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Business Taxes Law Guide – Revision 2021
 

Transactions and Use Tax Court Decisions

C    H    K    M    R




C


C.O.D. Gas & Oil Co., Inc. v. State Board of Equalization … (1997)

Coleman v. County of Santa Clara … (1998)

County of Monterey; Monterey Peninsula Taxpayers Association v. … (1992)

County of San Diego; Rider v. … (1991)

County of Santa Clara; Coleman v. … (1998)


H


Hoogasian Flowers, Inc. v. State Board of Equalization … (1994)

Howard Jarvis Taxpayers Association v. State Board of Equalization … (1993)


K


Kuykendall v. State Board of Equalization … (1994)


M

Monterey Peninsula Taxpayers Association v. County of Monterey … (1992)


R

Rider v. County of San Diego … (1991)




Transactions and Use Tax Court Decisions


C


Claim for Refund of Unconstitutional District Taxes

Plaintiff motor vehicle fuel retailers sought refund of district taxes they had paid to the state which were later declared to be unconstitutional. Plaintiffs argued that they had the right to file an action for refund of such taxes even though the Legislature had adopted a comprehensive statutory scheme whereby it is the purchasers who have the right to file the claims for refund of unconstitutional district taxes, rather than retailers as is generally the case. The Court of Appeal held that the statutory scheme was constitutional and that it clearly prohibited these retailers from filing claims. Since plaintiffs had no statutory basis for maintaining an action for refund, the trial court’s dismissal of the suit was upheld. C.O.D. Gas & Oil Co., Inc. v. State Board of Equalization (1997) 59 Cal.App.4th 756.


A District Tax Adopted by a Simple Majority Vote Is Valid Because It Is Not a Special Tax

The voters of Santa Clara County adopted a new district tax during the 1996 general election by a simple majority vote (51.8 percent). This tax was adopted as Measure B, which specified that the ½ percent sales and use tax would be used for general county purposes. During the same election, the voters also approved Measure A by 77.6 percent of the vote. This was characterized in the measure itself and in the voter pamphlet as advisory only. It specified the voters' intent that any new sales tax revenue should be spent on certain projects specified in that measure.

Plaintiffs challenged the new tax as an attempt to circumvent the supermajority requirement for special taxes in that the measures were inseparably linked, meaning that Measure B was actually a special tax requiring a two-thirds vote to be validly adopted rather than a mere majority vote as required for a general tax. The Court of Appeal held that, although the two ballot measures were closely related to each other, they were not, in fact, legally connected. By itself, Measure B was a general tax which could be adopted by majority vote. Despite the passage of Measure A, the County was free to spend Measure B revenue on any and all County purposes without restriction, and the validity of neither measure was dependent on the passage of the other. The court therefore upheld the validity of the new tax. Coleman v. County of Santa Clara (1998) 64 Cal.App.4th 662.


The Imposition of a Sales Tax by the Monterey County Public Repair and Improvement Authority after Approval of the Tax by a Simple Majority of the Voters Violated Proposition 13

The Monterey Peninsula Taxpayers Association (MPTA) filed an action against the County of Monterey and the Monterey County Public Repair and Improvement Projects Authority challenging the validity of a sales tax that was approved by only a simple majority of the voters. MPTA claimed, among other things, that article XIII A, section 4 of the California Constitution, commonly known as Proposition 13, required that the tax be approved by two-thirds of the voters. The Authority was governed by four active members of the County Board of Supervisors. It was authorized to impose a sales tax increase and its purpose was to spend certain amounts of the new tax revenue on 27 specific improvement and repair projects throughout the County. The court of appeal concluded that the Authority was a "special district" and that stacking of several special projects was camouflage and did not suddenly convert a multi-specific-purpose tax into a "general tax" for "general governmental purposes." Therefore, the appellate court concluded that MPTA’s tax violated Proposition 13. Monterey Peninsula Taxpayers Assn. v. County of Monterey (1992) 8 Cal.App.4th 1520.


The Imposition of Sales Tax by the San Diego county Regional Justice Facility Financing Agency After Approval of the Tax by a Simple Majority of the Voters Violated Proposition 13

Plaintiff county taxpayers filed a suit challenging the validity of a tax imposed on sales occurring in the county because the tax violated the supermajority vote requirements of California Constitution article XIII A, §4. The California Supreme Court affirmed judgment in favor of the taxpayers, holding that a "special district" within the meaning of Section 4 would include any local taxing agency created to raise funds for city or county purposes to replace revenues lost by reason of the restrictions of Proposition 13. The Court further held that a "special tax" is one levied to fund a specific governmental project or program, such as the construction and financing of a county's justice facilities. The Court recognized under the foregoing principle, every tax levied by a "special purpose" district or agency would be deemed a "special tax," but found that this interpretation seemed most consistent with the probable intent of the framers of Proposition 13. Rider v. County of San Diego (1991) 1 Cal.4th 1.


H


Sales Tax Imposed by School District Held Invalid

Plaintiff retailers filed an action against the Board for refund of local sales tax imposed by intervenor San Francisco Educational Financial Authority (EFA) pursuant to an ordinance approved by the majority (but less than two-thirds) of qualified electors. The retailers argued that the tax was unconstitutional under Proposition 13, which requires that special taxes by special districts be approved by two-thirds of the qualified electors voting on the measure.

The court of appeal affirmed the trial court’s grant of summary judgment in favor of plaintiff retailers because the local sales tax imposed by intervenor was invalid as it was not approved by two-thirds of the qualified electors. The court found that school districts were special districts within the meaning of article XIII A, section 4, and because the EFA was a taxing agency controlled by school districts, it was subject to the supermajority requirement of the state constitution. Hoogasian Flowers, Inc. v. State Board of Equalization (1994) 23 Cal.App.4th 1264.


Local Retail Transaction and Use Tax Ordinances Held Invalid if Not Approved by Two-Thirds of County’s Voters

A taxpayers' association and individual taxpayers challenged the County Regional Justice Facilities Act and County Regional Justice Facilities Financing Act, seeking a declaration that the Acts were invalid and void for unconstitutionally authorizing special districts to impose an ad valorem tax without securing approval of two-thirds of voters of the district as required by the State Constitution. The Acts authorized the Agencies to adopt by ordinance a county-wide sales tax of one-half of one percent effective if approved by a majority of the electors voting on the measure. The court of appeal held that the Acts were not void in their entirety; however, any tax ordinance approved by the Agencies is invalid if it is not approved by at least two-thirds of the county's voters, as required by Proposition 13. The court of appeal concluded that the test of a "special district," as viewed in Rider v. County of San Diego (1991) 1 Cal.4th 1, 11, was whether "[a] local taxing agency [was] created to raise funds for city or county purposes to replace revenues lost by reason of the restrictions of Proposition 13." Since the dominant purpose of the Acts was to raise revenue by means of a sales tax to fund the construction and operation of jails and courthouses, including the retirement of debt incurred for existing facilities, activities which fit squarely within the core functions customarily and historically performed by municipalities and financed through levies of property taxes, the court of appeal held that any tax ordinances passed by the Agencies were unconstitutional unless approved by two-thirds of the voters, as required by Proposition 13. Howard Jarvis Taxpayers' Assn. v. State Bd. of Equalization (1993) 20 Cal.App.4th 1598.


K


"Statutory Procedure for Refund of Unconstitutionally Imposed Sales Tax Is Valid

Plaintiff commenced a class action against defendants State Board of Equalization and San Diego County Regional Justice Facility seeking a refund of sales taxes in the wake of a decision by the California Supreme Court declaring a local sales tax in San Diego as unconstitutional. Following the Court’s decision, the Board announced a plan for refund claims to be made through the San Diego retailers who had transferred the Jail Tax moneys to the Board. Plaintiffs commenced the consumer class action for refund, seeking direct reimbursement of the Jail Tax moneys to the consumers who effectively paid the tax. The trial court granted plaintiffs’ summary judgment finding that they the taxpayers, and ordered defendants to submit a plan to refund the taxes; however, during the pendency of the litigation, the legislature enacted California Revenue & Taxation Code section 7275 et seq. (SB 263), which, by its terms, constituted the sole manner of obtaining refunds.

The appellate court found that the trial court's judgment created no vested rights and that the legislature clearly intended the statutory scheme to apply to the pending litigation. The court of appeal further found that article XIII, §32, of the California Constitution, gave the legislature plenary power to create the refund scheme through statute and that the statute was not unconstitutional although it created different classes of taxpayers and although its ends might have been achieved through different means. Kuykendall v. State Bd. of Equalization (1994) 22 Cal.App.4th 1194.


M

The Imposition of a Sales Tax by the Monterey County Public Repair and Improvement Authority after Approval of the Tax by a Simple Majority of the Voters Violated Proposition 13

The Monterey Peninsula Taxpayers Association (MPTA) filed an action against the County of Monterey and the Monterey County Public Repair and Improvement Projects Authority challenging the validity of a sales tax that was approved by only a simple majority of the voters. MPTA claimed, among other things, that article XIII A, section 4 of the California Constitution, commonly known as Proposition 13, required that the tax be approved by two-thirds of the voters. The Authority was governed by four active members of the County Board of Supervisors. It was authorized to impose a sales tax increase and its purpose was to spend certain amounts of the new tax revenue on 27 specific improvement and repair projects throughout the County. The court of appeal concluded that the Authority was a "special district" and that stacking of several special projects was camouflage and did not suddenly convert a multi-specific-purpose tax into a "general tax" for "general governmental purposes." Therefore, the appellate court concluded that MPTA’s tax violated Proposition 13. Monterey Peninsula Taxpayers Assn. v. County of Monterey (1992) 8 Cal.App.4th 1520.


R

The Imposition of Sales Tax by the San Diego county Regional Justice Facility Financing Agency After Approval of the Tax by a Simple Majority of the Voters Violated Proposition 13

Plaintiff county taxpayers filed a suit challenging the validity of a tax imposed on sales occurring in the county because the tax violated the supermajority vote requirements of California Constitution article XIII A, §4. The California Supreme Court affirmed judgment in favor of the taxpayers, holding that a "special district" within the meaning of Section 4 would include any local taxing agency created to raise funds for city or county purposes to replace revenues lost by reason of the restrictions of Proposition 13. The Court further held that a "special tax" is one levied to fund a specific governmental project or program, such as the construction and financing of a county's justice facilities. The Court recognized under the foregoing principle, every tax levied by a "special purpose" district or agency would be deemed a "special tax," but found that this interpretation seemed most consistent with the probable intent of the framers of Proposition 13. Rider v. County of San Diego (1991) 1 Cal.4th 1.