Rivera v. City of Fresno

Decision Date29 November 1971
Docket NumberS.F. 22810
Citation6 Cal.3d 132,98 Cal.Rptr. 281,490 P.2d 793
CourtCalifornia Supreme Court
Parties, 490 P.2d 793 Sophie RIVERA et al., Plaintiffs and Appellants, v. CITY OF FRESNO et al., Defendants and Respondents. In Bank

J. W. Hedrick, Jr., Fresno, Loeb & Loeb, Frank M. Keesling, Albert F. Smith, John S. Warren and Terry D. Oehler, Los Angeles, for plaintiffs and appellants.

Joseph W. Cotchett, San Mateo, Hafif & Shernoff, Stephen L. Odgers, Herbert Hafif, Clarement, P. M. Barceloux, Burton J. Goldstein, Albert E. Levy, Ralph Golub, Goldstein, Barceloux & Goldstein and M Reed Hunter, San Francisco, as amici curiae on behalf of plaintiffs and appellants.

Spencer Thomas, Jr., City Atty., A. Grant Macomber, Senior Deputy City Atty., Sturgis, Den-Dulk, Douglass & Anderson and Robert T. Anderson, Oakland, for defendants and respondents.

Roger Arnebergh, City Atty., Los Angeles, James A. Doherty and Thomas C. Bonaventura, Asst. City Attys., as amici curiae on behalf of defendants and respondents.

BURKE, Justice.

Plaintiffs, who are utility users in defendant City of Fresno, appeal from a judgment sustaining the validity of a utility users' tax levied by the city. We are informed that a similar tax has been imposed by some forty or more cities in this state. As will appear, we have concluded that plaintiffs err in their contention that the city lacked authority to impose the tax. The judgment will therefore be affirmed.

The utility users' tax ordinance here at issue (Fresno Municipal Code, §§ 4--1001 through 4--1017) imposes a tax (with exceptions not here material) 'upon every person using intrastate telephone communication service' in defendant city, and 'upon every person using gas in the city which is delivered through mains or pipes, and every person using electrical energy in the city.' The tax is at the rate of five percent of the total charges made for the utility service, is collected from the user by the utility company supplying the particular utility service as part of its regular billing, and is paid over to the city by the utility company. Procedures for administration of the tax ordinance are set forth in the Fresno Municipal Code.

The City of Fresno operates under a charter which contains 'home rule' provisions authorized by the Constitution. (Cal.Const., art. XI, § 5; formerly §§ 6, 8, subd. (j).) Accordingly, the city is empowered to exercise full control over its municipal affairs, unaffected by general laws on the same subject matters and subject only to limitations found in the Constitution and the city charter. (Professional Fire Fighters, Inc. v. City of Los Angeles (1963) 60 Cal.2d 276, 291, 32 Cal.Rptr. 830, 384 P.2d 158; Los Angeles Ry. Corp. v. Los Angeles (1940) 16 Cal.2d 779, 783, 108 P.2d 430; The City of Oakland v. Williams (1940) 15 Cal.2d 542, 549--550, 103 P.2d 168; West Coast Adver. Co. v. San Francisco (1939) 14 Cal.2d 516, 521--522, 95 P.2d 138; Butterworth v. Boyd (1938) 12 Cal.2d 140, 146--147, 82 P.2d 434.)

Plaintiffs contend, however, that the Legislature has enacted a uniform statewide system of sales and use taxation and has declared its intent to preempt that field, that such a system is a matter of statewide concern rather than a local municipal affair, and that therefore the Fresno utility users' tax must yield to the Legislature's enactment under principles recently reviewed and expounded in Bishop v. City of San Jose (1969) 1 Cal.3d 56, 61--63, 81 Cal.Rptr. 465, 460 P.2d 137. (See also City of Santa Clara v. Von Raesfeld (1970) 3 Cal.3d 239, 245--246, 90 Cal.Rptr. 8, 474 P.2d 976.)

The state entered the field of sales and use taxes more than 35 years ago with the enactment of the Retail Sales Tax Act of 1933 (Stats.1933, ch. 1020, p. 2599, § 1), and the Use Tax Act of 1935. (Stats.1935, ch. 361, p. 1297, § 1.) Certain cities in the state subsequently began imposing similar taxes, at varying rates, with express approval of the Legislature. (See Gov.Code, § 37101; City of Commerce v. State Board of Equalization (1962) 205 Cal.App.2d 387, 390, 23 Cal.Rptr. 143(3, 4).)

In 1955 the Legislature enacted a uniform local sales and use tax law, known as the Bradley-Burns Act. Rev. & Tax. Code, § 7200 et seq.) 1 It confers upon counties the authority to impose by local ordinance a sales and use tax, and directs that the county must credit against the amount of the county tax the amount of sales and use taxes due to cities within county boundaries under city tax ordinances having substantially the same provisions. Among the provisions required in a county ordinance, and in the sales and use tax ordinance of a city if those paying the city tax are to be entitled to credit against the county tax, are these: (1) the local tax rate shall not exceed one percent; (2) provisions identical (with minor exceptions not here material) to those in the state sales and use tax acts; (3) a provision that the county or the city, as the case may be, 'shall contract prior to the effective date of the (local) sales and use tax ordinance with the State Board of Equalization to perform all functions incident to the administration or operation of the (local) sales and use tax ordinance.' (§ 7202, subds. (a), (b), (c), (d) and (h), subsecs. (1), (2), (3), (4); § 7203.)

The Bradley-Burns Act 'contemplates an integrated, uniform system of city and county sales and use taxation. The counties are given authority to impose sales and use taxes as a means of raising additional revenue, and the cities are furnished with a plan of state administration which will relieve them from operating collection systems of their own. The taxpayers will receive the benefit of a scheme which will free them from the burden of complying with differing regulations of state and local taxes, avoid the necessity of making payments and reports to several governmental bodies, and permit all auditing to be done by a single agency.' (Geiger v. Board of Supervisors (1957) 48 Cal.2d 832, 837, 313 P.2d 545, 547.)

In due course, both the County of Fresno and the City of Fresno adopted ordinances imposing sales and use taxes in accordance with the Bradley-Burns Act, and entered into contracts with the State Board of Equalization for administration of those taxes. Thereafter, in 1968, the City of Fresno enacted the utility users' tax now under challenge.

Also in 1968, the Legislature added a further provision to the Bradley-Burns Act in the form of section 7203.5 of the Revenue and Taxation Code. 2 So far as here material, section 7203.5 (in its second par.) prohibits the State Board of Equalization from administering any sales or use tax ordinance of any city or county which imposes a sales or use tax in addition to those conforming to the Bradley-Burns, Act, but the section further specifies (in its third and final par.) that nothing therein prohibits a city or county from levying 'any other substantially different tax' authorized by the California Constitution or by statute or city charter.

The bill which added the above section to the Revenue and Taxation Code became chapter 1265, statutes of 1968. It set forth various findings of the Legislature which noted, inter alia, 3 that 'the state must rely on sales and use taxes as its chief source of revenue,' and declared the desirability of the integrated, uniform system of city and county sales and use taxation contemplated by the Bradley-Burns Act. The bill concludes with the statement: 'Therefore, the Legislature declares that the state, by enactment of the Sales and Use Tax Law, and the Bradley-Burns Uniform Local Sales and Use Tax Law, has preempted this area of taxation.' Stats. 1968, ch. 1265, p. 2388, § 2.) Plaintiffs rely upon the past-quoted statement in support of their contention that the Legislature has preempted the field of sales and use taxation.

Defendant city contends that the power of a home rule charter city to impose taxes for revenue purposes is strictly a municipal affair pursuant to the direct constitutional home rule grant, 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. The defendant asserts that it is not disputed that the tax here involved was imposed for revenue purposes only. However, we are not required to reach the issue of preemption 4 in deciding the case before us. Defendant city correctly urges that its utility users' tax is a 'substantially different tax' from the sales and use taxes to which the Bradley-Burns Act refers (see final par. of § 7203.5, fn, 2, Ante), and as such was expressly excepted by the Legislature from the purview of Bradley-Burns as well as from the declared state preemption of the field by enactment of that act and of the state sales and use tax acts.

As stated in Bank of America v. State Bd. of Equal. (1962) 209 Cal.App.2d 780, 791, 26 Cal.Rptr. 348, 354, one of the chief purposes of the use tax is to help retailers, who are subject to sales tax, to compete on equal footing with their competitors outside of the taxing jurisdiction who are exempt from the sales tax. Ths it is intended to reach property purchased for use and storage in the taxing jurisdiction from retailers who, being outside such jurisdiction, are not subject to its laws. 'It also seeks to reach such property where the taxable event of a sales tax, i.e., the sale, occurs outside of this state or where such property is immune from the sales tax because of the commerce clause. (Citations.) The use tax is complemental to the sales tax, and as such is intended to supplement the latter by imposing upon those subject to it a tax burden equivalent to the sales tax in order that tangible personal property sold or utilized in this state would be taxable once for the support of the state (or local) government. * * *' (Bank of America v. State Bd. of Equal., Supra, pp. 791--792 of 209 Cal.App.2d, pp. 354 of 26 Cal.Rptr.)

The state sales...

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