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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Court Decisions
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Stettner v. Mercedes-Benz Financial Services USA, LLC … (2023)
A Refund Action Cannot Be Maintained in Court Unless the Taxpayer First Exhausts Its Administrative Remedies Prior to Filing Suit
Plaintiffs alleged Defendant, Mercedes-Benz Financial Services USA, LLC., violated California's Unfair Competition Law (Bus. Prof Code, §§ 17200, 17203) and Sales and Use Tax Regulation §1660(c)(1) by unlawfully charging sales tax on the disposition fee, which is imposed on leased vehicles at the end of a car lease term. Plaintiff sought to compel Mercedes-Benz to file, and CDTFA to process, claims for refund on behalf of affected consumers. The district court sustained CDTFA and Mercedes-Benz’s demurrers. The Court of Appeal affirmed, holding that the taxpayers failed to exhaust their administrative remedies prior to bringing suit. The Court of Appeal explained that taxpayers cannot circumvent the constitutional and statutory requirement by initiating administrative proceedings after filing suit as doing so would improperly expand the court's jurisdiction. The court found that it did not need to decide whether the tax was a sales tax as alleged by plaintiffs, or a use tax as asserted by CDTFA, because even if the tax was a sales tax, plaintiffs could also not state a claim for consumer relief under Javor v. State Board of Equalization (1974) 12 Cal.3d 790, because there had been no prior legal determination that the vehicle turn-in fee was a disposition fee under Regulation 1660. Stettner v. Mercedes-Benz Financial Services USA, LLC (2023) 98 Cal.App.5th 45.