Haman v. County of Humboldt

• Decision Date: 05 March 1972
• Docket Number: S.F. 22874
• Citation: 8 Cal.3d 922,506 P.2d 993,106 Cal.Rptr. 617
• Court: California Supreme Court
• Parties: , 506 P.2d 993 Richard HAMAN et al., Plaintiffs and Appellants, v. COUNTY OF HUMBOLDT et al., Defendants and Respondents. In Bank

Page 617

106 Cal.Rptr. 617

8 Cal.3d 922, 506 P.2d 993

Richard HAMAN et al., Plaintiffs and Appellants, v. COUNTY OF HUMBOLDT et al., Defendants and Respondents.

S.F. 22874.

Supreme Court of California,

In Bank.

March 5, 1972.

Mathews, Traverse & McKittrick, and Francis B. Mathews, Eureka, for plaintiffs and appellants.

Raymond W. Schneider, County Counsel, and Charles P. Selden, Deputy County Counsel, for defendants and respondents.

BY THE COURT.

Plaintiffs Richard Haman, James Blum, Otto Krasch, Thomas Webster and Hunter's Offshore Enterprises, filed suit to recover the excess of property tax they paid on their fishing boats for the calendar year 1968 over the amount they would have been required to pay if their boats had been registered in California. The trial court found for the county, and all plaintiffs have appealed.

Until 1967 all fishing boats in Humboldt County were assessed at 24 percent of actual cash value. In 1967 the Legislature enacted section 227 of the Revenue and Taxation Code, ¹ which lowered the assessment level for fishing boats registered in California to 1 percent of their actual cash value. Such registration is handled by the federal government, and provides one basis for proving that a boat has a tax situs within the county. Under the federal statute, a boat should be registered at the port nearest the residence of the owner. ²

Plaintiffs were residents of California during 1968, but had previously registered their boats at ports in Oregon, Washington, and Alaska. Apparently, the boats were registered in California after the lien date in 1968. Plaintiffs concede that their boats had a tax situs in Eureka in 1968. ³ Since their boats were not registered in California, the county assessor demanded that they pay taxes aggregating $5,230.07 based on the normal assessment at 24 percent of actual cash value. Had they qualified under section 227 of the Revenue and Taxation Code, their aggregate tax would have been $248.50. They paid under protest.

At the trial there was evidence that the operation of fishing boats registered in other states in no way differed from that of boats registered in California. Plaintiffs had to satisfy the same licensing requirements and obey the same regulations as to amount of catch within state waters. The county conceded that the only difference between California-registered boats and boats registered in other states is the fact of registration. The boat owners contend that this classification violates the equal protection clause of the Fourteenth Amendment.

At the outset we must recognize that since we are dealing with a tax measure the state is to be accorded very great latitude. (Lehnhausen v. Lake Shore Auto Parts Co., --- U.S. ---, 93 S.Ct. 1001, 35 L.Ed.2d 351; Allied Stores of Ohio v. Bowers (1959), 358 U.S. 522, 526--527, 79 S.Ct. 437, 3 L.Ed.2d 480; Royster Guano Co. v. Virginia (1920), 253 U.S. 412, 415, 40 S.Ct. 560, 64 L.Ed. 989; Fox, etc. Corp. v. City of Bakersfield, 36 Cal.2d 136, 141--142, 222 P.2d 879; Tetreault v. Franchise Tax Bd., 255 Cal.App.2d 277, 282, 63 Cal.Rptr. 326.) Flexibility and variety of tax schemes are appropriate (Tax Commissioners v. Jackson (1931), 283 U.S. 527, 537, 51 S.Ct. 540, 75 L.Ed. 1248; Ohio Oil Co. v. Conway (1930), 281 U.S. 146, 159, 50 S.Ct. 310, 74 L.Ed. 775; Stebbins v. Riley (1925), 268 U.S. 137, 142, 45 S.Ct. 424, 69 L.Ed. 884), and the state may permissibly distinguish in favor of a given class (Stebbins v. Riley, Supra, 268 U.S. at p. 142, 45 S.Ct. 424; American Sugar Refining Co. v. Louisiana (1900), 179 U.S. 89, 92, 21 S.Ct. 43, 45 L.Ed. 102). Tax statutes are generally not subjected to close scrutiny, and distinctions can be justified on the basis of administrative convenience and promotion of legitimate state interests. (Carmichael v. Southern Coal Co. (1937), 301 U.S. 495, 511--512, 57 S.Ct. 868, 81 L.Ed. 1245.)

In Allied Stores of Ohio v. Bowers, Supra, 358 U.S. 522, 79 S.Ct. 437, 3 L.Ed.2d 480, the United States Supreme Court set down the governing principles with respect to exemptions. The state there had exempted from ad valorem property tax any property held in storage for a nonresident owner. Plaintiff contended that this exemption denied equal protection to resident owners of stored property. Noting that the state must justify such distinctions on a rational basis (358 U.S. at p. 527, 79 S.Ct. 437), the court upheld the tax statute because it could reasonably be said that the exemption would encourage the development of the warehouse business within the state: '(I)t has repeatedly been held and appears to be entirely settled that a statute which encourages the location within the State of needed and useful industries by exempting them, though not also others, from its taxes is not arbitrary and does not violate the Equal Protection Clause of the Fourteenth Amendment.' (358 U.S. at p. 528, 79 S.Ct. at p. 441.)

In Central R. Co. v. Pennsylvania (1962), 370 U.S. 607, 82 S.Ct. 1297, 8 L.Ed.2d 720, the state allowed railroad companies that had tracks outside the state a reduction in the amount of property tax charged for their railroad cars based upon the amount of time those cars were outside the state, but denied a similar reduction to railroads that only had tracks within the state. The court sustained the tax because it felt that there were reasonable based to treat the two differently, since railroads with tracks outside the state would be more likely to encounter taxes and other costs in other states. (370 U.S. at pp. 617--618, 82 S.Ct. 1297.)

It is also clear that administrative difficulties can justify different treatment under a tax statute. In Carmichael v. Southern Coal & Coke Co., Supra, 301 U.S. 495, 57 S.Ct. 868, 81 L.Ed. 1245, the court upheld imposition of a social security tax that exempted employers of fewer than eight workers because the expense of collection from small employers could exceed the expected returns. (301 U.S. at pp. 511--512, 57 S.Ct. 868.)

There are, however, limits to the latitude afforded a state in demanding taxes. The equal protection clause applies to tax measures. (Wheeling Steel Corp. v. Glander (1949) 337 U.S. 562, 571--572, 69 S.Ct. 1291, 93 L.Ed. 1544; Concordia Ins. Co. v. Illinois (1934), 292 U.S. 535, 549, 54 S.Ct. 830, 78 L.Ed. 1411; Liggett Co. v. Lee (1933), 288 U.S. 517, 532, 53 S.Ct. 481, 77 L.Ed. 929.) The distinction between classes drawn by a tax statute 'must rest upon some ground of difference having a fair and substantial relation to the object of the legislation.' (Royster Guano Co. v. Virginia, Supra, 253 U.S. 412, 415, 40 S.Ct. 560, 561, 64 L.Ed. 989.)

In Liggett Co. v. Lee, Supra, 288 U.S. 517, 53 S.Ct. 481, 77 L.Ed. 929, the state charged a license tax based on the number of stores owned. The fee for each store was smaller where all stores owned were within one county than where the stores owned were in more than one county. The court found that there was no reason for the different treatment because county lines do not relate in any significant way to any factor important in calculating the tax. (288 U.S. at pp. 533--535, 53 S.Ct. 481.)

The discrimination between residents owning fishing boats documented in California and residents owning fishing boats documented in other states may not be justified on either the ground that the tax will promote local industry or the ground that it tends to eliminate double taxation. The place of registration with the federal government does not relate to the operation of the fishing boats. By placing the greater tax on the foreign documented boat, the tax, if anything, would tend to drive industry away from California. As to double taxation, the boat documented in another state and used in California faces a greater risk of double taxation than the boat documented in this state and used here.

The principal justification proffered by the county for the discrimination is that it is expensive to prove that a boat registered in another state is used in this state and is owned by a resident. Although, as pointed out above, administrative convenience may furnish a basis for discrimination as to taxes in a proper case, we are satisfied that in the instant case the difference in rates is so great that it may not be upheld. (Cf. Mullaney v. Anderson, 342 U.S. 415, 417--419, 72 S.Ct. 428, 96 L.Ed. 458; Toomer v. Witsell, 334 U.S. 385, 398--399, 68 S.Ct. 1156, 92 L.Ed. 1460.) The state has demanded that plaintiffs pay 24 times the tax paid by other residents of California who either documented their boats at the time of purchase in California or who were subsequently permitted by the Commissioner of Customs to change the home port designation to a California port. To accept the discrimination made by the tax statute would require that we conclude that approximately 95...