Articles Posted in Tax Law

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Defendant Darren Rose, a member of the Alturas Indian Rancheria, ran two smoke shops located in Indian country but far from any lands governed by the Alturas Indian Rancheria. In those smoke shops, Rose sold illegal cigarettes and failed to collect state taxes. California brought an enforcement action to stop illegal sales and collect civil penalties. Rose appealed, arguing: (1) California and its courts did not have jurisdiction to enforce California’s civil/regulatory laws for his actions in Indian country; and (2) the amount of civil penalties imposed was inequitable and erroneous. The Court of Appeal concluded: (1) federal law and tribal sovereignty did not preempt California’s regulation and enforcement of its laws concerning sales of cigarettes; and (2) the superior court’s imposition of civil penalties was proper. View "California v. Rose" on Justia Law

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Plaintiffs and appellants Luz Solar Partners Ltd., III; Luz Solar Partners Ltd., IV; Luz Solar Partners Ltd., V; Luz Solar Partners Ltd., VI; Luz Solar Partners Ltd., VII; Luz Solar Partners Ltd., VIII and Harper Lake Company VIII; and Luz Solar Partners Ltd., IX and HLC IX (collectively “Luz Partners”) challenged the assessment of real property improved with solar energy generating systems (SEGS units) for tax years 2011-2012 and 2012-2013. They contended that defendants-respondents San Bernardino County (County) and the Assessment Appeals Board of San Bernardino County (Appeals Board) erroneously relied on the State of California Board of Equalization’s (Board) incorrect interpretation of the applicable statutes governing the method of assessing the value of the property. Finding that the Board correctly interpreted the applicable law in setting forth the method of assessing the value of the solar properties, the Court of Appeal affirmed. View "Luz Solar Partners Ltd. v. San Bernardino County" on Justia Law

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If a municipality imposes a sales tax, the State Board of Equalization (now the California Department of Tax and Fee Administration) has the authority to collect and then remit the tax back to the municipality under the Bradley-Burns Uniform Local Sales and Use Tax Law (Stats. 1955, ch. 1311; 7200 et seq.). The Board is authorized to determine where sales of personal property occur and to designate the municipality that will receive the local sales tax it collects. After an internal reorganization of an existing seller, the Board decided that local sales tax which had been remitted to Fontana and Lathrop, where the seller had warehouses, would be “reallocated” to Ontario, the site of the seller’s new marketing operation. The trial court set aside that decision. The court of appeal reversed, finding that the Board’s decision was supported by substantial evidence. The manner in which the Board determined where the taxable event occurred was well within its administrative expertise and its discretionary authority to make such a determination. Customers believed they were ordering goods from the Ontario facility, which became the retailer when it purchased goods for shipment to customers. View "City of Fontana v. California Department of Tax and Fee Administration" on Justia Law

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If a municipality imposes a sales tax, the State Board of Equalization (now the California Department of Tax and Fee Administration) has the authority to collect and then remit the tax back to the municipality under the Bradley-Burns Uniform Local Sales and Use Tax Law (Stats. 1955, ch. 1311; 7200 et seq.). The Board is authorized to determine where sales of personal property occur and to designate the municipality that will receive the local sales tax it collects. After an internal reorganization of an existing seller, the Board decided that local sales tax which had been remitted to Fontana and Lathrop, where the seller had warehouses, would be “reallocated” to Ontario, the site of the seller’s new marketing operation. The trial court set aside that decision. The court of appeal reversed, finding that the Board’s decision was supported by substantial evidence. The manner in which the Board determined where the taxable event occurred was well within its administrative expertise and its discretionary authority to make such a determination. Customers believed they were ordering goods from the Ontario facility, which became the retailer when it purchased goods for shipment to customers. View "City of Fontana v. California Department of Tax and Fee Administration" on Justia Law

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In a 2005 Cooperation and Option Agreement to facilitate Russell's construction and operation of the Energy Center, a natural gas-fired, combined cycle electric generating facility in Hayward, the city granted Russell an option to purchase 12.5 acres of city-owned land as the Energy Center's site and promised to help Russell obtain permits, approvals, and water treatment services. Russell conveyed a 3.5-acre parcel to the city. The Agreement's “Payments Clause” prohibited the city from imposing any taxes on the “development, construction, ownership and operation” of the Energy Center except taxes tethered to real estate ownership. In 2009, Hayward voters approved an ordinance that imposes “a tax upon every person using electricity in the City. … at the rate of five and one-half percent (5.5%) of the charges made for such electricity” with a similar provision regarding gas usage. Russell began building the Energy Center in 2010. In 2011, the city informed Russell it must pay the utility tax. The Energy Center is operational.The court of appeal affirmed a holding that the Payments Clause was unenforceable as violating California Constitution article XIII, section 31, which provides “[t]he power to tax may not be surrendered or suspended by grant or contract.” Russell may amend its complaint to allege a quasi-contractual restitution claim. View "Russell City Energy Co. v. City of Hayward" on Justia Law

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Prior to its dissolution, Culver City’s former redevelopment agency made an unauthorized transfer to the City of about $12.5 million. The Department of Finance (DOF) discovered the unauthorized transfer after the former redevelopment agency was dissolved and the City took over as the successor agency. Based on that discovery, DOF authorized the county auditor-controller to reduce by about $12.5 million the tax increment revenue made available to the successor agency to pay the successor agency’s enforceable obligations. In a prior action, the Sacramento Superior Court held that the former redevelopment agency should have retained the $12.5 million to pay its bills rather than transferring it to the City. DOF did not seek an order requiring the City to repay the $12.5 million. And neither party appealed the superior court’s judgment. Since judgment was entered in “Culver City I”, the City has not repaid the $12.5 million to the successor agency, and DOF has continued to authorize successive reductions to the allotment of tax increment revenue to the successor agency to pay its enforceable obligations. DOF asserts that those funds held by the City are available to the successor agency for payment of its enforceable obligations, but the City maintains that it has no duty to pay the money back. In this action, the City, both in its municipal capacity and as the successor agency of the former redevelopment agency, sought mandamus relief to stop DOF’s successive reductions of tax increment revenue to pay the successor agency’s enforceable obligations. DOF sought an order reversing the former redevelopment agency’s transfer of $12.5 million to the City and requiring the City to return the money. The superior court in this action held that DOF’s successive reductions were not authorized by the Dissolution Law. Based on this holding, the superior court granted the City’s petition for writ of mandate. While recognizing Culver City I’s holding that the former redevelopment agency’ss transfer to the City was unauthorized, the superior court denied DOF’s petition for an equitable writ of mandate requiring the return of the money because there was a statutory remedy for this situation. The State Controller conducted a review and ordered the City to return the $12.5 million to the successor agency. DOF appealed, asserting that the superior court erred by: (1) denying DOF’s petition for writ of mandate directing the City to return the money and (2) finding that successive reductions to the tax increment revenue provided to the successor agency for the same $12.5 million held by the City was not authorized by the Dissolution Law. The Court of Appeal affirmed. View "City of Culver City v. Cohen" on Justia Law

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For over 40 years, San Francisco has had an ordinance that imposes a tax on parking lot users for the “rent” paid to occupy private parking spaces. Since 1980, the amount of the tax has been 25 percent of the rent; parking lot users owe the tax, but parking lot operators are required to collect the tax when the users pay to park and periodically remit it to San Francisco. The ordinance states it is not to be construed as imposing a tax on the state or its political subdivisions but those “exempt” entities must “collect, report, and remit” the tax. The universities operate parking lots on property that is close to university facilities and is mostly owned by the state; they have never collected or remitted city parking taxes. In 2011, San Francisco directed the universities to start collecting and remitting the tax. After the universities refused, San Francisco unsuccessfully sought to compel compliance, citing its “home rule” powers. The court of appeals agreed that the universities are immune from compliance with the ordinance because they have not expressly consented to collecting and remitting the tax and their parking-lot operations are a governmental, not a proprietary, function. View "City and County of San Francisco v. Regents of the University of California" on Justia Law

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This case involved the interpretation, and application of Water Code section 51200 and articles XIII C and XIII D of the California Constitution, as approved by California voters in 1996 as Proposition 218, and the interplay between them. Defendants and cross-complainants Reclamation District No. 17 and Governing Board of Reclamation District 17 (collectively "Reclamation") maintained levees and other reclamation works within the district’s boundaries. Plaintiff and cross-defendant Manteca Unified School District (School) owned real property within Reclamation’s boundaries. School filed an action for declaratory relief, arguing section 51200 exempted it from paying assessments to Reclamation and Proposition 218 did not confer such authority. School also sought recovery of over $299,000 previously collected by Reclamation. Reclamation answered and cross-complained for declaratory relief. The trial court found the assessments levied by Reclamation were invalid under section 51200 but denied recovery of assessment payments made during the pendency of the action and concluded School’s action was not barred by the statute of limitations. Reclamation appealed, arguing section 51200 and Proposition 218 allowed assessments against school district property unless the district could show through clear and convincing evidence that the property received no special benefit. School cross-appealed, contending the trial court erred in denying recovery for assessments paid during the pendency of the case. The Court of Appeal concluded the trial court erred in declining to apply the constitutional mandate of Proposition 218 to the statutory exemption from assessments provided by section 51200. Accordingly, the Court reversed the judgment and dismissed the cross-appeal. View "Manteca Unified Sch. Dist. v. Reclamation Dist. No. 17" on Justia Law

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Plaintiffs each bought skin puncture lancets and glucose test strips from retail pharmacy stores owned and/or operated by defendants. When plaintiffs purchased these items, the retail pharmacies charged them "sales tax" and subsequently remitted the money they collected as sales tax to the Board of Equalization. Plaintiffs filed suit alleging that the lancets and test strips have been exempt from sales tax since March 10, 2000, the date on which the Board made effective California Code of Regulations, title 18, section 1591.1, subdivision (b)(5). The Supreme Court held in Loeffler v. Target Corp., that the customer was not the taxpayer and thus could not herself seek a refund from the Board. At issue was whether the customer may obtain a court order compelling the retail pharmacy to file an administrative refund claim with the Board. The state's Supreme Court held in Javor v. Board of Equalization that the Legislature's authority in this regard was not exclusive and that courts retain a residual power to fill remedial gaps by fashioning tax refund remedies in "unique circumstances." The court concluded that a court may create a new tax refund remedy—and, accordingly, that the requisite "unique circumstances" exist— only if (1) the person seeking the new tax refund remedy has no statutory tax refund remedy available to it, (2) the tax refund remedy sought is not inconsistent with existing tax refund remedies, and (3) the Board has already determined that the person seeking the new tax refund remedy is entitled to a refund, such that the refusal to create that remedy will unjustly enrich either the taxpayer/retailer or the Board. In this case, because the Revenue and Taxation Code does not provide for this remedy and because plaintiffs have not established any of the three prerequisites to the exercise of the judicial residual power to fashion new remedies, the court concluded that the trial court correctly sustained demurrers to all of the claims in the complaint without leave to amend. Accordingly, the court affirmed the judgment. View "McClain v. Sav-On Drugs" on Justia Law

Posted in: Health Law, Tax Law

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The Association filed a property tax refund suit against the County under Revenue and Taxation Code section 5140. The County argued that the action was barred because the Association failed to file a timely refund claim pursuant to Revenue and Taxation Code section 5097, subdivision (a)(3)(A)(i). The superior court determined that the Association filed a timely claim, reversed the Board's decision, and remanded. The County appealed the superior court's judgment in favor of the Association, and the Association appealed the superior court's post-judgment order denying its motion for attorney's fees. Section 5097, subdivision (a)(3)(A)(i) sets the procedural time limit within which a party in the Association's position must file a claim with the County for a refund of taxes. The court explained that the one year time limit was not affected by the timing of the party's payment of the property taxes due. Because the Association did not file their claim for refund of taxes with the County within the one year time limit of section 5097, subdivision (a)(3)(A)(i), the court concluded that the superior court lacked jurisdiction over the Association's subsequent property tax refund action against the County. Accordingly, the court reversed and remanded with directions to dismiss the action. View "Cal. State University Fresno Association v. County of Fresno" on Justia Law

Posted in: Tax Law