Cod Gas & Oil Co. v. State Bd. of Equalization

• Decision Date: 12 November 1997
• Docket Number: No. C024659,C024659
• Citation: 69 Cal.Rptr.2d 366,59 Cal.App.4th 756
• Court: California Court of Appeals Court of Appeals
• Parties: , 97 Cal. Daily Op. Serv. 9022, 97 Daily Journal D.A.R. 14,531 COD GAS & OIL CO., INC. et al., Plaintiffs and Appellants, v. STATE BOARD OF EQUALIZATION, Defendant and Respondent.

Page 366

69 Cal.Rptr.2d 366

59 Cal.App.4th 756, 97 Cal. Daily Op. Serv. 9022,

97 Daily Journal D.A.R. 14,531

COD GAS & OIL CO., INC. et al., Plaintiffs and Appellants, v. STATE BOARD OF EQUALIZATION, Defendant and Respondent.

No. C024659.

Court of Appeal, Third District, California.

Nov. 12, 1997.

[59 Cal.App.4th 757] Lester J. Gendron, Madera, for Plaintiffs and Appellants.

Daniel E. Lungren, Attorney General, Lawrence K. Keethe, Supervising Attorney General and Steven J. Green, Deputy Attorney General, for Defendant and Respondent.

RAYE, Associate Justice.

Plaintiff Cod Gas & Oil Co., Inc., a motor fuel retailer, brings this tax refund action on behalf of itself and 18 other similarly-situated fuel retailers to recover sales taxes later declared unconstitutional. The trial court entered judgment against plaintiffs after sustaining defendant's demurrer without leave to amend for failure to state a cause of action. In a convoluted argument, plaintiffs alternately contend they were not reimbursed by purchasers for the invalid portion of the sales tax, or that reimbursement should not entitle purchasers to refunds denied to plaintiffs. They also contend Revenue and Taxation Code sections 7275 et seq. are unconstitutional, depriving them of a vested right to seek refunds under the remedies available prior to the effective date of that statutory scheme. Finally, plaintiffs conclude, without analysis, that the statutory refund scheme unconstitutionally discriminates between classes of taxpayers.

FACTS

On appeal from a judgment of dismissal following the sustaining of a demurrer, we treat the factual allegations of plaintiffs' first amended complaint as true, solely for the purpose of determining whether plaintiffs have stated a viable cause of action. (Stevenson v. Superior Court (1997) 16 Cal.4th 880, 885, 66 Cal.Rptr.2d 888, 941 P.2d 1157.) The facts are therefore drawn from that pleading, except where otherwise noted.

As statutorily required, plaintiff retailers collected use taxes from purchasers of motor fuel, with notices posted at the fuel pumps stating the advertised price included all sales taxes. (Bus. & Prof.Code § 13470; Civ.Code § 1656.1.) Those taxes included certain supplemental county-wide taxes later declared unconstitutional, because they were approved by a simple majority rather than by 2/3 of those voting as required by article XIIIA, section 4 of the California Constitution. (See Rider v. County of San Diego (1991) 1 Cal.4th 1, 5, 2 Cal.Rptr.2d 490, 820 P.2d 1000 [Rider I ]; Kuykendall v. State Bd. of Equalization (1994) 22 Cal.App.4th 1194, 1200, 27 Cal.Rptr.2d 783; Monterey Peninsula Taxpayers Assn. v. County of Monterey (1992) 8 Cal.App.4th 1520, 1524-1525, 1536, 11 Cal.Rptr.2d 188.)

The State Board of Equalization (the SBE) collected the San Diego County tax for the period January 1, 1989, to February 13, 1992, when the court in Rider I found the tax to be unconstitutional. The SBE collected the Monterey County tax for the period April 1, 1990, to October 1, 1992, when the court in Monterey Peninsula Taxpayers found that tax to be similarly unconstitutional. In Rider v. County of San Diego (1992) 11 Cal.App.4th 1410, 1419, 14 Cal.Rptr.2d 885 (Rider II ) the appellate court on remand held the trial court had no authority to fashion a remedy for disbursement of the invalidly collected taxes, and ordered the funds held in an impound account until all refund claims were settled. (See also Kuykendall v. State Bd. of Equalization, supra, 22 Cal.App.4th at p. 1200, 27 Cal.Rptr.2d 783.)

The Legislature subsequently enacted Senate, Bill 263, (Rev. & Tax.Code §§ 7275-7279.6) effective October 11, 1993, providing a comprehensive system for refunds and other disbursements of county taxes found to be unconstitutional. (Stats.1993, ch. 1060, pp. 1-8, § 2; see Kuykendall v. State Bd. of Equalization, supra, 22 Cal.App.4th at p. 1201, 27 Cal.Rptr.2d 783.) Those statutes authorize refund actions to be brought only by purchasers with evidence of purchases of $5,000 or more. (Rev. & Tax.Code § 7277.) Retailers are expressly excluded from the definition of persons entitled to bring refund actions. (Rev. & Tax.Code § 7277.)

On December 13, 1993, plaintiff Cod Gas & Oil Co., Inc. (Cod Gas) filed a claim for refund of the invalid San Diego County taxes. ¹ The claim was filed on Cod Gas's own behalf, and purportedly for a class of other

similarly-situated taxpayers. Plaintiffs allege each of the other 18 retailers named as plaintiffs filed similar claims. After plaintiffs' refund claims were denied or deemed denied pursuant to Revenue and Taxation Code sections 6933-6934, plaintiffs filed the instant action seeking certification as a class action, refunds of the San Diego and Monterey County supplemental taxes, and a declaration that Revenue and Tax Code sections 7275 et seq. are unconstitutional to the extent they limit refunds to certain purchasers. The trial court sustained the SBE's demurrer without leave to amend.

DISCUSSION

Revenue and Taxation Code section 6904, subdivision (b)(1) requires that every claim on behalf of a class of taxpayers "[b]e accompanied by written authorization from each taxpayer sought to be included in the class." It is undisputed the claim filed by Cod Gas did not comply with this requirement, rendering that claim ineffective for any person or entity except Cod Gas. (See Woosley v. State of California (1992) 3 Cal.4th 758, 790, 13 Cal.Rptr.2d 30, 838 P.2d 758.) In any event, the viability of plaintiffs' class action is immaterial; we conclude neither class nor individual refund actions can be maintained. (Rev. & Tax.Code § 7277.)

It is a state constitutional requirement that actions for refund of allegedly illegal taxes be brought only in the manner prescribed by the Legislature. (Cal. Const., art. XIII, § 32; see Woosley v. State of California, supra, 3 Cal.4th at p. 789, 13 Cal.Rptr.2d 30, 838 P.2d 758.) As our Supreme Court explained, "This constitutional limitation rests on the premise that strict legislative control over the manner in which tax refunds may be sought is necessary so that governmental entities may engage in fiscal planning based on expected tax revenues." (Woosley v. State of California, supra, 3 Cal.4th at p. 789, 13 Cal.Rptr.2d 30, 838 P.2d 758.)

The exclusive manner prescribed for obtaining refund of unconstitutional county sales taxes is set forth in Revenue and Taxation Code sections 7275 et. seq. Revenue and Taxation Code section 7275 provides, in relevant part, "Notwithstanding any other provision of law, on and after [October 11, 1993,] the procedures for refund or reimbursement of unconstitutional taxes contained in this chapter constitute the sole remedies for refund or reimbursement of [the] illegal taxes...." (Rev. & Tax.Code § 7275, subd. (b)(1).)

Refund actions are authorized only for purchasers with evidence of purchases of $5,000 or more. (Rev. & Tax.Code § 7277.) Section 7277 authorizes refund actions by "a person who has reimbursed a retailer for [payment of the unconstitutional tax] or a person, other than in a capacity as a retailer " who has paid the tax. (Rev. & Tax.Code § 7277, subd. (a), emphasis added.) That section further limits the right to bring a refund action to those "purchasers" with proof of tax payment to the retailer, for purchases totaling $5,000 or more, defining "purchaser" as "any person or entity, other than in a capacity as a retailer," who purchased property subject to the unconstitutional tax. (Rev. & Tax.Code § 7277, subds. (b), (c), emphasis added.) The statute could not be more clear in barring retailers from seeking refunds of the subject taxes.

Plaintiffs contend the statutory bar to retailer refund claims is unconstitutional, arguing they paid the tax to the SBE and thus have a "vested interest" in the right to seek refunds. It is undisputed their fuel sales prices were "fully tax-paid" as required by Business and Professions Code section 13470, and that a notice to that effect was posted at their fuel pumps. However, they dispute this constituted "reimbursement" for the taxes paid to the SBE, since no amount of the price they charged for fuel was specifically or separately identified to purchasers as reimbursement.

This point requires little discussion. Civil Code section 1656.1 establishes a rebuttable presumption that a retailer has been reimbursed for sales taxes where a notice is posted "to the effect that reimbursement for sales tax will be added to the sales Plaintiffs' argument regarding reimbursement is at odds with the rationale underlying Revenue and Taxation Code section 7277. The statutory scheme contained in Revenue and Taxation Code sections 7275 et seq. (Senate Bill 263 (1993-1994 Reg.Sess.)) was designed in part to facilitate refund of the unconstitutional taxes to purchasers who bore the economic burden of the taxes. (Stats.1993, ch. 1060, § 4, pp. 6-7.) In enacting those statutes, the Legislature expressly recognized then-current law provided "only persons who directly pay a tax to state taxing authorities may file claims for refund." (Stats.1993, ch. 1060, § 4, subd. (b), p. 6.) "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." (Stats.1993, ch. 1060, § 4, subd. (c), p. 7.) The Legislature added that in certain cases, revenues raised by the unconstitutional taxes had been impounded, and "would, under the proper authority, be available for refund to the consumers who bore the economic burden of paying those taxes." (Ibid.)

                price...." 2  There is no merit to plaintiffs' unsupported suggestion that each element of the total tax must be specifically identified in the posted notice to trigger the presumption of reimbursement.  Since plaintiff retailers posted the requisite notice, and all taxes were in fact

...