City of Los Angeles v. London Towne Livery Service, Ltd.

• Decision Date: 18 October 1979
• Parties: CITY OF LOS ANGELES, a Municipal Corporation, Plaintiff and Appellant, v. LONDON TOWNE LIVERY SERVICE LTD., a corporation, Defendant and Respondent. Civ. 56100.
• Court: California Court of Appeals Court of Appeals

Page 94

159 Cal.Rptr. 94

97 Cal.App.3d 814

CITY OF LOS ANGELES, a Municipal Corporation, Plaintiff and Appellant, v. LONDON TOWNE LIVERY SERVICE LTD., a corporation, Defendant and Respondent.

Civ. 56100.

Court of Appeal, Second District, Division 2, California.

Oct. 18, 1979.

Burt Pines, City Atty., Thomas C. Bonaventura, Sr. Asst. City Atty., Ronald A. Tuller, Deputy City Atty., for plaintiff and appellant.

Duwain H. Herring, Los Angeles, for defendant and respondent.

COMPTON, Associate Justice.

In an action by the City of Los Angeles (City) to collect unpaid business taxes from London Towne Livery Service, Ltd. (London) the superior court entered summary judgment in favor of London on the basis that City's ordinance is unconstitutional. The City has appealed. We reverse.

London, who maintains offices in Beverly Hills and Newport Beach, operates a charter transportation service throughout the counties of Los Angeles and Orange. Admittedly it conducts a portion of its business in the City of Los Angeles where it frequently picks up and discharges passengers.

The City's Municipal Code section 21.194, insofar as it is relevant here, imposes a tax on persons engaged in the business of transporting of passengers for hire at the rate of ninety cents per day for each vehicle used. The tax is levied where the transporting occurs either entirely within the City or on trips originating or terminating within the City. Thus the tax applies with equal force to intracity as well as intercity operators.

The levy of taxes is a municipal affair, and a city may properly impose and collect license taxes for revenue purposes. (Arnke v. City of Berkeley, 185 Cal.App.2d 842, 8 Cal.Rptr. 645.) There is no constitutional prohibition against local taxes upon businesses doing business both within and outside the taxing jurisdiction, " . . . as long as such taxes are apportioned in a manner by which the measure of tax fairly reflects that proportion of the taxed activity which is actually carried on within the taxing jurisdiction, no constitutional objection appears." (City of Los Angeles v. Shell Oil Co., 4 Cal.3d 108, at 124, 93 Cal.Rptr. 1, at 11, 480 P.2d 953, at 963.)

London is in fact "doing business" in the City. Its vehicles do not merely pass through the City but instead pick up and deposit passengers within the City. The City taxes only those London vehicles used on trips which originate or terminate within the City.

This situation is analogous to that in Security Truck Line v. City of Monterey, 117 Cal.App.2d 441, 256 P.2d 366, 257 P.2d 755. There the City of Monterey imposed a tax on trucks used to haul fish from outside the city to canneries located in the city. The court held that Security Truck was doing business in Monterey because the City was a terminus for such hauls. "(S)uch activities constitute the doing of business in Monterey, a taxable event occurred there, and that city is empowered to tax such event by a proper nondiscriminatory ordinance." (Security, at 452, 256 P.2d at 374.)

London contends, and the superior court agreed, that the City's tax is measured in a constitutionally defective manner which results in extraterritorial application and discriminates against intercity operators. We disagree.

True, a city cannot base its tax on an extraterritorial event; the taxable event must occur in the taxing city, (Security Truck Line v. City of Monterey, supra ) and "(N)o measure of apportionment can satisfy the constitutional standard if the measure of tax is made to depend upon a factor which bears no fair relationship to the proportion of the taxed activity actually taking place within the taxing jurisdiction." (City of Los Angeles v. Shell Oil Co., supra, 4 Cal.3d at 124, 93 Cal.Rptr. at 11, 480 P.2d at 963.) However, a city has broad discretion in determining the base for its tax and "(w)hen classifications provided by a license tax ordinance are attacked on constitutional grounds, every intendment and presumption is in favor of upholding them." (Web Service Co. v. Spencer, 252 Cal.App.2d 827, at 837, 61 Cal.Rptr. 493, at 500.)

The tax in question does not provide unlawful extraterritorial taxation. This tax is designed to operate only when an operator is actually engaged in business within the City. The events that trigger the tax are the transportation of persons by an operator: (1) wholly within the City, (2) from a place outside the City to a place within the City, (3) from a place within the City to a place outside the City, and (4) from a place within the City to a place also within the City, where the trip includes going outside the City. (L.A.Mun.Code, § 21.194.)

London's argument that the tax discriminates in favor of intracity operators is but another way of stating the contention of extraterritorial application. That argument is simply that the method of taxation, i. e., a flat fee per vehicle per day adopted by the City is not a reasonable measure of the amount of business done in the City. In this contention London relies on Security Truck Line v. City of Monterey, supra, and City of Los Angeles v. Carson, 181 Cal.App.2d 540, 5 Cal.Rptr. 356.

Carson relied almost entirely on Security in invalidating a city tax similar to the one now before us. There the tax was levied at a per vehicle, Per quarter year rate on persons engaged in transporting passengers for hire.

Carson, the taxpayer in that case, operated a scheduled bus service over fixed routes in cities other than Los Angeles. In addition, Carson used the same buses for occasional charter service which picked up and deposited passengers in the City of Los Angeles.

The court in Carson observed that the evidence disclosed the number of trips subject to the Los Angeles city tax during a selected quarterly period was such that they could have been accomplished by the use of a single bus, even though Carson had used several different buses, thereby increasing its tax liability several fold.

The holding in Carson was that under the circumstances and evidence in that case the tax was not a reasonable measure of the business transacted in Los Angeles. The court did observe, at page 548, 5 Cal.Rptr. at page 361, however, that the tax did appear "to be fair insofar as the operations of one who is engaged Primarily in the business of furnishing charter bus service are concerned (cf. City of Los Angeles v. Tannahill, 105 Cal.App.2d 541, 233 P.2d 671) . . . ." (Emphasis added.)

Security Truck Line v. City of Monterey, supra, 117 Cal.App.2d 441, 256 P.2d 366, 257 P.2d 755, was comparable to City of...