1

Filed 8/3/18 (unmodified opinion attached)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

LARRY LITTLEJOHN,

Plaintiff and Appellant,

v.

COSTCO WHOLESALE 

CORPORATION et al.,

Defendants and Respondents.

 A144440

 (City & County of San Francisco 

 Super. Ct. No. CGC-13-531835)

 ORDER MODIFYING OPINION;

 NO CHANGE IN JUDGMENT

BY THE COURT:

It is ordered that the opinion filed herein on July 13, 2018, be modified as follows:

1. On page 2, in the first paragraph of the section entitled “BACKGROUND,” the 

word “not” in the quotation in the second full sentence is to be underlined, so it will now 

read: “not subject to sales tax.”

2. On page 9, in the paragraph commencing with the words “In contrast” the 

fourth full sentence which beings with the words “As counsel for the Board advised this 

court” is deleted and the following sentence is inserted in its place: “There appear to be 

many such letters issued each year.”

The petition for rehearing filed July 30, 2018, is denied. There is no change in the 

judgment.

Date: August 3, 2018 ________Siggins, P.J. ___________P.J.
1

Filed 7/13/18 (unmodified version)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

LARRY LITTLEJOHN,

Plaintiff and Appellant,

v.

COSTCO WHOLESALE 

CORPORATION et al.,

Defendants and Respondents.

 A144440

 (City & County of San Francisco 

 Super. Ct. No. CGC-13-531835)

Plaintiff Larry Littlejohn appeals from a ruling sustaining a demurrer to his third 

amended complaint (complaint) without leave to amend. Littlejohn sought to sue Costco 

Wholesale Corporation and Costco Wholesale Membership, Inc. (Costco), the California 

Board of Equalization (Board) and Abbott Laboratories, Inc. (Abbott) to recover amounts 

he paid in sales tax reimbursement on purchases of Abbott’s product Ensure. 

Littlejohn alleged that because Ensure is properly categorized as a food product no 

sales tax was actually due on his purchases. Costco should not have charged him sales 

tax reimbursement, and was under no obligation to pay and should not have paid sales tax 

to the state on its sales of Ensure.

Littlejohn based his claim on a cause of action identified by our Supreme Court in 

Javor v. State Board of Equalization (1974) 12 Cal.3d 790 (Javor), that held under “the 

unique circumstances” of that case, that the customer could sue “to compel defendant 

retailers to make refund applications to the Board and in turn require the Board to 

respond to these applications by paying into court all sums, if any, due defendant 

retailers.” (Id. at p. 802.) Because this case does not involve allegations of unique 
2

circumstances showing the Board has concluded consumers are owed refunds for taxes 

paid on sales of Ensure, we affirm.

BACKGROUND

The complaint alleges a putative class action against Costco and the Board. It 

alleges that on February 16, 2013, Littlejohn purchased a case of Ensure nutritional 

drinks at Costco and was charged sales tax reimbursement. Costco paid sales tax on this 

purchase to the Board even though, according to the complaint, the Board had “already in 

the first instance ‘ascertained’ that the Ensure products involved in this action are not 

subject to sales tax.”1 Costco allegedly collected sales tax reimbursement and paid sales 

tax on Ensure from August 2006 through the date of Littlejohn’s purchase in 2013, 

although by the time the third amended complaint was filed it had stopped doing so for 

more than a year. 

The complaint alleges in considerable detail, supported by documents issued by 

the Board, that during the period in question Ensure was classified as a food product 

exempt from sales tax, not a nutritional supplement that would have been subject to tax. 

For some time before 2002, it appears Ensure was considered a food product not subject 

to sales tax. In 2002 the labelling on Ensure was changed and, due to the labelling 

change, at that time the Board considered Ensure to be a nutritional supplement. But the 

labeling was changed again in 2006, and the Board, in an informal opinion of tax counsel,

advised a taxpayer that Ensure qualified as “a food product for human consumption, the 

sales of which are not subject to tax.” In March 2013 a letter from one of the Board’s 

auditors, in response to an e-mail inquiry, restated the position that sales of Ensure were 

not taxable. This position was also restated in the Board’s September 2013 Tax 

Information Bulletin stating that: “The products Ensure [and] Ensure Plus . . . are not 

currently taxable because their labels meet the definition of a nontaxable food product.”

The complaint asserted two causes of action against Costco, and a third cause of 

action against Costco and the Board. The first alleged that Costco breached an implied 

 

1

The specific products Littlejohn claims are not subject to tax are Ensure, Ensure 

Plus and Ensure Clinical Strength (Ensure).
3

contract with its customers by charging sales tax reimbursement on products not actually 

subject to tax. The second alleged that Costco engaged in unfair business practices by 

representing to customers that sales of Ensure were taxable and collecting sales tax 

reimbursement on such sales. The third cause of action presents the issue before us. It is 

predicated on Javor, and alleges the Board is a constructive trustee of the sales tax 

erroneously collected and paid to the state by Costco on its sales of Ensure. Accordingly, 

that sales tax should be refunded to Costco and in turn refunded to the Costco customers 

who paid the sales tax reimbursement. This cause of action seeks to require the court to 

“[o]rder Costco to immediately apply to the full extent it legally can do so to the [Board] 

for reimbursement of all sales tax it paid to the [Board] due to sales of Ensure in order to 

immediately return to the class the sales tax reimbursement it paid to Costco for Ensure 

and to pay interest on said sums from the date they were paid to Costco to the full extent

allowed by law.” 

Defendants demurred. Littlejohn opposed the demurrers and moved to compel 

Costco to file a refund claim with the Board. The court sustained the demurrers without 

leave to amend and denied the motion to compel. The court concluded that the judicially 

noticed documents in the record showed the Board had not resolved the question of 

whether Ensure was nontaxable during the relevant period. Specifically, it ruled that the 

opinion of counsel and other documents said to support the third cause of action were not 

the functional equivalent of the Board’s determination in Javor. The court held that the 

documents were entitled to deference, but they did not have the same force of law as 

regulations adopted by the Board and were not binding.

Littlejohn’s appeal is timely. 

DISCUSSION

1. The Claims Against Costco

a. Claims Premised on the Unfair Practices Act.2

 

2 Business and Professions Code section 17200 et seq.
4

In Loeffler v. Target Corp. (2014) 58 Cal.4th 1081 (Loeffler) our Supreme Court 

reviewed the history and development of California law on the issues raised by 

Littlejohn’s complaint. In a brief overview, the Court summarized: “under California’s 

sales tax law, the taxpayer is the retailer, not the consumer. In addition, the taxability 

question, whether a particular sale is subject to or is exempt from sales tax, is 

exceedingly closely regulated, complex, and highly technical. A comprehensive 

administrative scheme is provided to resolve these and other tax questions and to govern 

disputes between the taxpayer and the Board. Under these administrative procedures, it 

is for the Board in the first instance to interpret and administer an intensely detailed and 

fact-specific sales tax system governing an enormous universe of transactions. 

Administrative procedures must be exhausted before the taxpayer may resort to court. . . . 

[T]his comprehensive statutory scheme is inconsistent with consumer claims such as 

plaintiffs’ by which a party other than the taxpayer would seek to litigate whether a sale 

is taxable or exempt.” (Loeffler, supra, 58 Cal.4th at p. 1103.) For that reason the Court 

rejected unfair business practice claims against a retailer based on the allegation that the 

retailer had collected a sales tax reimbursement on take-out sales of coffee allegedly not 

subject to a sales tax, because resolution of the claims would require the court to 

determine the taxability of the transactions. For the same reason, the trial court clearly 

was correct in this case to sustain the demurrers to plaintiff’s first and second causes of 

action. Both are based on the premise that the sale of Ensure is not taxable, which fact the 

court would have to determine to sustain the claim.

b. Claim Premised on Javor 

Article XIII, section 32 of our state constitution provides in part: “After payment 

of a tax claimed to be illegal, an action may be maintained to recover the tax paid, with 

interest, in such manner as may be provided by the Legislature.”

As Loeffler described, sales tax is imposed on retailers for the privilege of selling 

tangible personal property, and it is the retailers, not the purchasing consumers, who pay 

the tax. What is commonly understood to be sales tax paid on transactions by consumers 

is really sales tax reimbursement paid to the retailer. These principles are particularly 
5

relevant to actions or claims for refunds. It is the taxpaying retailer who may file a claim 

for a refund with the taxing agency after first paying sales tax, not the consumer or 

purchaser of goods. (Loeffler, supra, 58 Cal.4th at pp. 1104, 1107.)3

In Decorative Carpets, Inc. v. State Board of Equalization (1962) 58 Cal.2d 252 

(Decorative Carpets), our Supreme Court held that legislative policy supported a 

constructive trust theory that would justify ordering a plaintiff retailer who sought and 

obtained a refund for overpayment of sales taxes to repay its customers who were 

charged the tax. (Id. at p. 255.) In reaching this holding, the court explained that the 

Board’s “liability to refund taxes erroneously collected, however, is governed by statute 

(Rev. & Tax. Code, § 6901 et seq.) and the orderly administration of the tax laws requires 

adherence to the statutory procedures and precludes imposing on [the Board] the burden 

of making refunds to the taxpayer’s customers. [The Board], however, has a vital interest 

in the integrity of the sales tax (County of San Bernardino v. Harsh Calif. Corp., supra,

52 Cal.2d 341, 345), and may therefore insist as a condition of refunding overpayments 

to plaintiff that it discharge its trust obligations to its customers. To allow plaintiff a 

refund without requiring it to repay its customers the amounts erroneously collected from 

them would sanction a misuse of the sales tax by a retailer for his private gain.” (Ibid.) 

In Javor, supra, 12 Cal.3d 790, our Supreme Court considered whether a customer 

could file a direct action against the Board for a refund of sales tax. In rejecting a direct 

action, the court observed that “to give customers a direct cause of action against the 

Board for all erroneously collected sales tax reimbursements which have already been 

paid to the Board by the retailer would neither be consonant with existing statutory 

 

3

Sales taxes were formerly administered by the defendant Board of Equalization. 

(Loeffler, supra, 58 Cal.4th at p. 1107.) In 2017, the functions of the Board relevant to 

this case were transferred to the California Department of Tax and Fee Administration. 

(Gov. Code § 15570.22; 2017 Stats. 2017, ch 16, § 5.) We will continue to refer to the 

Board in this opinion as the entity responsible for administering the tax. 

We also deny appellant’s request for judicial notice. The regulations of the Board 

that appellant seeks to have this court notice have been superseded by emergency 

regulations that pertain to the authority of the Department of Tax and Fee Administration 

to consider claims for refunds.
6

procedures nor with the import of Decorative Carpets.” (Id. at p. 800.) Nonetheless, the 

court recognized that the Board had a duty ‘to see that the customer obtains any refund 

made to the retailer.” (Ibid.)

But Javor arose under “unique circumstances.” (Javor, supra, 12 Cal.3d at 

p. 802.) There, the customer was seeking a refund of sales tax paid on a purchase price 

that included a repealed federal excise tax. The Board promulgated a regulation 

authorizing retailers who had collected and received refunds of the repealed tax to seek a 

refund of sales tax on the condition that they pay the refunded taxes to their customers. 

(Id. at p. 794.) The process required the retailer to demonstrate to the Board that a refund 

had been paid in order to receive a like amount from the Board. The court observed that 

“[u]nder the procedure set up by the Board the retailer is the only one who can obtain a 

refund from the Board; yet, since the retailer cannot retain the refund himself, but must 

pay it over to the customer, the retailer has no particular incentive to request the refund 

on his own. Despite this lack of incentive, the Board has not required the retailer to 

refund the total excessive amount collected, but rather has merely allowed retailers to 

collect a refund when the retailer is compelled to pay a refund to a customer who has 

demanded it.” (Id. at p. 801.) 

The Javor court recognized that there had been an urgency statute that arguably 

provided customers a cause of action against a retailer for the refund, but that statute had 

expired. (Javor, supra, 12 Cal.3d at p. 802.) “Therefore, purchasers can most effectively 

enforce their refund right by compelling retailers to claim their own refunds from the 

Board. The Board has admitted that it must pay these refunds to retailers. All that 

plaintiffs seek in this action is to compel defendant retailers to make refund applications 

to the Board and in turn require the Board to respond to these applications by paying into 

court all sums, if any, due defendant retailers. . . . [¶] We think that to require this 

minimal action from the Board is clearly mandated by the Board’s duty to protect the 

integrity of the sales tax by ensuring that customers receive their refunds. . . . [¶]

[A]llowing the Board to be joined as a party for these purposes in the customer’s action 
7

against the retailer is an appropriate remedy entirely consonant with the statutory 

procedures providing for a customer’s recovery of overpaid sales tax.” (Ibid.)

We know of no published case since Javor that has allowed a cause of action 

against the Board to proceed for the purpose of directing a retailer to file a claim for a 

refund of sales tax. In Loeffler, our Supreme Court confirmed that the exact contours of a 

Javor-type claim remain undefined: “The integrity of the tax system and avoidance of 

unjust enrichment, possibly of the retailer, but more probably of the state, in certain 

circumstances may support a Javor-type remedy for consumers. Plaintiffs, however, 

declined to pursue such a remedy, and we need not consider the exact showing required 

of consumers to demonstrate their entitlement to the Javor remedy.” (Loeffler, supra, 58 

Cal.4th at pp. 1133–1134.) 

The most recent published case to reject a possible Javor cause of action is 

McClain v. Sav-on Drugs (2017) 9 Cal.App.5th 684, review granted June 14, 2017,

S241471 (McClain). McClain distilled from Decorative Carpets and Javor three factors 

for courts to consider in deciding whether to recognize a Javor cause of action. They are: 

1) whether the plaintiff has an available statutory remedy for a tax refund; 2) whether the 

proposed judicial remedy would be consonant with statutory tax refund procedures; and 

3) whether there has been a “precursor determination” either by the Board or as a result 

of legal action by a taxpayer that a tax refund is due and owing. (Id. at p. 697.) McClain 

concludes that “[l]imiting a court’s authority to fashion new tax remedies to situations 

involving all three of these requirements specifically reinforces the constitutional 

mandate, described above, that the Legislature have primacy in fixing the procedures by 

which tax refunds are obtained.” (Id. at p. 698.) We agree.

Appellant argues this case is the one that should recognize a Javor cause of action. 

According to appellant, the August 21, 2006 informal opinion of the Board’s tax counsel 

(annotation), a March 2013 letter from one of the Board’s auditors, and the Board’s 

September 2013 Tax Information Bulletin stating that some forms of Ensure are not 

taxable as a food product constitute a precursor determination of refund that provide the 
8

unique circumstances warranting a Javor remedy. For the reasons that follow, we 

disagree. 

In this case, there is no question that the first requirement identified in McClain is 

met. Appellant, a Costco customer, has no statutory remedy for a sales tax refund. Nor 

is the remedy he proposes, compelling Costco as the taxpayer to file a refund claim with 

the Board, in fatal conflict with the statutory scheme. But appellant has not shown that 

the Board made a precursor determination that sales tax paid on purchases of Ensure 

between May 30, 2009, and mid-2014 must be refunded. 

In the most fundamental sense, the documents appellant relies upon to demonstrate 

the Board’s position are substantively deficient for the simple reason that they say 

nothing of the propriety of refunds for retailers who paid taxes on sales of Ensure. The 

most that can be said is that for some time following a product labelling change in 2002, 

the Board’s counsel opined that sales of specified Ensure products were subject to tax. In 

2006 counsel’s view changed and it concluded sale of those products were not taxable. 

However, none of the documents were issued in response to an inquiry about refunds or 

address whether tax paid by retailers on sales of Ensure products would be refunded. In 

sharp contrast, in Javor “[t]he Board ha[d] admitted that it must pay these refunds to 

retailers.” (Javor, supra, 12 Cal.3d at p. 802, italics added.) The Board has made no 

such determination in this case.

More importantly, the Board’s regulations and case law make clear that the 

documents plaintiff relies upon do not have the force of law and are not binding on the 

Board. Opinions of counsel, such as the one plaintiff relies upon issued in August 2006, 

have no precedential effect and may be relied upon only by the person seeking advice 

from the Board. (Cal. Code Regs., tit 18, § 1705.)4 Of course, they are written on the 

 

4

The California Business Taxes Law Guide, volume 2, published by the Board 

provides the following explanatory note: “Annotations published in the Business Taxes 

Law Guides are summaries of the conclusions reached in selected legal rulings of

counsel. ‘Legal ruling of counsel’ means a legal opinion written and signed by the Chief 

Counsel or an attorney who is the Chief Counsel’s designee, addressing a specific tax 
9

Board’s letterhead and considered to be the opinions of the Board’s counsel. But when 

the Board determines to issue a decision with binding effect, it does so in the form of a 

“precedential decision” of the Board. (Cal. Code Regs., tit. 18, § 5551, subd. (b)(4).) 

In contrast, the purpose of advice letters of counsel is to provide the requesting 

taxpayer a safe harbor from tax liability. By inquiring of the taxability of a transaction or 

item for sale, the taxpayer can use the Board’s reply as a defense to any claim. To that 

end, Revenue and Taxation Code section 6596 provides that if a person’s “failure to 

make a timely return or payment is due to the person’s reasonable reliance on written 

advice from the board, the person may be relieved of the [sales and use] taxes imposed . . 

. and any penalty or interest added thereto.” As counsel for the Board advised this court 

in oral argument, there appear to be hundreds, if not thousands, of such letters issued each 

year. (See generally, Board of Equalization, Business Taxes Law Guide, Volume 2.) We

are therefore concerned that holding counsels’ replies to specific taxpayer inquiries to be 

a precursor determination sufficient to support a Javor cause of action will have a 

perverse effect on the integrity of our sales tax system. “[I]t is presumed that all “gross 

receipts” are subject to the sales tax unless the contrary is established by the retailer. (§ 

6091.) This presumption exists in order to ensure ‘the proper administration of [the sales 

tax law] and to prevent evasion of the sales tax. . . .’ [Citation.] Taxpayers’ exemption 

claims must be supported by adequate records. [Citation.] The burden of proof is on the 

taxpayer.” (Loeffler, supra, 58 Cal.4th at p. 1107.) Moreover, the willingness of 

taxpayer retailers to seek safe harbor written advice from the Board could be stifled if 

doing so would expose them to potential litigation under a Javor scenario and the burdens

 

application inquiry from a taxpayer or taxpayer representative, a local government, or 

Board of Equalization staff.

Business Taxes Annotations are a research tool to locate selected legal rulings of 

counsel. Annotations are intended to provide guidance regarding interpretation of Board 

statutes and regulations as applied by staff to specific factual situations. Annotations do 

not have the force or effect of law. Although annotations are synopses of past advice 

provided by Board’s legal staff, the advice is not binding and may be revised at any 

time.” 
10

of preparing an administrative claim for refund and distributing refunded amounts to 

potentially countless consumers.

5

For similar reasons that we decline to give legal effect to the opinion of counsel, 

we decline to give effect to the March 2013 letter by a Board auditor. The March 13 

letter is written in response to an e-mail inquiry by a consumer. It is not advice to a 

taxpayer, nor does it address particular sales transactions over a specific time. It merely 

directs the inquiring consumer to address a possible claim of refund with the appropriate 

retailer. Neither is the information in The Tax Information Bulletin a precursor 

determination by the Board, for the simple reason that it is a newsletter, not a decision of 

the Board, a legal opinion, or even a reply to a specific factual inquiry. The Tax 

Information Bulletin provides general information to inform taxpayers and interested 

parties “in simplified terms the most common areas of noncompliance” they are likely to 

encounter. (See Rev. and Tax. Code, § 7084.) There is no basis to give this document 

legal effect.

Appellant in oral argument said the decision most favorable to his position is 

Loeffler. Presumably, he is referring to the court’s suggestion that a Javor remedy lies 

“when neither the Board nor the taxpayer has an interest in ‘ascertaining’ whether excess 

reimbursement has been charged.” (Loeffler, supra, 58 Cal.4th at p. 1122.) However, in 

light of the Board’s vital interest in the integrity of our state’s tax laws, we decline to 

infer, absent some particular allegation, that the Board has no interest in ascertaining 

whether excess sales tax reimbursement has been charged to a California consumer.

Loeffler acknowledged informal remedies available to consumers who believe 

they have been charged excess sales tax reimbursement. The Board fields a large number 

 

5

Filing a claim for refund of sales tax is subject to a strict limitation period and 

can be a fairly complex and burdensome process. (See Cal Code Regs. tit. 18, §§ 5230, 

5231, 5232; Barnes v. State Bd. of Equalization (1981) 118 Cal.App.3d 994 [Board 

remedy for refund not exhausted when retailer failed to produce date of each sale or 

purchase, contract or invoice number for each sale, sales/purchase price for each item, 

periods in which tax was paid and amount of state (versus local) sales tax paid on each 

item].)
11

of telephone calls and e-mails from the public; tips from informants can lead to taxpayer 

audits; complaints can lead to deficiency determinations; and interested persons may 

petition for the Board to adopt, amend or repeal regulations, or file declaratory relief 

actions challenging the imposition of a tax. (Loeffler, supra, 58 Cal.4th at p. 1123.) 

Finally, Loeffler’s suggested remedy of declaratory relief actions to challenge the 

imposition of sales tax as inconsistent with statute or constitution (see ibid) is not 

toothless. To the contrary, such actions can lead to a legislatively crafted refund remedy 

that takes into account public policy and the administrative burden and expense of 

processing claims. In Rider v. County of San Diego (1991) 1 Cal.4th 1 (Rider), the court 

declared unconstitutional a supplemental sales and use tax designed to pay for 

construction of a county jail and youth facility because it was not approved by two-thirds 

of San Diego’s voters as required under Article XIII A, section 4 of our state constitution. 

In response to Rider, the legislature crafted a refund remedy for consumers with a 

threshold of purchases in excess of $5,000. In affirming the legislative refund scheme 

and rejecting a Javor-type class remedy, the Court of Appeal observed: “[S]ince a 

consumer with under $5,000 in purchases would be entitled to a return of less than $25, 

the administrative costs associated with the court-ordered scheme of direct refunds to all 

consumers would likely neutralize a substantial portion of the scheme’s asserted benefits. 

Thus, given the great latitude accorded the Legislature in tax matters, we conclude the 

statutory $5,000 threshold requirement for refunds is not impermissible.” (Kuykendall v. 

State Bd. of Equalization (1994) 22 Cal.App.4th 1194, 1214.) This kind of pragmatic 

approach that may be employed by a legislative body counsels us not to employ a 

judicially created remedy when the entitlement to a refund of sales tax and the 

administrative burdens of a refund process are unclear. 

We are aware that Loeffler cautions: “The integrity of the tax system and 

avoidance of unjust enrichment, possibly of the retailer, but more probably of the state, in 

certain circumstances may support a Javor-type remedy for consumers.” (Loeffler, 

supra, 58 Cal.4th at p. 1133.) But the state is not unjustly enriched when sales taxes are 

overpaid due to a taxpayer’s good faith misinterpretation of his or her obligation to pay 
12

tax. “One may not recover under a theory of unjust enrichment a payment made to a unit 

of government unless it was made under coercion. A person who, at the time of payment 

misinterprets the law to his detriment does not thereby gain a right of recovery; he must 

have paid as a result of compulsion.” (Reynolds v. City and County of San Francisco

(1975) 53 Cal.App.3d 99, 101.) There is no allegation here that Costco paid sales tax on 

Ensure under protest or as a result of any threatened enforcement action or other 

government coercion. 

Our review of the foregoing authorities lead us to conclude that a Javor remedy 

should be limited to the unique circumstances where the plaintiff’s allegations show that

the state has been unjustly enriched by the overpayment of sales tax, and the Board 

concurs that the circumstances warrant refunds to consumers. Requiring such allegations 

ensures that courts will be faithful to our state constitution’s delegation of authority to 

craft a remedy for the overpayment of sales tax to the Legislature, and to the statutory 

scheme that allows the Board to first take into account the timeliness of any claims for 

refund, the likely amounts involved and the burdens and costs implicit in its refund 

procedure. 

2. The claims against Abbott

Plaintiff’s second amended complaint also contains two causes of action against 

Abbott, the manufacturer of Ensure. It alleges the existence of an unspecified agreement 

under which Costco purchases Ensure from Abbott that is “in force regardless of who 

actually sells the product to Costco.” The pleading alleges, “Although Abbott does or 

may also use distributors or middlemen to sell the product it remains liable for all 

promises made in the chain of distribution to Costco to induce it to stock and sell 

Ensure.” The agreement allegedly contains an “implied and/or express” provision that 

Abbott would “alert Costco of a potential tax consequence of all material ingredient and 

label changes of Ensure and . . . take all reasonable steps to alert Costco of changes that 

do, or are reasonably likely to, affect sales tax consequences and of the fact that any such 

changes do or are likely to affect sales tax status.” Plaintiff and all persons who 
13

purchased Ensure from Costco allegedly are third party beneficiaries of the agreement. 

The second amended complaint alleges one cause of action for breach of the alleged 

agreement and another cause of action alleging that Abbott’s conduct violated Business 

and Professions Code, sections 17200 and 17500 “by failing to adequately notify 

retailers, including Costco, that the sales tax status of Ensure had changed, was likely to 

change, and/or that the label or ingredients had changed.” 

The trial court sustained Abbott’s demurrer to both causes of action without leave 

to amend. The court explained, among other things, that “the complaint makes it plain 

that Abbott had nothing to do with the collection or payment of the taxes. . . . [T]here is 

no suggestion that Abbott was under a duty to notify the retailers of [the fact that the tax 

status of the product had changed], or how plaintiff would in some way be the beneficiary 

of that duty.” We agree with the trial court. From the pleading it is far from clear that 

there was ever any agreement between Abbott and Costco, much less one that contains 

either an express or implied provision such as plaintiff describes or with respect to which 

all Costco customers would be third party beneficiaries. Moreover, no facts are alleged 

that would give rise to a duty on Abbott’s part to advise retailers of the sales taxability of 

its products in the various jurisdictions in which the products are sold, or that would 

create a duty to customers paying sales tax reimbursement on their purchases of the 

product. Plaintiff has cited no authority supporting these claims, nor has he suggested 

any facts he might add to the complaint were leave to amend granted that would establish 

a right to relief against Abbott. Abbott’s demurrer was properly sustained without leave 

to amend.

DISPOSITION

The judgment is affirmed. 
14

_________________________

Siggins, J.

I concur:

_________________________

McGuiness, Acting P.J. *

Littlejohn v. Costco, A144440

 

* Retired Presiding Justice of the Court of Appeal, First Appellate District, 

Division Three, assigned by the Chief Justice pursuant to article VI, section 6 of the 

California Constitution.
1

POLLAK, J., Concurring and Dissenting.

This appeal presents the recurring question of whether there is a remedy for a 

customer who has paid sales tax reimbursement to a retailer upon the purchase of an item 

on which no sales tax was due but sales tax was nonetheless remitted by the retailer to the 

California State Board of Equalization (Board).1 There is no question that only the 

retailer may request a refund from the Board, that only the Board may determine in the 

first instance whether an item is subject to payment of a sales tax, and that the customer 

may not recover any excess sales tax reimbursement from the retailer under consumer 

protection theories. It is also clear that the retailer may recover a refund only to the 

extent that the refund is passed on to the customer who paid the sales tax reimbursement. 

Thus, neither the retailer who paid the sales tax nor the Board that received it may have 

an incentive to initiate proceedings authorized by the Revenue and Taxation Code to 

determine whether a refund is due. The question therefore comes down to whether the 

customer may compel the retailer to request a refund from the Board. The majority in 

effect concludes that, as a practical matter, the customer may never do so. In my view, 

the majority’s conclusion is inequitable and inconsistent with the pronouncements of our 

Supreme Court, and overstates the problems that would arise from recognizing the 

customer’s right to compel the submission of a refund application under appropriate 

circumstances.

In Javor v. State Board of Equalization (1974) 12 Cal.3d 790 (Javor) our Supreme 

Court held that under “the unique circumstances” of that case, such relief is available. In 

the more recent case of Loeffler v. Target Corp. (2014) 58 Cal.4th 1081 (Loeffler), the 

court in a split decision held that in such a case the consumer may not recover from the 

retailer under consumer protection statutes because “the propriety of a reimbursement 

charge . . . turns on the taxability of a transaction [that] must be resolved in the first 

 

1 As the majority opinion notes, in 2017 the relevant functions of the Board were 

transferred to the California Department of Tax and Fee Administration. (Gov. Code, 

§ 15570.22; 2017; Stats. 2017, ch. 16, § 5.) Like the parties and the majority opinion, I 

continue to refer to the Board as the agency responsible for administering the sales tax.
2

instance by the Board in the context of a procedure recognized in the tax code and 

applying the safe harbor measures contained in that code.” (Id. at p. 1134.) The court 

recognized, however, that “[t]he integrity of the tax system and avoidance of unjust 

enrichment, possibly of the retailer, but more probably of the state, in certain 

circumstances may support a Javor-type remedy for consumers” but the plaintiffs in that 

case had declined to pursue such a remedy. (Id. at pp. 1133–1134.) In McClain v. SavOn Drugs (2017) 9 Cal.App.5th 684 (McClain), now under review by our Supreme Court 

(review granted June 14, 2017, S241471), a division of the Second Appellate District 

defined the circumstances under which a “Javor-type remedy” may be available but 

found them not to apply in that case. I agree in large part with the three criteria 

articulated in McClain but disagree with the manner in which the criteria were applied in 

that case and in which the most significant criterion is applied by the majority in this 

case.

The third amended complaint (the complaint) of plaintiff Larry Littlejohn, the 

operative pleading with respect to the principal issues on appeal, alleges a putative class 

action against Costco Wholesale Corporation and Costco Wholesale Membership, Inc. 

(collectively, Costco) and against the Board. The complaint alleges that on February 16, 

2013, plaintiff purchased at a Costco store a case of Ensure nutritional drinks, on which 

he was charged sales tax reimbursement and Costco paid sales tax to the Board, although 

the Board had “already in the first instance ‘ascertained’ that the Ensure products 

involved in this action are not subject to sales tax.”2The complaint alleges that Costco 

wrongly collected sales tax reimbursement and paid sales tax on the sale of Ensure from 

“at least August 2006” through the date of plaintiff’s purchase on February 16, 2013, 

although as of the filing of the third amended complaint on December 26, 2014, it had 

discontinued doing so “for over a year.” 

 

2

The specific products to which the complaint refers are “Ensure, Ensure Plus, 

and Ensure Clinical Strength.” Unless otherwise indicated, all subsequent references in 

this opinion to Ensure are to the three products. 
3

The complaint alleges in considerable detail, supported by attachments to the 

pleading, the facts evidencing the determination that Ensure, as a food product rather than 

a nutritional supplement, was not subject to sales tax during the period in question. Prior 

to 2002, Ensure was treated as a nontaxable food product. In 2002 there was a change in 

the label of Ensure; therefore, according to a tax information bulletin issued by the Board 

in December 2002: “The Board previously classified Ensure and Ensure Plus as exempt 

food because their labels did not describe the products as supplements. However, we 

have examined the current labels for Ensure and Ensure Plus, and the products are now 

labeled as ‘nutritional supplements.’ They also indicate a doctor should be consulted if 

the user intends to use the products as their sole source of nutrition. Because the labeling 

of these products has changed, the application of tax has also changed. Grocery stores 

and other retailers that sell Ensure and Ensure Plus should report tax on their sales of 

those products.” (Italics added.)

However, the label on Ensure was again changed in 2006. According to an 

informal opinion letter from the Board’s tax counsel issued on August 21, 2006: “As you 

know, Regulation 1602(a)(5)(A) places its focus on the contents of the product’s label. 

Thus, if the label changes, the tax consequences may also change. Based upon our 

examination of the current label for Ensure provided by the Taxpayer, we note . . . [the 

description of label contents]. [T]hus, Ensure is not excluded as a food product under 

Regulation 1602(a)(4) (step two). [¶] Notwithstanding the above conclusion, because 

Ensure comes in liquid form, we must next determine whether either Exclusion under 

Regulation 1602(a)(5)) applies (step three). If so, we must then determine whether 

Ensure qualifies as a complete dietary food (step four). In this regard, we note . . . 

[further description of label contents]. Accordingly, we conclude that Ensure now 

qualifies as a food product for human consumption, the sales of which are not subject to 

tax. (Reg. 1602(a)(4 & 5). However, if the assumptions made herein are inaccurate . . . 

then this opinion may be different.” (Italics added.)

In a March 14, 2013 response to an inquiry from an individual who “explain[ed] 

that it is [his] understanding that Ensure nutritional drinks are not taxable and . . . need[s] 
4

confirmation to show [his] retailer,” Board counsel responded, “The [Board] has 

determined that Ensure products such as Ensure, Ensure Plus and Ensure Clinical 

Strength are classified as food products and not food supplements. Therefore, the sales 

of Ensure products would be exempt from sales tax.” (Italics added.) This opinion was 

repeated in the Board’s September 2013 tax information bulletin, stating “The products 

EnsureTM [and] Ensure PlusTM. . . are not currently taxable because their labels meet the 

definition of a nontaxable food product.” (Italics added.)

The third cause of action of plaintiff’s complaint, which presents the significant 

legal issue before us, alleges that the Board is a constructive trustee holding sales tax 

erroneously collected on Costco’s sale of Ensure that should be refunded to Costco and in 

turn refunded to the customers who paid the sales tax reimbursement. The prayer 

requests, inter alia, “to the full extent allowed by [Javor and Loeffler] pursuant to the 

equitable powers of this court, . . . plaintiff prays that the court order Costco to 

immediately apply to [the] full extent it legally can do so to the [Board] for 

reimbursement of all sales tax it paid to the [Board] due to sales of Ensure in order to 

immediately return to the class the sales tax reimbursement it paid to Costco for Ensure 

and to pay interest on said sums from the date they were paid to Costco to the full extent 

allowed by law.”

The trial court sustained the defendants’ demurrer to the third cause of action, 

holding that “[t]he judicially noticed record shows that [the Board] has not resolved that 

Ensure was untaxable during the period relevant to this lawsuit.” The court rejected 

plaintiff’s argument that “the various positions taken by the [Board] in e.g., 2006 were 

. . . tantamount to the type of determination made by the taxing authorities in Javor.”

For the reasons stated in the majority opinion, I agree that the trial court properly 

sustained demurrers to the first two causes of action of the complaint and to the causes of 

action alleged in a prior complaint against Abbott Laboratories, Inc. and Abbott 

Laboratories Sales, Marketing & Distribution Co. However, I disagree that the demurrers 

were properly sustained as to the complaint’s third cause of action.
5

The Supreme Court’s opinion in Loeffler contains a thorough history of the 

development of California law on the issues before us. In a brief overview the court 

summarized: “under California’s sales tax law, the taxpayer is the retailer, not the 

consumer. In addition, the taxability question, whether a particular sale is subject to or is 

exempt from sales tax, is exceedingly closely regulated, complex, and highly technical. 

A comprehensive administrative scheme is provided to resolve these and other tax 

questions and to govern disputes between the taxpayer and the Board. Under these 

administrative procedures, it is for the Board in the first instance to interpret and 

administer an intensely detailed and fact-specific sales tax system governing an enormous 

universe of transactions. Administrative procedures must be exhausted before the 

taxpayer may resort to court. . . . [T]his comprehensive statutory scheme is inconsistent 

with consumer claims such as plaintiffs’ by which a party other than the taxpayer would 

seek to litigate whether a sale is taxable or exempt.” (Loeffler, supra, 58 Cal.4th at 

p. 1103.) For that reason the court rejected unfair business practice claims against a 

retailer based on the allegation that the retailer had collected a sales tax reimbursement on 

take-out sales of coffee allegedly not subject to a sales tax, because resolution of the 

claims would require the court to determine the taxability of the transactions. For the 

same reason, the trial court in the present case was correct in sustaining the demurrers to 

plaintiff’s first and second causes of action, which both proceed on the premise that the 

sale of Ensure is not taxable, which fact the court would have to determine to sustain the 

claim.

Loeffler also reaffirmed, however, the recognition in a line of Supreme Court cases 

that “the Board bears some responsibility to consumers when excess sales tax has been 

remitted to it, given its ‘vital interest in the integrity of the sales tax.’ ” (Loeffler, supra, 

58 Cal.4th 1081, citing Decorative Carpets, Inc. v. State Board of Equalization (1962) 58 

Cal.2d 252, 255 (Decorative Carpets).) In Decorative Carpets, the court held that a 

retailer that had paid excessive sales tax to the Board could recover a refund only if the 

refund was returned by the retailer to the customers that had paid the retailer sales tax 

reimbursement. “Ordering the return of the funds in question to the customers from 
6

whom they were derived is consonant with legislative policy,” the court held, referring to 

the policy underlying what was then section 6054.5 of the Revenue and Taxation Code.3 

(58 Cal.2d at p. 255.) The court further observed that although that statute had been 

enacted after the overpayments had been made in that case, “the Legislature never 

provided that customers are not entitled to recover from retailers amounts erroneously 

charged to cover sales taxes. Thus it was left to the courts to define the rights of the 

parties in this respect and to adopt appropriate remedies. It is still left to the courts to 

adopt appropriate remedies when excessive reimbursements have been collected by 

mistake and paid to the state.” (Id. at p. 256.) The court held that “orderly administration 

of the tax laws requires adherence to the statutory procedures and precludes imposing on 

[the Board] the burden of making refunds to the taxpayer’s customers” (id. at p. 255) but 

the court prohibited the taxpayer from obtaining a refund unless the funds were returned 

to the customers that had paid the reimbursement.

 

3 All subsequent statutory references are to the Revenue and Taxation Code unless 

otherwise noted.

Section 6054.5 then provided in part: “When an amount represented by a person 

to a customer as constituting reimbursement for taxes due under this part is computed 

upon an amount that is not taxable or is in excess of the taxable amount and is actually 

paid by the customer to the person, the amount so paid shall be returned by the person to 

the customer upon notification by the Board of Equalization or by the customer that such 

excess has been ascertained. In the event of his failure or refusal to do so, the amount so 

paid, if knowingly computed by the person upon an amount that is not taxable or is in 

excess of the taxable amount, shall constitute an obligation due from him to this State.”

In 1968, section 6054.5 was amended to apply to situations in which the taxpayer 

mistakenly as opposed to knowingly charged excess reimbursement. (Stats. 1968, 

ch. 501, § 1, pp. 1143-1144.) Section 6054.5 subsequently was repealed and has now 

been replaced by section 6901.5. (See Loeffler, supra, 58 Cal.4th at pp. 1117-1118.) The 

substance of these provisions remains the same: upon ascertainment by the Board that 

excessive sales tax has been paid, the taxpayer may either obtain a refund and remit the 

refund to the customers from whom it received sales tax reimbursement or permit the 

excess to be retained by the state. In a Board operations memorandum, the Board has 

recognized that “[i]f tax reimbursement in excess of the tax liability on a transaction is 

collected and paid to the State, the taxpayer has no further tax liability.” (State Bd. of 

Equalization, operations memo No. 754 (Jan. 12, 1983) p. 1; see Loeffler, supra, at 

p. 1119.)
7

Javor is the only case of which we are aware recognizing and enforcing the right 

of a customer who paid an excessive sales tax reimbursement to compel the retailer to 

whom it was paid and who paid the excess sales tax to the Board to apply to the Board 

for a refund that would be passed back to the customer. As the court recognized, the 

circumstances in Javor were unique. Congress had retroactively repealed a federal excise 

tax on the sale of motor vehicles that had decreased the gross sales price on which the 

state sales tax on car purchases had been calculated, giving rise to excess sales tax 

payments. This caused the Board to issue a notification and operations memo to 

automobile dealers and other interested parties and a press release announcing that the 

excess was subject to refund provided that the dealer returned the amount of the refund to 

the customer that had paid the sales tax reimbursement. The court held that “purchasers 

can most effectively enforce their refund right by compelling retailers to claim their own 

refunds from the Board. The Board has admitted that it must pay these refunds to 

retailers. All that plaintiffs seek in this action is to compel defendant retailers to make 

refund applications to the Board and in turn to require the Board to respond to these 

applications by paying into court all sums, if any, due defendant retailers. [¶] We think 

that to require this minimal action from the Board is clearly mandated by the Board's duty 

to protect the integrity of the sales tax by ensuring that the customers receive their 

refunds. The integrity of the sales tax requires not only that the retailers not be unjustly 

enriched [citation], but also that the state not be similarly unjustly enriched. [¶] We hold 

that under the unique circumstances of this case a customer, who has erroneously paid an 

excessive sales tax reimbursement to his retailer who has in turn paid this money to the 

Board, may join the Board as a party to his suit for recovery against the retailer in order 

to require the Board in response to the refund application from the retailers to pay the 

refund owed the retailers into court or provide proof to the court that the retailer had 

already claimed and received a refund from the Board. We think that allowing the Board 

to be joined as a party for these purposes in the customer's action against the retailer is an 

appropriate remedy entirely consonant with the statutory procedures providing for a 
8

customer’s recovery of erroneously overpaid sales tax.” (Javor, supra, 12 Cal.3d at

p. 802.)

In McClain, in which numerous pharmacies had collected sales tax reimbursement 

and paid sales tax on purchases that the plaintiffs alleged were not subject to sales tax, the 

Court of Appeal sought to define the circumstances under which the pharmacies could be 

compelled to seek refunds as in Javor. The court held that “Although Decorative 

Carpets dealt with a ‘greedy’ retailer and Javor dealt with unmotivated retailers, both 

cases share three commonalities that, in our view, define the ‘unique circumstances’ to 

which Javor alludes and that are prerequisites to the judicial recognition of any new tax 

refund remedy.” (McClain, supra, 9 Cal.App.5th at p. 697.) A court “may create a new 

tax refund remedy—and accordingly, Javor’s ‘unique circumstances’ exist—only if 

(1) the person seeking the new tax refund remedy has no statutory tax refund remedy 

available; (2) the tax refund remedy sought is not inconsistent with existing tax refund 

remedies; and (3) the Board has already determined that the person seeking the new tax 

refund is entitled to a refund, such that the refusal to create that remedy will unjustly 

enrich either the taxpayer/retailer or the Board.” (Id. at p. 700.) The court held that none 

of the three prerequisites were present in that case.

Although I believe that the three criteria articulated by the court in McClain are 

consistent with the rulings of our Supreme Court and may fairly be taken as the 

conditions under which such equitable relief may be granted, I differ as to that court’s 

application of these criteria. 

As to the first prerequisite, the court held the plaintiffs were “not remedy-less” 

because they “may urge the Board to initiate an audit of the retail pharmacies’ practices 

in collecting the sales tax or to conduct a deficiency determination of the retail 

pharmacies’ sales tax payments. [Citations.] They can, as ‘interested person[s],’ petition 

the Board under the Administrative Procedures Act (Gov. Code, § 11340 et seq.) to 

compel the Board to ‘adopt[], amend[], or repeal’ Regulation 159.1, subdivision (b)(5) 

and the collection of sales tax under that regulation. [Citations.] And they can as 

‘interested person[s]’ sue the Board under the Administrative Procedure Act for 
9

declaratory relief ‘as to the validity of Regulation 1591.1.” (McClain, supra, 9 

Cal.App.5th at pp. 700-701.) The majority in the present case and I agree that the right to 

request relief is not the same as a right to the relief itself. The ability to ask a retailer to 

submit a refund application is hardly a remedy if the retailer refuses to do so. Of course 

customers may ask retailers to submit refund applications, and citizens may ask public 

agencies to conduct audits of other entities or to modify their regulations, and they may 

ask a court for declaratory relief, but they are not entitled to demand any such relief. 

Treating the mere ability to exercise the rights of any citizen as precluding the right to 

compel a retailer to submit a refund application is tantamount to saying that there is never 

a right to compel submission of a refund application. Indeed, applying the condition in 

this manner would have precluded the remedy afforded in Javor. 

The majority here and I also disagree with the McLain court’s analysis of the 

second factor. Relying in part on observations in the Loeffler opinion, the court in 

McClain held that “judicial recognition of a right of customers to sue retailers and the 

Board for a sales tax refund when the Board has yet to determine whether any refund is 

due is inconsistent with at least two provisions of the Revenue and Taxation Code.” 

(McClain, supra, 9 Cal.App.5th at p. 701.) The import of this statement in part turns on 

what is required to establish a Board determination, addressed below. However, the 

asserted inconsistency between recognizing a customer’s right to compel a retailer to 

submit a refund application and the statutory waiver provisions to which the court in 

McClain referred4is not convincing. The Supreme Court in Loeffler held it would be 

inconsistent with those provisions to hold retailers civilly liable to their customers for 

 

4

Section 6905 provides: “Failure to file a claim within the time prescribed in this 

article constitutes a waiver of any demand against the State on account of overpayment.” 

Section 6901.5 provides: “When an amount represented by a person to a customer as 

constituting reimbursement for taxes due under this part is computed upon an amount that 

is not taxable or is in excess of the taxable amount and is actually paid by the customer to 

the person, the amount so paid shall be returned by the person to the customer upon 

notification by the Board of Equalization or by the customer that such excess has been 

ascertained” (italics added), but that if the person (i.e., the retailer) refuses to do so the 

amount so paid “shall be remitted by that person to this state.” 
10

failing to request a refund from the Board. (Loeffler, supra, 58 Cal.4th at p. 1129.) 

Remitting the excess sales tax to the Board provides the retailer with a “safe harbor” from 

customer claims seeking to impose liability on the retailer for having collected excessive 

sales tax reimbursement. But, as the court long ago stated in Decorative Carpets and 

quoted in Loeffler, “ ‘the Legislature never provided that customers are not entitled to 

recover from retailers amounts erroneously charged to cover sales taxes.’ ” (Loeffler,

p. 1112.) And as the court reaffirmed in Javor, also repeated in Loeffler, “ ‘the Board is 

clearly mandated by the Board’s duty to protect the integrity of the sales tax by ensuring 

that the customer received their refunds. The integrity of the sales tax requires not only 

that the retailers not be unjustly enriched [citation], but also that the state not be similarly 

unjustly enriched.’ ” (Loeffler, p. 1116.) 

Fundamental principles embedded in the Revenue and Taxation Code are that 

payment of the sales tax is an obligation of the party selling an item subject to the tax, 

and that the taxability of a transaction is to be determined (or “ascertained”) by the Board 

in the first instance. The inconsistency with the statutory scheme that the entire line of 

Supreme Court cases recognizes and precludes would arise from permitting the purchaser 

of a product—not the payer of the sales tax—to seek to recover directly from the Board 

an amount that it claims in judicial proceedings did not constitute reimbursement of a 

lawful sales tax. No such inconsistency arises, however, if a seller either voluntarily or 

under compulsion seeks a refund from the Board. While sections 6905 and 6901.5 

confirm that a seller who does not request a refund waives the right to a refund and to the 

recoupment of any excess sales tax it may have paid, those provisions do not address 

whether a seller may be compelled to make that request by one who is the true party in 

interest bearing the financial impact of the payment of a tax that was not owing. While a 

retailer incurs no civil liability for waiving its right to a refund, that is not to say that as a 

matter of the equities also recognized in the line of Supreme Court cases, the retailer may 

not be prohibited from making such a waiver, to the detriment of those who have borne 

the cost of the erroneous tax payment. (See Decorative Carpets, supra, 58 Cal.2d at 

p. 255.) Indeed, in Loeffler the court, referring to the final subparagraph of regulation 
11

1700, subdivision (b)(6), stating that the regulation does not limit the rights of customers 

to pursue refunds from persons who collected excess tax reimbursement,5observed that 

“[t]he regulation reasonably may be interpreted to refer to our recognition that, when 

neither the Board nor the taxpayer has an interest in ‘ascertaining’ whether excess 

reimbursement has been charged, in limited circumstances consumers may file an action 

to require the taxpayer to seek a refund.” (Loeffler, supra, 58 Cal.4th at p. 1122.) Under 

the McClain view, the limited circumstances would in effect be no circumstances.

The nub of the matter comes down to the third prerequisite identified in McClain: 

“the Board has already determined that the person seeking the new tax refund is entitled 

to a refund.” (McClain, supra, 9 Cal.App.5th at p. 690.) In that case, the court held that 

the Board had not made such a determination with respect to the sale of the skin puncture

lancets and test strips there in question, and that an opinion letter from Board staff was 

insufficient to establish such a determination. The opinion letter in that case was very 

different from the unequivocal opinions given in the present case, indicating, so far as can 

be determined from the appellate opinion, that some transactions were and others were 

not taxable, leaving the taxability of particular sales still to be determined.6 The trial 

court in the present case rejected the contention that “[t]he various positions taken by the 

[Board] in e.g., 2006 were indeed tantamount to the type of determination made by the 

taxing authorities in Javor.” In support of the trial court’s conclusion, the Board argues 

that plaintiff “misunderstands the nature of the Board documents” on which he relies. 

The Board explains: “Any taxpayer or member of the public may make an inquiry to the 

 

5

“The provisions of this regulation with respect to offsets do not necessarily limit 

the rights of customers to pursue refunds from persons who collected tax reimbursement 

from them in excess of the amount due.” (Cal. Code Regs., tit. 18, § 1700, subd. (b)(6).)

6

The appellate opinion refers to “a 2003 opinion letter sent by a Board staff 

member arguably setting forth additional prerequisites to application of Regulation 

1591.1’s exemption” which was not a binding determination of the Board concerning the 

taxability of any specific transaction. (McClain, supra, 9 Cal.App.5th at p. 702.) The 

court stated it was an “undisputed fact that the Board has yet to determine that all of the 

sales the customers challenge fall within the ambit of Regulation 1591.1’s exemption.” 

(Ibid.)
12

Board regarding the interpretation of tax laws within the Board’s jurisdiction. These 

questions are routed to a member of the Board’s staff. Their responses, which may be 

memorialized in a letter or memorandum, do not constitute the determination of the 

Board as a whole. The Board has made clear that they do not have the effect of law or 

bind the Board. (Cal. Code Regs., tit. 18, § 5700, subd. (a)(1) & (2).)[7]. . . [¶] A tax 

bulletin is a newsletter that summarizes the conclusions of recent opinion letters. 

Obviously, a tax bulletin cannot carry more weight than the opinion letters on which they 

are based.” The majority opinion here, with which I respectfully disagree, accepts the 

Board’s contention, pointing out that “the Board’s regulations and case law make clear 

that the documents plaintiff relies upon do not have the force of law and are not binding 

on the Board.” (Maj. opn., ante, p. 9.)

Although the letter opinions of Board counsel and the Board’s tax bulletins do not 

have the force of law and are not binding on the Board, I submit they may not be so 

readily disregarded. Unlike the situation in McClain, the opinions here are specific and 

unambiguous, referring to all sales of a particular branded product. The opinion letters 

are written on the Board’s letterhead and the Tax Information Bulletins are issued 

quarterly by the Board, listing the members of the Board and contact information for the 

Board. Although the Board may not be bound by opinions stated in these materials, the 

opinions undoubtedly are issued with the Board’s approval and within the scope of the 

staff’s official responsibilities. The opinion letters are issued for the purpose of guiding 

the taxpayer requesting the opinion, and the tax bulletins are issued with the expectation 

that other taxpayers will rely on those opinions. When these opinions state, as they do 

 

7

These provisions contain two definitions for purposes of the regulation: 

“(1) ‘Annotations’ are published in either the Business Tax Law Guide or the Property 

Tax Law Guide and are summaries of the conclusions reached in selected legal rulings of 

counsel. Annotations do not embellish or interpret the legal rulings of counsel which they 

summarize and do not have the force and effect of law. (2) ‘Legal ruling of counsel’ 

means a legal opinion written and signed by the Chief Counsel or an attorney who is the 

Chief Counsel’s designee, addressing a specific tax application inquiry from a taxpayer 

or taxpayer representative, a local government agency, or board staff.” (Cal. Code Regs., 

tit. 18, § 5700, subd. (a)(1) & (2).)
13

here, that a specifically identified item is not subject to sales tax, it is a reasonable 

inference that the Board in fact considers sale of the item not to be taxable. At a 

minimum these materials make a prima facie showing that in the Board’s view the item is 

not taxable. 

The cases are uniform in holding that the court may not in the first instance 

determine the taxability, or nontaxability, of a particular product. Absent an express 

indication from an authorized Board spokesperson concerning the taxability of an item, 

the court would necessarily be required to make that analysis before concluding that there 

has been an overpayment and directing a taxpayer to submit a refund application. 

However, the court need not engage in such an analysis to recognize a prima facie 

showing that it is the Board’s view that sale of a particular item is not subject to sales tax. 

Opinion letters from Board counsel and explicit advice contained in the Board’s tax 

information bulletin, such as those before us,8suffice to make such a showing without 

reference to the analysis underlying the opinion. When a refund application a taxpayer 

had been ordered to submit would come before the Board, the Board would determine 

whether the opinion correctly reflects its determination of the taxability of the item in 

question. The Board could grant or deny the application. The court would have made no 

determination of taxability in the first instance.

As the Supreme Court first observed in Decorative Carpets, it has been “left to the 

courts to adopt appropriate remedies when excessive reimbursements have been collected 

by mistake and paid to the state.” (Decorative Carpets, supra, 58 Cal.2d at p. 256.) In 

my view, recognizing the sufficiency of a prima facie showing such as has been made 

here to compel the submission of a refund application is such an appropriate remedy. In 

this manner overpayments may be recovered by the person who indirectly bore the 

 

8

The complaint acknowledges that for a period starting in 2002 Ensure was 

subject to sales tax because of a change in its labelling, as stated in a 2002 tax 

information bulletin. However, the complaint alleges that Ensure was “not subject to 

sales tax for any purpose at all times since at least August 2006” and seeks no relief with 

respect to earlier time periods. (Moreover, the complaint does not question the 

applicability of the three-year limitations period in section 6902.)
14

unjustified cost, unjust enrichment to either the seller of the taxed item or the state would 

be avoided,9and there would be no inconsistency with statutory provisions. Contrary to 

the statement in the majority opinion, the integrity of the sales tax system would thus be 

enhanced. 

There is no basis for the majority’s concern that recognizing “a Javor cause of 

action will have a perverse effect on the integrity of our sales tax system.” (Maj. opn., 

ante, p. 10.) Recognizing such a cause of action is in no way inconsistent with the 

presumption that gross receipts are subject to the sales tax. The majority says that “the 

willingness of taxpayer retailers to seek safe harbor written advice from the Board could 

be stifled if doing so would expose them to potential litigation under a Javor scenario.” 

(Ibid.) This fear assumes that retailers would disregard the advice received from the 

Board. To the contrary, in questionable cases retailers would be encouraged to obtain the 

Board’s advice with the intention of following the advice, obtaining safe harbor 

protection, and avoiding the potential of being compelled to submit a refund 

application.10

 

9

The statement in the majority opinion that “the state is not unjustly enriched 

when sales taxes are overpaid due to a taxpayer’s good faith misinterpretation of his or 

her obligation to pay tax” (maj. opn., ante, p. 12) directly contradicts the Supreme 

Court’s acknowledgement—and common sense—that the Board’s receipt and retention 

of a tax that was not due does constitute unjust enrichment to the state. (Loeffler, supra, 

58 Cal.4th at p. 1133.) The majority’s citation to Reynolds v. City and County of San 

Francisco (1975) 53 Cal.App.3d 99, 101 for the proposition that one may not recover for 

a payment mistakenly made to a government entity unless the payment was made under 

coercion overlooks the fact that the Board has established a procedure for the refund of 

overpayments; the only question is whether one who was harmed by the overpayment 

may require the taxpayer to make use of that procedure.

10 While a retailer that has been collecting sales tax on an item may be concerned 

that an opinion letter indicating the item is not taxable could prompt demands that it seek 

a refund for the tax remitted on past sales, the greater concern would seem to be with 

respect to avoiding that possibility with respect to future sales. Opinion letters 

presumably are requested to obtain advice with respect to sales that will be made, or 

continue to be made, in the future. 
15

Recognizing a customer’s right to compel submission of a refund application 

undoubtedly would present some practical issues. As the Supreme Court pointed out in 

Loeffler, the taxpayer bears the burden of proving the right to a refund and “may 

recognize that it has failed to retain records adequate to carry its burden of establishing it 

is entitled to an exemption or has overpaid.” (Loeffler, supra, 58 Cal.4th at p. 1129.) 

Submitting a refund claim may entail considerable cost in collecting data and engaging in 

proceedings before the Board. In some cases it may be unreasonable to compel a seller to 

incur substantial costs to obtain a de minimis recovery for the benefit of the customer 

who paid the tax reimbursement. Such problems, however, are not insurmountable. An 

order compelling the submission of a refund application would be equitable and therefore 

could include such conditions as equity demands. The court might condition its order on 

the customer performing much of the work necessary to prepare the refund application, or 

reimbursing the taxpayer for costs necessarily incurred in submitting the application. If 

the action proceeds as a class action, the refund application might seek a refund only for 

the excess tax paid on sales to class members who submit evidence of their purchase and 

a refund request. If not a class action, it might be sufficient to apply for a refund of the 

excess tax paid on the sale to the individual requesting the refund. Appropriate factors 

for the court to consider in fashioning appropriate conditions would seem to include the 

amount of the excess tax involved, the effort that will be required to collect data and 

submit the application, and the reasonableness of the taxpayer having paid the excess tax 

given any notice of which the taxpayer was or should have been aware.

In all events, the remedy would not likely be utilized with undue frequency. It 

would be available only when opinion letters or Board publications have unqualifiedly 

indicated that no sales tax, or a lesser sales tax, is payable on the sale of a specific item. 

The disregard of opinion letters and tax information bulletins with the clarity and 

specificity of those in this case in all likelihood is a unique circumstance. Moreover, 

because such a remedy is available, retailers and others would be encouraged to carefully 

determine whether tax is due upon sale of the products they sell and to avoid 

overpayments that come out of the pockets of their customers. And, consistent with the 
16

majority’s reference to the possibility of legislative action, the Legislature would retain 

the ability to enact facilitating procedures or to qualify taxpayers’ rights should 

experience indicate that the burdens of enforcement outweigh the benefits of providing 

redress to aggrieved taxpayers. Absent further legislation, however, the Supreme Court 

has said it is for the court to fashion an appropriate remedy. The conclusion reached by 

the majority effectively precludes any such relief.

I would reverse the dismissal of the third cause of action and otherwise affirm the 

judgments.

_________________________

Pollak, J.
1

Trial Court: San Francisco City and County Superior

Court

Trial Judge: Honorable Curtis E.A. Karnow

Counsel:

Daniel Berko, Carlos Jato for Plaintiff and Appellant.

Morrison & Foerster, Miriam A. Vogel, David F. McDowell, Purvi G. Patel, for 

Defendants and Respondents, Costco Wholesale Corporation and Costco Wholesale 

Membership, Inc.

Winston & Strawn, Robb C. Adkins, Charles J. Moll III, Krista M. Enns, for Defendants 

and Respondents, Abbott Laboratories, Inc, and Abbott Laboratories Sales, Marketing & 

Distribution Co.

Kamala D. Harris, Attorney General, Diane Shaw, Acting Senior Assistant Attorney 

General, Nhan T. Vu, Deputy Attorney General, for Defendant and Respondent, 

California State Board of Equalization.