Opinion ID: 1412641
Heading Depth: 1
Heading Rank: 5

Heading: Identifying Characteristics

Text: Perhaps the most striking feature of the tax is its application to all employees in all occupations, trades, and professions. In this regard, the tax is unlike the usual license tax on a specific or several specific occupational or business groups. In this way the tax is like an income tax, since such taxes are normally levied upon all income, no matter what the business or occupational source. The tax is upon the individual employee (... upon persons who ...) rather than upon the employment (i.e., lawyers, dry cleaning establishments, retail sales). Income taxes are also levied against persons rather than occupations, trades, or businesses, as is the case with license taxes. Thus, income taxes are directed against the fact of income, whereas license taxes are directed against the fact of employment. By these standards the tax is clearly an income tax. Historically, and even by definition, license taxes involve the issuance of a license to the activity granted the privilege of doing business. Licenses take various forms, but often look like a certificate. Some are prominently displayed in the business establishment. Such licenses are usually granted to dispose of property, pursue a business, occupation or calling, or to exercise a privilege. ( Ingels v. Riley, supra, 5 Cal.2d at p. 157). The Oakland tax makes no provision for the issuance of licenses, nor did the San Francisco commuter tax. One strongly identifying mechanism of the modern income tax is its withholding provision, a feature characteristic of state and federal income taxes. Municipal income taxes, as employed in other states, usually contain this provision. ( Legislative Developments, supra, 7 Harv.J.Legis. at p. 273.) On the other hand, license taxes are not usually collected in this manner. The gross receipts occupation tax does have a venerable history in California. ( Ante, p. 394, and cases cited.) However, examination reveals that such taxes have been upon the privilege of engaging in a specific area of activity. Such is not true of the income tax, nor of the Oakland tax. The subject tax is a percentage of the monetary proceeds of labor  characteristic of the income tax. Furthermore, the tax here employed is upon the same source which the State of California includes in its definition of gross income. (Rev. & Tax. Code, § 17071, subd. (a) (1).) The tax under consideration is upon all employees. The city contends that employee services are like any other trade or profession, in a generic sense, and hence are as subject to license tax as any trade or profession. They are not so treated in other taxing areas. For example, employee services are not a trade or profession for federal self employment tax purposes. (26 U.S.C. § 1402(c)(2) and (3))