Opinion ID: 1382971
Heading Depth: 2
Heading Rank: 4

Heading: legal issues and contentions

Text: (1) In our recent Shell decision we described the legal and constitutional framework within which our determinations in the instant case must be made. [I]t is clear that in spite of the absence of a specific `commerce clause' in our state Constitution, other provisions in that Constitution  notably those provisions forbidding extraterritorial application of laws and guaranteeing equal protection of the laws ...  combine with the equal protection clause of the federal Constitution to proscribe local taxes which operate to unfairly discriminate against intercity businesses by subjecting such businesses to a measure of taxation which is not fairly apportioned to the quantum of business actually done in the taxing jurisdiction. (2) On the other hand, those constitutional principles do not prohibit local license taxes upon businesses `doing business' both within and outside the taxing jurisdiction; as long as such taxes are apportioned in a manner by which the measure of tax fairly reflects that proportion of the taxed activity which is actually carried on within the taxing jurisdiction, no constitutional objection appears. (3) However, and conversely, no measure of apportionment can satisfy the constitutional standard if the measure of tax is made to depend upon a factor which bears no fair relationship to the proportion of the taxed activity actually taking place within the taxing jurisdiction. (4 Cal.3d at p. 124.) We then observed that the apportionment scheme set out in Ruling 14 was capable of being applied in violation of these principles because [t]hat formula, to the extent that it places decisive importance upon the situs of the goods at the time of shipment or delivery, rests upon a `purely accidental and extraneous event that has no relation to the taxable event occurring in [the City] or the quantum of business there carried on.' (4 Cal.3d at p. 125.) However, we went on to point out that more than the mere possibility of erratic or unconstitutional application of an apportionment formula must be shown by a taxpayer who challenges such a formula. (4) `One who attacks a formula of apportionment carries a distinct burden of showing by clear and cogent evidence that it results in extraterritorial values being taxed.' ( Butler Bros. v. McColgan, supra, 315 U.S. 501, 507....) (4 Cal.3d at p. 126.) In Shell we concluded that the taxpayer  which had showed at trial that substantial elements of its sales process relating to the transactions there in question (i.e., sales to out-of-city dealers of gasoline stored within the City) took place outside the City  had sustained its burden. In the instant case we must likewise look to each of the four categories of transactions here in issue and determine whether General Motors has sustained its burden of showing by clear and cogent evidence that the particular application of Ruling 14 results in the taxation of significant extraterritorial values. [12] It is to this task that we now turn.