Ainsworth v. Bryant

Citation34 Cal.2d 465,211 P.2d 564
Decision Date23 November 1949
Docket NumberNo. S,S
CourtUnited States State Supreme Court (California)
PartiesAINSWORTH v. BRYANT, Tax Collector et al. F. 17880.

Samuel W. Wicklow, San Francisco, for appellant.

John J. O'Toole and Dion R. Holm, City Attorneys, and Thomas J. Blanchard, Deputy City Attorney, San Francisco, for respondents.

SPENCE, Justice.

Plaintiff, a retail seller of intoxicating liquor, brought this action to enjoin defendants from enforcing against him the 'Purchase and Use Tax Ordinance' of the city and county of San Francisco. Defendants' demurrer to the complaint was sustained and an injunction was denied. From the judgment accordingly entered, plaintiff appeals.

Duly enacted by the San Francisco Board of Supervisors and approved by the Mayor in July, 1947, with the tax levy effective as of October 1, 1947, the ordinance No. 4537 is one 'imposing (an) excise tax on the retail purchase, use of other consumption of tangible personal property, providing for the registration of retailers, for the levy and collection of such tax and prescribing penalties for the violation of the provisions (thereof).' The sole issue presented is the validity of the application of this ordinance to retailers tailers of intoxicating liquor. It is plaintiff's theory that the tax in question may not be so applied in view of article XX, section 22, of the state Constitution, which provides, in part, as follows: 'The State of California, subject to the Internal Revenue Laws of the United States, shall have the exclusive right and power to license and regulate the manufacture, sale, purchase, possession and transportation of intoxicating liquor within the State * * *.' Defendants, on the other hand, maintain that the ordinance is a legitimate revenue measure of general application enacted under the taxing power of the municipality, and that the subjection of plaintiff to its terms is not violative of the cited constitutional provision. Consideration of the purport of the local ordinance in the light of the constitutional limitation sustains the propriety of defendants' position.

The ordinance imposes 'an excise tax at the rate of one-half of one per cent of the purchase price * * * on the purchase by any person of tangible personal property from any retailer in the City and County of San Francisco, and on the use or other consumption of tangible personal property in said City and County purchased from any retailer for use or other consumption therein.' Sec. 15. It specifies that 'every person purchasing from a retailer in (said) City and County or using or otherwise consuming (therein) tangible personal property purchased from a retailer for any such purpose is liable for the tax,' and that 'his liability is not extinguished until the tax has been paid * * *' Emphasis added; sec. 16. It directs the retailer to collect the tax from the purchaser at the time of sale, but if he fails to do so then the 'person upon who such tax is imposed shall pay the same when due to the Tax Collector * * *' Sec. 17. It requires every retailer to register with the tax collector and set forth certain data on the registration form, and within five days thereafter the tax collector shall issue without charge to the registrant 'a certificate of authority * * * to collect the tax from the purchaser,' which certificate 'shall be prominently displayed' in the registrant's place of business. Sec. 19. The tax is 'due and payable from the purchaser at the time of purchase from a retailer in (said) City and County or, if not so purchased, at the time of using or otherwise consuming tangible personal property in (said) City and County.' Sec. 20. The registrant must keep records in the form prescribed by the tax collector and make quarterly returns. Sec. 21. Any violation of the ordinance is made a misdemeanor. Sec. 70.

Having due regard for the foregoing language of the ordinance as expressive of the legislative intent, Sutherland, Statutory Construction, 3rd Ed., Horack, Vol. 2, ch. 45, p. 314, the tax clearly appears to be one imposed upon the purchaser-consumer, applicable to all purchase transactions in all lines of retail business within the city and county, subject to certain exemptions not pertinent here, sec. 18. The funds realized by the tax are declared to be 'for capital expenditures and public improvements and for the servicing of (designated sewer and airport) bonds, and any future bond issues of the City and County for capital expenditures or public improvements.' Sec. 60. It is well settled that the power of a municipal corporation operating under a freeholders' charter (as is the city and county of San Francisco) to impose taxes 'for revenue purposes, including license taxes, is strictly a municipal affair' pursuant to the direct constitutional grant of the people of the state, Const., art. XI, sec. 6; West Coast Advertising .co. v. San Francisco, 14 Cal.2d 516, 524, 95 P.2d 138, 143, and that 'the restrictions on the exercise of that power are only the limitations and restrictions appearing in the Constitution and in the charter itself'. Id., 14 Cal.2d at page 526, 95 P.2d at page 144. So it was said in the earlier case of Ex parte Braun, 141 Cal. 204, at pages 209-210, 74 P. 780, at page 782, quoting from Mr. Justice Field in United States v. New Orleans, 98 U.S. 381, 25 L.Ed. 225: 'A municipality without the power of taxation would be a body without life, incapable of acting, and serving no useful purpose. When such a corporation is created, the power of taxation is vested in it, as an essential attribute, for all the purposes of its existence, unless its exercise be in express terms prohibited. For the accomplishment of these purposes, its authorities, however limited the corporation, must have power to raise money and control its expenditure.' Thus, in view of this settled principle, the question arises as to whether there has been reserved exclusively to the state, insofar as concerns intoxicating liquor, Const., art. XX, sec. 22, the power of taxation exemplified by the San Francisco ordinance.

As above quoted, section 22 of article XX of the state Constitution adopted November 8, 1932, and effective on December 5, 1933, concurrently with the repeal of the Eighteenth Amendment to the federal Constitution, Parente v. State Board of Equalization, 1 Cal.App.2d 238, 240, 36 P.2d 437 reserved to the state the 'exclusive right and power to control, license and regulate' the intoxicating liquor business in its designated phases. Sandelin v. Collins, 1 Cal.2d 147, 153, 33 P.2d 1009, 1010; 93 A.L.R. 956. The Alcoholic Beverage Control Act, which was designed to supersede pre-existing statutes relating to the regulation and control of the liquor traffic, State Liquor Control Act, Stats.1933, ch. 658, p. 1697, repealed by Stats.1935, ch. 330, p. 1152, was enacted in 1935, Stats.1935, ch. 330, p. 1123, Gen.Laws, Act 3796, in the 'exercise of the police powers of the State, for the protection of the safety, welfare, health, peace and morals of the people' thereof. Sec. 1. With only two of its sections classifiable as revenue-producing in the imposition of excise taxes, Secs. 23, 24; Empire Vintage Company v. Collins, 40 Cal.App.2d 612, 105 P.2d 391, the act is generally regarded as a regulatory measure, see Yosemite Park & Curry Co. v. Collins, D.C.Cal., 20 F.Supp. 1009, 1015; State v. Glacier Park Co., 118 Mont. 205, 164 P.2d 366, 369, consistent with the established distinction between regulation and taxation as governmental functions. 38 Am.Jur. sec. 322, p. 15; 3 McQuillin, Municipal Corporations, 2nd Ed. rev., sec. 1091, p. 647; 4 Dillon, Municipal Corporations, 5th Ed., sec. 1408, p. 2461.

The purport of the constitutional provision involving the state's exercise of its police power and referring only to its exclusive authority to 'license and regulate' the liquor business was considered in the case of Los Angeles Brewing Company v. Los Angeles, 8 Cal.App.2d 391, 48 P.2d 71. There the city had sought to impose upon and collect from plaintiff company a license tax upon its business of manufacturing and distributing beer and wine within the city. In support of the validity of the ordinance it was argued that the word 'license' in the constitutional provision meant 'permit to operate as distinguished from the power to impose a license tax for the purpose of revenue only as the words 'tax' and 'revenue' do not appear in the amendment.' 8 Cal.App.2d at page 395, 48 P.2d at page 73. This argument was rejected as contrary to the judicial interpretation given to the phrase 'license and regulate' in previous decisions in this state, Ex parte Frank, 52 Cal. 606, 609, 28 Am.Rep. 642; City of San Jose v. San Jose & Santa Clara Railroad Company, 53 Cal. 475, 481; Ex parte Braun, supra, 141 Cal. 204, 206, 74 P. 780; In re Nowak, 184 Cal. 701, 705, 195 P. 402, wherein a grant of such power by the legislature to a municipality had been held to 'include authority to impose a license tax for revenue only.' Los Angeles Brewing Co. v. Los Angeles, supra, 8 Cal.App.2d page 396, 48 P.2d at page 73. Accordingly, it was deemed proper that the same phrase be similarly construed in the constitutional provision, and therefore the state's 'exclusive' licensing power over the liquor business 'took away from the political subdivisions of the state the right to impose a license tax for the purpose of revenue upon any such business.' (Emphasis added; ibid.) To the same effect, see Vitale v. City of Los Angeles, 13 Cal.App.2d 704, 705, 57 P.2d 993.

It is to be noted that the court in the Los Angeles Brewing Company case, supra, was passing on the constitutional provision, art. XX, sec. 22, as originally enacted in 1932 and as it stood in 1933, when it contained no express reference to the power of taxation. However, in 1934 the section was amended and there was added, among other provisions, the following: 'The State Board of...

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