Justia Tax Law Opinion Summaries

Amazon fulfills orders for products sold by third-party merchants through a program it calls “Fulfillment by Amazon” (FBA). According to the First Amended Complaint (FAC), the state agency responsible for collecting sales and use tax is the California Department of Tax and Fee Administration (DTFA) has historically not collected from Amazon sales and use taxes for products sold through the FBA program.   Plaintiff filed a taxpayer action under section 526a seeking a declaration that the DTFA “has a mandatory duty to assess and collect” sales and use tax specifically from Amazon for products sold through the FBA program. The DTFA and its Director and the Amazon entities that Plaintiff named in his FAC as Real Parties in Interest all demurred to the FAC. The trial court sustained Respondents’ demurrers without leave to amend.   The Second Appellate District affirmed the trial court’s order sustaining Respondents’ demurrers. The court explained that no statute or regulation conclusively establishes that the DTFA must pursue Amazon for sales and use taxes related to FBA transactions. The language of Revenue and Taxation Code section 6015, subdivision (a) makes it clear that there may be multiple “persons” who the DTFA may regard as “retailers” for the purposes of a single transaction. The statutory framework of the Sales and Use Tax Law and the statutes vesting the DTFA with authority to administer that statutory framework led the court to conclude that whether a taxpayer is a retailer for purposes of the Sales and Use Tax Law is a discretionary determination and not a ministerial task. View "Grosz v. Cal. Dept. of Tax & Fee Administration" on Justia Law

In three related actions, privately held public utilities sued for property tax refunds for fiscal years 2014-2015 and 2015-2016, following the County’s denial of refund claims submitted under Revenue and Taxation Code section 5097. Section 100(b) establishes formulas for calculating the debt-service component of certain property taxes. Pursuant to that statute, Santa Clara County imposed taxes on the utilities’ properties at rates higher than those imposed on non-utility properties. Although section 100(b) was enacted in 1986, the utilities argued that imposition of a higher debt-service tax rate on their property, under the statutory formulas, violated California Constitution article XIII, section 19, which provides that the state-assessed property of certain regulated utility companies “shall be subject to taxation to the same extent and in the same manner as other property.”The trial court denied motions to dismiss, holding that the County had not carried its burden of establishing that the utilities cannot state a claim. The court of appeal reversed. Article XIII, section 19, does not mandate that utility property be taxed at the same rate as other property. Instead, it provides that, after utility property is assessed by the State Board of Equalization, it shall be subject to ad valorem taxation at its full market value by local jurisdictions. View "County of Santa Clara v. Superior Court of Santa Clara County" on Justia Law

Division purchased two office buildings from the city that included a short-term leaseback at below-market rent. Division alleged that the assessor failed to take the leaseback into account when valuing the buildings for property tax purposes and claims this violated Revenue and Taxation Code section 402.1. After failing to persuade the City’s Assessment Appeals Board, Division filed suit. The trial court dismissed, holding that the lease did not constitute an “enforceable restriction” under section 402.1.The court of appeal affirmed, noting that Division paid $53 million, a price discounted to reflect the leaseback. While a purchase price may play a significant role in the reassessment of property upon its sale, that price is only the beginning of the inquiry; one factor that may skew the purchase price and make it an unreliable indicator of fair market value is an agreement containing restrictions on the buyer’s use of the property. Such restrictions do not bind the assessor. Government-imposed land use restrictions must be taken into account when a property is valued for assessment purposes but under section 402.1 “enforceable restrictions” are land use restrictions imposed by the government under its police power, not restrictions agreed to by a public entity selling property to a private buyer in an ordinary arm’s-length transaction. View "290 Division (EAT), LLC v. City and County of San Francisco" on Justia Law

Condominium owners alleged that a sewer service charge collected by Napa Sanitation District consists of a “capacity fee” and a “use fee” and that the latter was an unlawful tax. A challenge to the capacity fee was barred by a 120-day limitations period, Government Code 66022 Although the complaint expressly did not attack the capacity fee, the District argued that the ordinances authorizing the sewer service charge are inseverable, so the court would have to invalidate the entire charge if the plaintiffs prevailed. The trial court dismissed the suit.The court of appeal reversed. It was premature for the trial court to decide the issue of severability. The severability doctrine is intended to determine the scope of the remedy after a legal infirmity in the ordinance has been established; a finding of in-severability would not alter the nature of the claim or the underlying rights. Even if severability principles would require the invalidation of the entire sewer service charge, the District, rather than the plaintiffs, would bear the consequence of its decision to draft the ordinances that way. Severability is a shield by which a legislative body can preserve parts of its law that are not implicated by a valid legal claim, not a sword to preclude that claim, View "Raja Development Co., Inc. v. Napa Sanitary District" on Justia Law

Donna Fisher lived in a mobilehome located in The Groves mobilehome residential community in Irvine, California. In 2011, Fisher filed a verified assessment appeal application with the Assessment Appeals Board No. 3 (the Board) for the County of Orange (the County) contesting the County Assessor’s assessment of the value of the land upon which her mobilehome was sitting for the 2011-2012 fiscal year. She argued the property had suffered a decline in value. Following extensive hearings, the Board issued its findings of fact and determination denying Fisher’s application. Fisher filed suit against the County to challenge the Board’s decision and sought a refund for overpayment of taxes in the amount of $739 for the underlying real property of her mobilehome. Following trial, the trial court issued a statement of decision rejecting Fisher’s challenges to the Board’s findings of fact and determination and entered judgment in favor of the County. Fisher again appealed, but the Court of Appeal affirmed, finding no reversible error. View "Fisher v. County of Orange" on Justia Law

The City of Malibu formed the Broad Beach Geologic Hazard Abatement District (the District), to protect the homes on the city’s Broad Beach, threatened by longstanding shoreline erosion. The District developed a plan to import sand and maintain a revetment on portions of the beach, in order to fortify the shoreline. To fund this project, it proposed a special assessment on parcels within its boundaries, and homeowners approved the assessment. Litigation ensued, in which the District filed an action seeking to validate the assessment, and the homeowners opposing the assessment claimed it violated the requirements of Proposition 218, which added article XIII D to the California Constitution, limiting local government’s ability to impose assessments.   The trial court ultimately agreed with the challengers on these issues and invalidated the District’s assessment. After the court’s ruling on the merits, the challengers sought attorney fees under Code of Civil Procedure section 1021.5, which codified the private attorney general doctrine of attorney fees.   The Second Appellate District affirmed the court’s judgment invalidating the assessment. The court held that Prop. 218 required the District to separate and quantify general benefits from the widened beach, regardless of whether those benefits imposed additional costs and without regard to the District’s subjective intent in designing the project. Further, the court wrote that it discerned no no error in the trial court’s determination and weighing of the challengers’ financial interest in the litigation. View "Broad Beach Geologic Hazard etc. v. 31506 Victoria Point LLC" on Justia Law

Plaintiffs-appellants The 2009 Metropoulos Family Trust, The Evan D. Metropoulos 2009 Trust, and the trusts’ trustee, the J.P. Morgan Trust Company of Delaware (the trustee), appealed the grant of summary judgment entered in favor of the California Franchise Tax Board (FTB) on plaintiffs’ complaint seeking a refund of 2014 income taxes. Plaintiffs argued their pro-rata share of income received from an S corporation’s November 2014 sale of a wholly-owned subsidiary was not subject to California income tax. The plaintiff trusts, who were shareholders in the S corporation Pabst Corporate Holdings, Inc. (Pabst), argued the income was derived from the sale of intangible property, namely goodwill associated with the subsidiary’s business, whose taxation was governed by Revenue & Taxation Code section 17952 and its corresponding regulation. The trial court denied plaintiffs’ motion and granted the FTB’s, ruling: (1) because the S corporation had characterized the income as business income on its return, the trusts were bound to treat their respective shares of that income the same way on their federal and California tax returns; and (2) even if section 17952 applied, the trusts’ income would still be taxable since the S corporation’s corporate headquarters were in California, the underlying businesses based marketing and sales departments in California, and the S corporation localized the goodwill in connection with its California business, giving the goodwill a “business situs” in California. Finding no reversible error in the trial court's judgment, the Court of Appeal affirmed. View "2009 Metropoulos Family Trust v. California Franchise Tax Board" on Justia Law

Plaintiffs filed a putative class action against San Jose and the County of Santa Clara, seeking to recover millions of dollars in garbage collection charges paid by plaintiffs and a class of similarly situated property owners. The complaint alleged that the plaintiffs own residential property in San Jose and receive garbage collection services from the city. Plaintiffs were billed for those services but failed to pay some of the bills. To recover the unpaid amounts, the city recorded liens on the property owned by the plaintiffs. The delinquent charges were referred to the County as special assessments to be included on the property tax bill. Plaintiffs paid the special assessments that appeared on their tax bill and the city released the liens against their property. Plaintiffs allege that including delinquent garbage collection charges as a special assessment on the property tax bill, although authorized by the San Jose Municipal Code, violates California laws regarding the recording and priority of real property liens.Citing Health and Safety Code section 5472, the trial court dismissed. The court of appeal affirmed, finding that complying with the payment under protest procedure is a mandatory pre-filing requirement and that the plaintiffs had not complied and could not amend the complaint to cure the deficiency. View "Padilla v. City of San Jose" on Justia Law

The owners and operators of six boutique hotels sued San Francisco, seeking refunds of about $1.7 million in penalties that had been assessed for failure to timely file returns and pay certain hotel taxes. The plaintiffs contended they were entitled to refunds because, exercising ordinary care, they had hired and then relied on an employee to file the returns and make the payments, only to learn after the taxes were past due that the employee was dishonest and had never filed the returns or paid the taxes. Section 6.17-4 of the ordinance required the waiver of certain penalties when “[f]ailure to make timely payment or report of tax liability . . . occurred notwithstanding the exercise of ordinary care by the taxpayer.”The court of appeal affirmed a judgment in favor of the plaintiffs. The court rejected San Francisco’s arguments that as a matter of law, reliance on an employee cannot constitute ordinary care under section 6.17-4, no matter how careful the plaintiffs were in hiring and supervising the employee, and that even if the plaintiffs were entitled to refunds of some penalties under section 6.17-4, other penalties had been assessed under section 6.11-3, a Code section to which the refund provision of section 6.17-4 does not apply. View "Gajanan v. City and County of San Francisco" on Justia Law

Property owners (Appellants) paid nearly $12 million in transfer taxes, penalties, and interest based on a 2014 merger that changed their parent companies. Both before and after the merger, Appellants directly owned two properties; only indirect ownership changed. They sought a refund of the sums paid under the San Francisco Business and Tax Regulations Code (SFBTRC).The court of appeal affirmed the dismissal of the suit, rejecting arguments that the tax exceeded San Francisco's authority under Revenue and Taxation Code section 11911 because it uses a higher tax rate and an expanded tax base. San Francisco, as a charter city and a “city and county,” is not bound by the limitations of section 11911. The purported failure to comply with notice and hearing requirements does not entitle Appellants to a refund. At the time of the merger, SFBTRC was triggered as to Appellants’ real property by the transfer of ownership interests in Appellants’ parent entity, consistent with Revenue and Taxation Code section 64(c)(1). SFBTRC 1108 applied due to the termination of Appellants’ parent, a partnership. Appellants are not entitled to a refund based on their argument that San Francisco assessed the wrong entities View "CIM Urban REIT 211 Main Street (SF), L.P. v. City and County of San Francisco" on Justia Law