Weekes v. City of Oakland

Citation64 Cal.App.3d 907,134 Cal.Rptr. 858
PartiesBeresford David WEEKES and Felder J. Walker, Plaintiffs and Respondents, v. CITY OF OAKLAND, Defendant and Appellant, Richard K. Groulx et al., Intervenors, Class-Representatives and Respondents. Civ. 37873.
Decision Date17 December 1976
CourtCalifornia Court of Appeals

Berkley, Vaughns, Rhodes & Sherrod by Thomas L.Berkley, Gene Rhodes, Leon H. Rountree, Jr., Oakland, for plaintiffs and respondents.

David A. Self, City Atty., Ralph R. Kuchler, Douglas Dang, Asst. City Attys., Oakland, for defendant and appellant.

Van Bourg, Allen, Weinberg & Roger, Stewart Weinberg, Michael B. Roger, San Francisco, for intervenors-respondents.

Evelle J. Younger, Atty. Gen., Ernest P. Goodman, Asst. Atty. Gen., Gary A. Larson, Deputy Atty. Gen., Thomas M. O'Connor, City Atty., John J. Doherty, Deputy City Atty., San Francisco, William J. Adams, City Atty., City of Merced, Merced, James D. Jackson, City Atty., City of Sacramento, Sacramento, Burt Pines, City Atty., Thomas C. Bonaventura, Senior Asst. City Atty., Pedro B. Echeverria, Thomas J. Theis, Deputy City Attys., Los Angeles, for amicus curiae.

SIMS, Associate Justice.

The City of Oakland and its treasurer have appealed from a judgment which, in response to plaintiffs' and intervenors' complaints, declared that the city's employees' license fee taxing ordinance was invalid and of no force and effect and permanently enjoined the enforcement of that ordinance.

The arguments advanced by appellant city and the two groups of amici curiae who have filed briefs for other cities on its behalf, and, as well, those presented by respondent taxpayers and the Attorney General as amicus curiae on behalf of the State Franchise Tax Board and the State Department of Finance, may be segregated into three general issues, as follows: (1) Does respondent city under its charter and the Constitution of this state have the power to levy the tax imposed by the ordinance under review?, if so (2) Has that power been abrogated by other inconsistent provisions of the Constitution or been preempted by general laws enacted by the Legislature?, and if not (3) Is the taxing ordinance invalid, in whole or part, with respect to specific provisions it contains? Underlying the first two questions is an examination of the nature of the tax imposed by the levy.

We find that the ordinance imposes a tax on the privilege of engaging in or following any business, trade, occupation or profession as an employee (with the exception of persons employed as domestic servants in private homes, and those receiving compensation of $1,625, or less, in any calendar quarter), whether a resident or nonresident, within the City of Oakland, and that it is measured by a percentage of the gross compensation of such person, with a credit for the proportion of any other business license fee for which the taxpayer may be responsible. The tax has qualities of both an income tax and a license or privilege tax for revenue. On balance we conclude that it is a valid tax measure authorized by the city charter and the enabling provisions of the state Constitution (art. XI, § 5) which impliedly empower chartered cities to levy taxes for general revenue purposes; that neither the constitutional provisions governing the levy of an income tax, nor state legislation, passed pursuant to the power thereby conferred, preempt the right of a chartered city to levy a tax of the nature involved here; and that the provisions of the ordinance do not violate constitutional provisions guaranteeing equal protection because of any alleged discrimination between residents and nonresidents, or because of the exemption of domestic servants; nor does it unlawfully restrict the right of any nonresident to travel and work outside the city in which he resides; nor does the ordinance unlawfully tax governmental employees. The judgment must be reversed. 1


Each side seeks, by categorizing the levy with a label, to place it on one side of a line dividing a permitted from a prohibited enactment. We first approach that subject. It is necessary to understand the nature of the enactment, in order to determine where it lies within the principles authorizing or prohibiting specific action by municipal authorities. Nevertheless, it is the latter which must be interpreted. The provisions of the ordinance are clear. Mere reference to the tax as an 'employee license fee,' 'compensation tax' or 'income tax' is not the determinative factor.

The ordinance (Ord.No. 9021 O.M.S.) adds section 5-1.65 and sections 5-1.65(a) through 5-1.65(s) to chapter 5, article 1 of the Oakland Municipal Code. It is entitled, 'An Ordinance Providing For The Raising Of Additional Public Revenues By Levying A License Fee Upon Persons Who Engage In The City Of Oakland In Any Trade, Occupation Or Profession, Of One Percent (1%) Of The Compensation Hereof; Providing For The Administration, Collection And Investment Of Said License Fee; Providing Penalties For Violation Of The Provisions Thereof; And Providing An Effective Date Hereof.'

Section 5-1.65 reads: 'EMPLOYEE LICENSE FEE. Commencing July 1, 1976, for the privilege of engaging in or following any business, trade, occupation or profession as an employee as defined in this section, within the City, a license fee measured by one percent (1%) of the gross receipts in excess of $1,625.00 for each quarterly report period specified herein of each such employee from such business, trade, occupation or profession is hereby imposed and required.'

Section 5-1.65(b) provides: '. . . 'Employee' shall mean all persons engaged in the operation or conduct of any business, whether as owner, any member of the owner's family, partner, agent, manager, solicitor, and any and all other persons employed or working in said business, trade, occupation or profession.'

Section 5-1.65(c) specifies: '. . . 'Engaging in or following any business, trade, occupation or profession as an employee' shall mean and include the doing of any work, rendering any kind of personal services, or holding any kind of position, office or job within the City, as clerk, laborer, tradesman, mechanic, manager, official or other employee but shall not mean or include any domestic servants employed in private homes.'

Section 5-1.65(d) prescribes: '. . . The words 'business, trade, occupation and profession' shall mean and include all and every kind of calling, whether or not carried on for profit, and shall also mean and include the holding of any kind of office or position, either by election or appointment, by any officer or employee of any employer as defined in this Section.'

Section 5-1.65(g) provides: '. . . 'Gross receipts' and 'compensation' shall have the same meaning and both words shall mean and include the total gross amount of all salaries, wages, commissions, bonuses, or other money payments of any kind or any other considerations having monetary value, which a person receives from or is entitled to receive from or be given credit for by his employer for any work done or personal service rendered in any trade, occupation or profession, including any kind of deductions before 'take home' pay is received; but the words 'gross receipts' and 'compensation' shall not mean nor include amounts paid to traveling salesmen or other workers as allowance or reimbursement for traveling or other expenses incurred in the business of the employer, except to the extent of the excess of such amounts over such expenses actually incurred and accounted for by the employee to the employer.' Section 5-1.65(h) provides for the apportionment of gross receipts attributable to work performed or services rendered partly within and partly without the city.

Section 5-1.65(k) provides that any employee's liability for the tax imposed by section 5-1.65 shall be reduced by the extent of his proportional liability (as an individual proprietor, or a partner, and, in the case of certain corporations, as a stockholder) to pay any other business license fees imposed by article 1 of chapter 5 of the Oakland Municipal Code.

Section 5-1.65(a) prescribes, 'LICENSE REQUIRED. Commencing July 1, 1976 it shall be unlawful for any employee to engage in or follow any business, trade, occupation or profession within the City without filing a required return, as defined herein, and paying the license fee when due for the privilege of engaging in or following such business, trade, occupation or profession as an employee as defined in this section.' There is no provision for application for or issuance of any licenses. Section 5-1.65(f) provides, however, '. . . 'Licensee' shall mean and include any person required to file a return or to pay a license fee under this section.'

Collection of the tax is to be accomplished through employers who are required to deduct and withhold and return and pay the taxes due for each employee quarterly (§ 5-1.65(i)). Section 5-1.65(e) states, '. . . 'Employer' shall mean and include any person, business, firm, corporation, either public or private, partnership, association, public utility, district, government body or political subdivision, or branch of any municipal, county, state or federal government, or any local public body or agency, or any other kind of organization who or that employs any person in any business, trade, occupation or profession in the City within the meaning of this section, whether or not for profit of the employer.'

When the employer fails to return and pay the tax, the employee is required to do so (§ 5-1.65(j)).

The city treasurer is charged with the duty of collecting, administering and enforcing the tax (§§ 5-1.65(l) and 5-1.65(m)). The ordinance provides for interest and penalties for failure to pay the tax (§ 5-1.65(n)), and for the collection of unpaid taxes, interest and penalties by civil suit (§ 5-1.65(p)). It prescribes...

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