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Business Taxes Law Guide—Revision 2024

Sales And Use Tax Court Decisions


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Target Corp.; Loeffler v. … (2014)

Tetra Pak, Inc. v. State Board of Equalization … (1991)

Tobi Transport, Inc. v. State Board of Equalization … (1980)

Touche Ross and Co. v. State Board of Equalization … (1988)


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Consumers May Not Sue Retailers For Refunds of Alleged Excess Sales Tax Reimbursement When the Board of Equalization Has Not Decided the Taxability Question in the First Instance

Consumers brought a putative class action against the retailer-taxpayer under two consumer protection statutes (California Unfair Competition Law (Bus. and Prof. Code, § 17200 et seq.) and California Consumer Legal Remedies Act (Civ. Code, § 1750, et seq.)) seeking a refund of the alleged excess sales tax reimbursement, damages, and an injunction forbidding the collection of the alleged excess sales tax reimbursement on sales of hot coffee "to go," which they claim are exempt from sales tax. The California Supreme Court held that the Revenue and Taxation Code provides the exclusive means by which the consumers' dispute over the taxability of a retail sale may be resolved (i.e., a postpayment refund action brought by the taxpayer), and that the consumers' lawsuit was inconsistent with California's statutory sales tax refund procedures. The Court held that the consumer protection statutes under which the consumers brought their action could not be employed to avoid the limitations and procedures set forth in the tax code. The Court further held that the propriety of a sales tax reimbursement charge that turns on the taxability of a transaction must be resolved in the first instance by the Board of Equalization in a procedure recognized in the tax code. Loeffler v. Target Corp. (2014) 58 Cal.4th 1081.


Amnesty Program Allowed Taxpayers to Make the Same Elections that Were Available to Timely Filers

The Tax Penalty Amnesty Program (Revenue and Taxation Code Section 7070 et seq.) was set up to give delinquent taxpayers a time period within which to square their accounts. It was enacted to expand the tax rolls and revenues with a minimum investment of time and trouble. Taxpayer took advantage of the program by filing a sales and use tax return on tangible personal property that the taxpayer had acquired to lease to others. Taxpayer elected to pay the entire tax based on the purchase price that he initially paid for the property. The Board denied the election as being untimely and assessed tax on the rental amount as continuing sales subject to use tax.

The court of appeal held that the taxpayer was entitled to make the untimely election. The amnesty program was a "collective pardon." To make the program effective, the disincentives that keep many taxpayers from making their tax payments needed to be removed. One disincentive would be the loss of the right to make the election provided for in Regulation 1660: to pay tax on the purchase price of the leased tangible personal property or upon the rental receipts. By enacting the amnesty program, the Legislature surrendered all sanctions except the payment of principal and the running of interest. A remedial statute such as this should be construed to advance and extend the remedy to bring within its scope every case which comes within its spirit and policy. Tetra Pak, Inc. v. State Board of Equalization (1991) 234 Cal.App.3d 1751.


Pumping Charges Should Be Included in the Measure of Tax

Plaintiff was engaged in the business of manufacturing and selling ready-mix concrete under one company name and providing pumping services for placing concrete in areas difficult to reach under another company name. Its customers could buy the concrete separately, engage only the pumping services, or could order both the concrete and the placement thereof. The sale of the concrete and pumping services was a single transaction using two invoices.

No written agreement existed between the plaintiff and the customer, and no explicit agreement existed between them as to when title to the concrete passes to the customer. During the course of an audit by the Board, it was concluded that tax for pumping services had been improperly excluded from the measure of sales tax. Following a hearing with the Board, plaintiff paid the tax and filed a claim for refund which was denied. The court concluded that the plaintiff's pumping operation was a transportation function which occurred before the sale of the concrete was completed and, therefore, the pumping charges should properly have been included in the measure of tax. Tobi Transport, Inc. v. State Board of Equalization (1980) 104 Cal.App.3d 730.


Existing Library of Custom Computer Programs Is Taxable when Sold

Plaintiff, the liquidation agent for taxpayer, sold all the assets of taxpayer's engineering services division to a purchaser. Part of the assets consisted of a library of custom computer programs. Taxpayer also made numerous sales of the assets of its other divisions to other purchasers. Plaintiff contended that the sale of the software library was a nontaxable sale of custom programs, and that the sale of the engineering services division's assets was an exempt occasional sale.

The court of appeal held in favor of the Board, stating that since the computer programs were not developed to the special order of the purchaser, their sale could not be characterized as a service excluded from tax under Revenue and Taxation Code Section 6010.9. The court also held that all of the taxpayer's sales, not just sales by one division, must be considered in determining whether the sale of that division's assets was an exempt occasional sale, and therefore the sale of the engineering services division was taxable. Touche Ross and Co. v. State Board of Equalization (1988) 203 Cal.App.3d 1057.