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Business Taxes Law Guide—Revision 2024

Transactions And Use Tax Law

Revenue and Taxation Code

Division 2. Other Taxes
Part 1.6. Transactions and Use Taxes
Chapter 4. Refunds of Unconstitutional Taxes*

Section 7279.6


7279.6. Arbitrary implementation reviewable by writ. An arbitrary and capricious action of the board in implementing the provisions of this chapter shall be reviewable by writ.

Note.—Section 3 of Ch. 1060, stated that the County of San Diego is authorized to pay all just debts and obligations that were accrued by the San Diego County Regional Justice Facility Financing Agency during the period of its existence.

Section 4 of Ch. 1060, stated the legislative findings and declarations of that act as follows: "(a) California courts of appellate jurisdiction have recently held that transactions and use taxes imposed by certain countywide taxing districts violate the California Constitution.

(b) Current law addresses refunds and overpayment of tax only on the assumption that the particular transaction in issue is not subject to tax, rather than on the premise that the tax itself is unconstitutional. Current law also provides that only persons who directly pay a tax to state taxing authorities may file claims for refund. Section 6902 of the Revenue and Taxation Code currently establishes a three-year limitation period with respect to the filing of claims for refund.

(c) As a result, under existing statutory provisions a substantial portion of the unconstitutional taxes would not be refunded to the ultimate consumers who bore the direct economic burden of paying those taxes. Moreover, in certain cases the revenues raised by the unconstitutional taxes were impounded by the levying entity and would, under the proper authority, be available for refund to the consumers who bore the economic burden of paying those taxes.

(d) Therefore, it is the intent of the Legislature in enacting this act, to alter the normal refund mechanism in the case where a transactions and use tax, imposed by a taxing district within a county pursuant to the Revenue and Taxation Code, has been found to be unconstitutional by a court of appellate jurisdiction, and the revenues derived from that tax have been impounded. The statutes added to the Revenue and Taxation Code by this act are intended to establish a comprehensive system of remedies that balances the right of persons who made purchases subject to the unconstitutional taxes to obtain a return of those taxes with the need of entities imposing valid taxes within the same county to obtain the revenues to which they are entitled. The provisions added by this act are intended to apply to all claims and actions for refund in the circumstances described herein, notwithstanding any other provision of law, but are not intended to in any way affect the normal refund statutes regarding claims and actions for refund on any other basis."

Section 5 of Ch. 1060, further stated the Legislature's findings and declarations that the system of tax credits provided by this act is adopted by the Legislature as the most efficient way to return revenues derived from the illegally collected taxes to the persons who bore the economic burden of those taxes. Nothing in this act may be construed to mean that the State of California assumes responsibility for the imposition of the illegal taxes at issue nor that there is any remedy for that illegal imposition of transactions and use taxes other than as provided in this act. There shall be no recovery against the State of California otherwise than as under this act in any action for refund of those illegally collected taxes.

Section 7 of Ch. 1060, provided, "If any provision of this act or the application thereof to any person or circumstances is held invalid, that invalidity shall not affect other provisions or applications of the act that can be given effect without the invalid provision or application, and to this end the provisions of this act are severable."


* Chapter 4 was added by Stats. 1993, Ch. 1060, effective October 11, 1993.