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Transactions and Use Tax Court Decisions

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Howard Jarvis Taxpayers' Assn. v. State Bd. of Equalization … (1993)

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.