if authorized by the enabling legislation, bind this and other courts as firmly as statutes themselves, the binding power of an agencys interpretation of a statute or regulation is contextual: Its power to persuade is both circumstantial and dependent on the presence or absence of factors that support the merit of the interpretation. (Id. at p. 7, italics in original.) A court is more likely to defer to an agency interpretation that is a long-standing and consistent interpretation of the law. (Id. at pp. 12-13.) In contrast, a  vacillating position . . . is entitled to no deference.  (Id. at p. 13.)

SBE has not consistently applied a separate statement rule to concurrent sales of services and tangible personal property. While Dell says that SBE routinely uses a separate statement rule to determine the taxability of services sold with tangible property, Dell also admits that SBE has used several different approaches from time to time. The multiplicity of SBEs approaches to the taxation of concurrent sales of goods and services is apparent in the regulations and annotations. These approaches include (1) taxing or not taxing the transaction as a whole, depending on whether the true object of the transaction is taxable property or nontaxable services (Cal. Code Regs., tit. 18,  1501 [accounting services not taxed at all despite incidental provision of binders or other property], Annot. No. 330.2150 [video production sets taxed in full without reduction for design services]); (2) apportioning the purchase price between taxable property and nontaxable services when the value of the services are separately stated (e.g., Annot. Nos. 315.0610 [tire balancing charges nontaxable when separately stated], 557.0573 [firewood stacking charges taxable when not separately stated]); and (3) apportioning the purchase price between taxable property and nontaxable services regardless of whether the value of the services are separately stated (e.g., Annot. No. 295.0035.200 [apportioning lump-sum price between birthday balloons and singing delivery service]).

Nor has SBE always applied a separate statement rule to the narrow subcategory of concurrent sales of tangible personal property and optional service contracts. Contrary to the claims of SBE and Dell, SBE Annotations do not support but, in fact, contradict the assertion that SBE has consistently interpreted the tax laws to require[] the charge for an optional service contract to be separately stated to avoid taxation. The Annotations demonstrate that SBE sometimes apportions the price paid for property and a service contract purchased together, despite the sellers failure to separately state the value of the service contract. For example, in the case of a manufacturer of industrial equipment, the manufacturer sold a lump-sum service agreement providing maintenance for the computerized equipment and software. (Annot. No. 120.0350.) SBE found that tax applies to the portion of the lump-sum service agreement that represents the charge for software maintenance (updates in tangible form on storage media) and does not apply to the portion of the agreement representing the charge for equipment maintenance. (Annot. No. 120.0350.) SBE taxed the tangible property component alone despite the manufacturers failure to itemize the value of the equipment service contract. (Annot. No. 120.0350.)

SBE repeated this interpretation of the tax laws in a subsequent Annotation concerning computers, where it stated: when a bundled contract includes a software maintenance portion and a hardware maintenance portion, the charge for the hardware portion is nontaxable. The contract should be prorated between the taxable software maintenance and the nontaxable hardware maintenance portion of the contract. (Annot. No. 490.0429; accord Annot. No. 490.0727 [service agreement for computer software and hardware maintenance not taxable on hardware component].) In another context, SBE stated that an optional service contract sold with a television was not taxable. (Annot. No. 490.0680.) SBE concluded that the service contract was not includable in taxable gross receipts, without conditioning that conclusion on an invoice itemizing the value of the service contract. (Annot. No. 490.0680.)

SBE has also required a company that sells photocopy machines and related services and supplies to allocate the lump-sum price charged for a service contract and supplies. (Annot. 315.0768.) On that occasion, SBE opined: [w]here both taxable and nontaxable items are sold for a single price, an allocation must be made between the taxable and nontaxable charges. (Annot. 315.0768.) SBE reached a similar conclusion concerning a company that sells printer service contracts that include replacement ink cartridges. (Annot. 490.0430.) SBE required the company to make [a]n allocation between the taxable [ink cartridges] and nontaxable [service contract] charges. (Annot. 490.0430.)

SBE admits that the transactions described in these Annotations demonstrate a departure from the asserted general principle that the value of services must be stated separately before SBE will apportion an aggregate price for a concurrent sale of goods and services. SBE offers an explanation that amounts to the following: SBE uses apportionment when it increases tax revenue but refuses apportionment when it decreases tax revenue. SBE says it apportions a lump-sum price for goods and services when necessary to ensure that tax is collected on the charge for a taxable item but interposes the separate statement rule and refuses to apportion a lump-sum price for goods and services when apportionment is unnecessary to collect tax on a taxable item. Thus, SBE says it apportions an aggregate charge for taxable software maintenance and nontaxable hardware maintenance to collect on the taxable component that might otherwise go uncollected. (Annot. 490.0429.) SBE explains that it does not apportion an aggregate charge for taxable Dell computers and nontaxable service contracts because Dell willingly remits tax on the aggregate price and has not used the bundling to avoid tax on the computer portion of its sales. This is a strange explanation. It does not show a consistent and principled application of the tax laws deserving of judicial deference and it fails to account for the varying tax treatment of concurrent sales of goods and services.

Our own review of the limited number of Annotations presented to us by the parties suggests that the varying tax treatment of concurrent sales of goods and services may rest on a sound basis, but not the one offered by SBE and not one that aids its position in this litigation. The principles we discussed earlier are instructive. Where services and tangible property are inseparably bundled together, determination of the taxability of the transaction turns upon whether the purchasers true object was to obtain the finished product or the service. (Cal. Code Regs., tit. 18,  1501; Navistar, supra, 8 Cal.4th at p. 875; Advance Schools, supra, 2 B.R. at p. 235.) For bundled transactions of goods and services, the true object test applies and the entire transaction is generally taxed or not taxed as a whole. (Cal. Code Regs., tit. 18,  1501; Advance Schools, supra, 2 B.R. at pp. 235-236.) This explains the Annotation opining that full taxation applies to video production sets, which are the object of the customers[] desire, without reduction for design services. (Annot. No. 330.2150.)

Despite authority to tax the entire transaction where property is the true object of the transaction, tax authorities may adopt more taxpayer-friendly rules that allow apportionment between taxable and nontaxable items bundled together. (Hellerstein, State Taxation, supra,  17.03[4] pp. 1-2 &  19A.04[2][a][iv], pp. 1-2, 5.) Where the purchase of vehicle tires is ostensibly the true object of a transaction, the incidental service for tire balancing is presumptively taxable as part of the sale of the tires but is exempted when the service charge is separately stated. (Annot. Nos. 315.0610.)

Bundled transactions are distinguishable from mixed transactions where goods and services are sold together yet are readily separable. (Advance Schools, supra, at pp. 235-236; Rylander, supra, 11 S.W.3d at p. 487; Hellerstein, State Taxation, supra,  12.08[1], p. 7[c] &  19A.04[2][a][iv], pp. 1-3.) Unlike bundled transactions, the goods and services in a mixed transaction are distinct (not intertwined) and each is a significant object of the transaction (not one incidental to the other). (Rylander, supra, at pp. 487-488.) In mixed transactions, the separate elements of the transaction are analyzed as separate transactions for tax purposes. (Rylander, supra, 11 S.W.3d at p. 488.) The tangible property aspect of the transaction is taxed and the service aspect of the transaction is not taxed. (Ibid.) Thus, in the lump-sum sale of a printer maintenance contract that includes replacement ink cartridges, apportionment is proper because the goods and services are distinct and each is a significant object of the transaction. (Annot. 490.0430.)

With these principles in mind, it is clear that a Dell service contract sold with a computer falls within this latter category of mixed transactions. We recognize that, even in the case of mixed transactions, the taxpayer bears the burden of proof concerning the right to a tax exemption. (Pope v. State Bd. of Equalization, supra, 202 Cal.App.3d at p. 84.) As we noted earlier, separate itemization is useful in meeting the taxpayers evidentiary burden of proving tax exemption for a service item in any transaction. But we will not impose a rule requiring a separate statement of a service contracts value on an invoice as the exclusive means to satisfy this burden of proof where, as here, there is no statute, regulation, or consistent administrative construction mandating a separate statement.

We recognize that a separate statement of value on an invoice eases SBEs auditing efforts. But, as SBE concedes on appeal, the tax laws must be administered as they are written without regard to administrative costs or convenience. Moreover, any administrative costs and inconvenience occasioned by the lack of an itemized invoice listing the value of Dell service contracts can be minimized by SBE action. SBE has the power to require retailers to keep records, receipts, invoices and other pertinent papers in such a form as SBE may require to administer the tax laws. ( 7053.) Contrary to SBEs stated concerns on appeal, nothing in our decision today need burden SBE with a wide-ranging search of a retailers internal records to determine the proper tax treatment of a service contract.

Iv. DIsposition

The alternative writ, having served its purpose, is discharged. The petition for a peremptory writ of mandate is denied.

_________________________

Sepulveda, J.

We concur:

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Ruvolo, P. J.

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Rivera, J.

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Analysis and review provided by La Mesa Property line Lawyers.

^[1] Computer software maintenance contracts present a special case. The maintenance of canned (not customized) software often involves the provision of both storage media on which program updates are recorded (tangible personal property) and consultation services. (Cal. Code Regs., tit. 18,  1502, subd. (f)(1)(C).) Optional canned software maintenance contracts sold for a single price are taxed at 50 percent of the lump-sum charge, representing the sale of tangible personal property. (Ibid.) This appeal does not concern computer software.

^[2] SBE contends that Dell service contracts furnish both repair services and replacement parts. Dell asserts that service contracts provide repair services alone, and replacement parts are provided under the warranties. We note that service contracts generally obligate the seller to provide replacement parts, unless expressly excluded. (Civ. Code,  1794.4, subd. (b).) However, it is irrelevant for our purposes whether replacement parts are provided under Dell service contracts or warranties. The warranties at issue are optional extended warranties conjoined with the service contracts for a single price.

^[3] An example illustrates the annotation form: Service Policies. Where an appliance dealer sells a television service policy in the nature of an optional warranty (not mandatory upon purchase), even if sold with the set, or as a second-year policy, it is a service contract not includable in taxable gross receipts. The dealer is regarded as the consumer of any parts used in performing this independent service. 5/21/54. (Annot. No. 490.0680.)