Jimmy Swaggart Ministries v. State Bd. of Equalization

• Decision Date: 29 August 1988
• Docket Number: No. D005707,D005707
• Citation: 204 Cal.App.3d 1269,250 Cal.Rptr. 891
• Court: California Court of Appeals Court of Appeals
• Parties: JIMMY SWAGGART MINISTRIES, Plaintiff and Appellant, v. BOARD OF EQUALIZATION OF the STATE OF CALIFORNIA, Defendant and Respondent.

Page 891

250 Cal.Rptr. 891

204 Cal.App.3d 1269

JIMMY SWAGGART MINISTRIES, Plaintiff and Appellant, v. BOARD OF EQUALIZATION OF the STATE OF CALIFORNIA, Defendant and Respondent.

No. D005707.

Court of Appeal, Fourth District, Division 1, California.

Aug. 29, 1988.

As Modified on Denial of Rehearing Sept. 28, 1988.

Review Denied Nov. 17, 1988.

Ajalat & Polley, Charles R. Ajalat, Terry L. Polley, Richard J. Ayoob, Los Angeles, Schall, Boudreau & Gore, Inc. and Richard R. Gore, San Diego, for plaintiff and appellant

John K. Van de Kamp, Atty. Gen., and Neal J. Gobar, Deputy Atty. Gen., for defendant and respondent.

KREMER, Presiding Justice.

The Jimmy Swaggart Ministries (Ministries) appeals a judgment refusing a refund of sales and use taxes paid under protest to the State of California. Ministries contends the taxes burden the free exercise of religion, excessively entangle the state with religion and offend the Ninth and Tenth Amendments. Ministries also contends insufficient facts support findings it was a "retailer" within the meaning of the tax laws or that it had a sufficient nexus to California to allow imposition of the sales and use taxes, that the trial court committed various evidentiary errors and erroneously denied it leave to amend its complaint. We conclude the sales and use taxes are constitutional and that the record does not support Ministries's other contentions. Therefore, we affirm.

FACTS

During the period in question (1974-1981), Ministries was a non-profit religious corporation affiliated with the Assemblies of God church. ¹ Ministries describes itself as "an evangelistic outreach to promote the gospel of Jesus Christ" by all available means, including "evangelistic crusades," radio and television broadcasting (both as owner and broadcaster), recording music and preaching, writing and publishing "and, [by] any and all other individual or mass media methods that presently exist or may be devised in the future to proclaim the good news of Jesus Christ." ²

During 1974-1981, Ministries conducted numerous "evangelistic crusades" in auditoriums and arenas across the country in cooperation with local churches. Over this period, Ministries held 23 crusades in California. The crusades lasted one to three days, with one crusade lasting six days. The crusade in California totaled 52 days over the period involved here. At the crusades, Ministries conducted services which included preaching and singing. Some of these services were recorded for later sale and/or broadcast. Outside, Ministries sold religious books, records and tapes as well as other religious and non-religious merchandise ³ at tables for either cash or credit card.

Ministries also published a magazine, "The Evangelist," which was sold nationwide by subscription. "The Evangelist" had California subscribers. The articles in the magazine were generally of a religious nature. Ministries advertised its religious books, tapes and records for sale in the magazine ⁴ and included an order blank listing In early 1980, the Board of Equalization of the State of California (Board) became aware Ministries was selling tangible personal property at its crusades in California. The Board informed Ministries that there was no sales tax exemption for religious materials and requested Ministries to register as a seller (to facilitate reporting and paying tax on sales). Ministries asserted it was exempt under the First Amendment.

the various items for sale in the particular issue, their unit price and provided spaces for filling in the quantity desired and the total price. Ministries also offered items for sale on its radio and television broadcasts.

In 1981, an audit commenced. The auditor suggested Ministries was also liable for a use tax on its mail order sales to California residents. In July 1981, the Board advised Ministries that (1) it should register as a seller, report and pay sales tax on all sales made at its California crusades, and (2) that there was a sufficient nexus with the state of California to require Ministries to collect and report use tax on its mail order sales to California purchasers.

Ministries cooperated with the Board by making its records available. Based on the records Ministries had provided, the parties stipulated "that [Ministries] sold for use in California tangible personal property for the period April 1, 1974, through December 31, 1981, measured by payment to [Ministries] of $1,702,942.00 for mail order sales from Baton Rouge, Louisiana and $240,560.00 for crusade merchandise sales in California." The Board notified Ministries it owed sales and use taxes of $118,294.54 plus interest of $36,021.11 and a penalty of $11,829.45 for a total amount due of $166,145.10. Ministries filed a petition for redetermination with the Board, arguing exemption from the tax under the First Amendment. Following a hearing and an appeal to the Board, the Board deleted the penalty but otherwise redetermined the matter without adjustment in the amount of $118,294.54 in taxes owing plus $65,043.55 in interest. Ministries paid the amount but filed a petition for redetermination and a refund with the Board. When the Board denied Ministries's petition, Ministries brought this lawsuit, seeking a refund of the taxes paid.

Following a trial, the trial court entered judgment for the Board, ruling that Ministries was not entitled to a refund of any taxes.

DISCUSSION

I

The Sales and Use Tax Law (Rev. & Tax Code, § 6001 et seq.) ⁵ requires retailers to pay a sales tax "[f]or the privilege of selling tangible personal property at retail...." ( § 6051.) A "sale" includes any transfer of title of tangible personal property in any manner. ( § 6006.)

The use tax is complementary to the sales tax. It is "imposed on the storage, use, or other consumption in this state of tangible personal property purchased from any retailer ... for storage, use, or other consumption" ( § 6201) at the same rate as the sales tax. The use tax is on the purchaser ( § 6202) but is generally collected by the retailer at the time the sale is made ( §§ 6202-6206).

In an action for a refund of taxes, the taxpayer has the burden of establishing all the facts necessary to establish its right to a refund. (El Dorado Oil Works v. McColgan (1950) 34 Cal.2d 731, 744-745, 215 P.2d 4, app. dism. 340 U.S. 801, 71 S.Ct. 52, 95 L.Ed. 589; Honeywell, Inc. v. State Bd. of Equalization (1982) 128 Cal.App.3d 739, 744-745, 180 Cal.Rptr. 479.)

Neither the California Constitution nor the Sales and Use Tax Law exempts religious organizations generally from sales and use taxes. ⁶

II

Ministries contends California's imposition of the sales and use taxes on it violates the Free Exercise clause of the First Amendment. ⁷ In support of this argument, Ministries relies primarily on the United States Supreme Court's 1943 decision in Murdock v. Commonwealth of Pennsylvania (1943) 319 U.S. 105, 63 S.Ct. 870, 87 L.Ed. 1292.

In Murdock, Jehovah's Witnesses were convicted of violating a city ordinance which required all persons canvassing within the city to procure a license and pay a fee. The Supreme Court framed the issue before it as "a single issue--the constitutionality of an ordinance which as construed and applied requires religious colporteurs to pay a license tax as a condition to the pursuit of their activities." (Id. at p. 110, 63 S.Ct. at p. 873.)

The Supreme Court observed:

"The hand distribution of religious tracts is an age-old form of missionary evangelism--as old as the history of printing presses. It has been a potent force in various religious movements down through the years. This form of evangelism is utilized today on a large scale by various religious sects whose colporteurs carry the Gospel to thousands upon thousands of homes and seek through personal visitations to win adherents to their faith. It is more than preaching; it is more than distribution of religious literature. It is a combination of both. Its purpose is as evangelical as the revival meeting. This form of religious activity occupies the same high estate under the First Amendment as do worship in the churches and preaching from the pulpits. It has the same claim to protection as the more orthodox and conventional exercises of religion. It also has the same claim as the others to the guarantees of freedom of speech and freedom of the press." (Id. at pp. 108-109, 63 S.Ct. at 872-73, fns. omitted.)

The Supreme Court discussed Jones v. City of Opelika (1942) 316 U.S. 584, 62 S.Ct. 1231, 88 L.Ed. 1691, which was reargued at the same time the Murdock case was argued. In the first Opelika opinion, the Court had upheld convictions against Jehovah's Witnesses for violating a similar license ordinance because the Jehovah's Witnesses had used "ordinary commercial methods of sales of articles to raise propaganda funds." ( Id. at p. 597, 62 S.Ct. at p. 1239.) The Opelika court had concluded it was proper for the state to charge "reasonable fees for the privilege of canvassing." (Ibid.) ⁸ The Murdock court observed "[T]he mere fact that religious literature is 'sold' by itinerant preachers rather than 'donated' does not transform evangelism into a commercial enterprise. If it did, then the passing of the collection plate in church would make the church service a commercial project. The constitutional rights of those spreading their religious beliefs through the spoken and printed word are not to be gauged by standards governing retailers or wholesalers of books. The right to use the press for expressing one's views is not to be measured by the protection afforded commercial handbills. It should be remembered that the pamphlets of Thomas Paine were not distributed free of charge. It is plain that a religious organization needs funds to remain a going concern. But an itinerant evangelist however misguided or intolerant he may be, does not become a mere book agent by selling the Bible or religious tracts to help...