Court Opinion

ID: 4127572
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:30:28.610587+00
Date Added: 2024-06-11T14:05:33.711657
License: Public Domain

TO BE PUBLISHED IN THE OFFICIAL REPORTS

                  OFFICE OF THE ATTORNEY GENERAL

                        State of California

                         DANIEL E. LUNGREN

                          Attorney General

              ______________________________________

            OPINION            :

                               :         No. 90-928

               of              :

                               :         JUNE 12, 1991

       DANIEL E. LUNGREN       :

        Attorney General       :

                               :

      RODNEY O. LILYQUIST      :

    Deputy Attorney General    :

                               :

__________________________________________________________________

          THE STATE BOARD OF EQUALIZATION has requested an opinion

on the following question:

          Is the San Diego City "transient transportation tax" a

sales or use tax or is it a substantially different tax for

purposes of administering local sales and use tax ordinances? 

                            CONCLUSION

          The San Diego City "transient transportation tax" is a

use tax for purposes of administering local sales and use tax

ordinances.

                             ANALYSIS

           Revenue and Taxation Code section 7203.51 provides:

          "The State Board of Equalization shall not
 

     administer and shall terminate its contract to administer

     any sales or use tax ordinance of a city, county,

     redevelopment agency, or city and county, if such city,

     county, redevelopment agency, or city and county imposes

     a sales or use tax in addition to the sales and use taxes

     imposed under an ordinance conforming to the provisions

     of Sections 7202 and 7203. 

     1

          All section references are to the Revenue and Taxation
 

Code unless otherwise specified.

                                 1.                          90-928

          "The   board   shall   give  such   city,   county,
    

     redevelopment agency, or city and county written notice

     of termination, stating the reasons therefor .... If the

     cause for termination is not cured within the time

     specified in the notice, the board shall not administer

     the ordinance until the cause for termination is removed

     ....

          "Nothing in this section shall be construed as

     prohibiting the levy or collection by a city, county,

     redevelopment agency, or city and county of any other

     substantially   different   tax  authorized   by    the
      

     Constitution of California or by statute or by the

     charter of any chartered city." (Emphasis added.)

          The City of San Diego imposes a use tax upon persons

leasing automobiles from car rental agencies located within the

city. (§ 7202, subd. (a)(8)(A) ["... a use tax of 1 percent or

less ... upon the storage, use, or other consumption of tangible

personal property ... in the city"], see also §§ 6006.3, 6009,

6010, 6010.1, 6201; Cal. Code of Regs., tit. 18, § 1660.) This 1

percent use tax is imposed upon total rental charges, collected by

the rental agency at the same time as other rental charges, and
 

becomes the obligation of the rental agency if not collected from

the customer or transmitted to the Board.     (See §§ 6011, 6201­

6204.)

          San Diego also imposes a "transient transportation tax"

upon persons renting automobiles for a period of 30 or fewer days

from car rental agencies located within the city. The tax rate is

3 percent of the total rental charges, and the tax is collected by

the rental agency at the same time as the other rental charges. The

tax becomes the obligation of the rental agency if not collected

from the customer or transmitted to the city. It is deposited in

the city's general fund for general governmental services.

          The question presented for analysis is whether the
 

"transient transportation tax" adopted by the City of San Diego is

an additional "sales or use tax" or a "substantially different tax"

as those terms are used in section 7203.5.      If the former, the

State Board of Equalization ("Board") must notify the city that the

contract to administer the city's sales and use tax ordinances will

be terminated unless the transient transportation tax ordinance is

rescinded. We conclude that the city's transient transportation

tax constitutes a use tax.

          The Sales and Use Tax Law (§§ 6001-7176) imposes a state

sales tax (§ 6051) on retail sellers and a state use tax (§ 6201)

on persons storing, using, or consuming tangible personal property

within the state. (See generally Rivera v. City of Fresno (1971)

6 Cal. 3d 132, 137; Century Plaza Hotel Co. v. City of Los Angeles

                                2.                            90-928

(1971) 7 Cal. App. 3d 616, 623.) These taxes are administered by the
 

Board. (§ 7051.) 

          The Bradley-Burns Uniform Local Sales and Use Tax Law (§§

7200-7212) provides a mechanism for the imposition of sales and use

taxes by cities and counties in addition to the state taxes.

(§§ 7202-7203.)    All local sales and use tax ordinances are

administered by the Board. (See §§ 7203.5-7204.3, 7209-7211.) As

explained in Geiger v. Board of Supervisors (1957) 48 Cal. 2d 832,

837:

          "The 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."

          Returning to the provisions of section 7203.5, we find

that it limits the amount of local sales and use taxes that may be

imposed, but has no effect upon the authority of a city or county

to impose a "substantially different tax."         The legislative

purposes of section 7203.5 are to prevent "situations which

complicated tax collection, reporting, auditing and accounting" for

local businesses and "varying and conflicting sales tax rates

[that] have an adverse effect on the general business climate in

California." (Stats. 1968, ch. 1265, § 2; see Rivera v. City of

Fresno, supra, 6 Cal. 3d 132, 136-138; Century Plaza Hotel Co. v.

City of Los Angeles, supra, 7 Cal. App. 3d 616, 624-625, fn. 6.)2

     2
         The full text of the declared purposes is as follows:

          "The Legislature finds that the overlapping tax

     structures of the federal, state and local governments

     are seriously hampering the functioning of the State of

     California. Due to the high rate of the federal income

     tax, the state is precluded from making the personal

     income tax and bank and corporation taxes its chief

     sources of revenue, as high state taxes, when combined

     with the high federal tax, would make the income and

     franchise taxes prohibitive in this state. Moreover, the
 

     state in the past has allowed local government to make

     the property tax its chief source of revenue and for the

     state again to rely on this source of revenue would cause

     great consternation among property owners.

                                   3.                          90-928

     "Therefore, the state must rely on sales and use

taxes as its chief source of revenue.

      "In addition, the Legislature is well aware that

prior to the enactment of the Bradley-Burns Uniform Local

Sales and Use Tax Law in 1955 the differences in the

amount of sales tax levied among the various communities

of the state created a very difficult situation not only

for retailers but also created fiscal problems for the

cities and counties. The retailer was faced with many

situations which complicated tax collection, reporting,

auditing and accounting. Because of the differences in

taxes   between   areas,   the   retailer  was   affected
  

competitively. Many areas advertised `no city sales tax,
 

if you buy in this area.' This factor distorted what

would otherwise have been logical economic advantages or

disadvantages.    It is apparent that enactment of the

Bradley-Burns Law has brought about reduced costs to the

retailer and has corrected illogical competitive
 

situations.

     "Moreover, the Legislature finds that recent
 

amendments to the state's Sales and Use Tax Law, which

are incorporated into the ordinances of local government

operating under the Bradley-Burns Law, have complicated

the administration of sales and use taxes in such areas

as prepayments and the taxing of certain occasional sales

and leases. The increasing complexity of these taxes has

made it more and more apparent that a return to the

conflicting systems in existence prior to the adoption of

the Bradley-Burns Law would be disastrous in California

today.

     "In the big metropolitan areas where most taxable

sales occur, local officials have shown the most interest

in returning to the older system of independent sales and

use tax administration. And it is in these areas that

most of the poor and the minority groups are
 

concentrated, and it is these persons who are least able

to pay increased consumer taxes. In addition, the recent
 

trend of business to locate outside of metropolitan areas

can only be accelerated by a system which grants them a

competitive advantage by locating in the suburbs. And

the fact should not be overlooked that varying and

conflicting sales tax rates will have an adverse effect

on the general business climate in California.

     "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

                           4.                            90-928

          With this general background in mind, we examine the

"transient transportation tax" ordinance adopted by the San Diego

City Council.    First, the label placed upon the tax is not

controlling as to its basic character. In Flynn v. San Francisco

(1941) 18 Cal. 2d 210, 214-215, the Supreme Court observed:

          "The character of a tax must be determined by its

     incidents, and from the natural and legal effect of the

     language employed in the act.       [Citations.]    The

     nomenclature is of minor importance, for the court will

     look beyond the mere title or the bare legislative

     assertion ... to see and determine the real object,

     purpose and result of the enactment. [Citations.]"

          The San Diego transient transportation tax and the city's

use tax have the same taxpayers (customers of the rental agencies),

taxable events (rentals of the automobiles), measure of the taxes

(total rental charges), collection mechanisms (rental agencies

collect and transmit the taxes), and ultimate city expenditure of

the funds (for general governmental purposes of the city).

          It has been suggested, however, that certain differences

between these city taxes compel the conclusion that the transient

transportation tax is not an additional use tax. First, the city's
 

transient transportation tax is limited to automobile leases of 30

or fewer days, while its use tax ordinance is not so limited. The

transient transportation tax is imposed even though some of the

rental use may occur outside the boundaries of the city, whereas

the city's use tax only applies to rental use within the city's

jurisdictional limits. (See § 7202, subd. (a)(8)(A).) Third, the

transient transportation tax is imposed regardless of whether the

rental agency has paid sales tax reimbursement on the vehicle; the

city's use tax ordinance exempts vehicles for which sales tax

reimbursement has been paid. (See § 6010, subd. (e)(10).)3

          We disagree with the proposed suggestion. These minor

differences do not transform the city's transient transportation

tax into something other than a use tax. It remains a tax upon the
 

use of tangible personal property. The differences do not change

the "real object, purpose and result of the enactment." (Flynn v.

San Francisco, supra, 18 Cal. 2d 210, 218.)

     preempted this area of taxation."

    3

          We are informed by the Board that car rental agencies do
 

not have an economic incentive to pay sales tax reimbursement at

the time they purchase their vehicles. Accordingly, a state and

local use tax is imposed upon their rental receipts in the ordinary

course of business.

                                5.                            90-928

          We find support for this conclusion in the cases that

have examined the provisions of section 7203.5. In Century Plaza

Hotel Co. v. City of Los Angeles, supra, 7 Cal. App. 3d 616, the
 

court ruled that a tax of 5 percent upon the purchase price of

alcoholic beverages sold by a retailer for consumption on the

premises where sold was not authorized under the terms of

section 7203.5. The court concludes:

          "... the taxes imposed by [the Sales and Use Tax
 

     Law] are levied by the state not, as here, by a chartered

     city. [The Bradley-Burns Uniform Local Sales and Use Tax
 

     Law] allows a maximum 1 percent rate for sales and use

     taxes, whereas the ordinance adopted by the city imposes

     a 5 percent tax, thus failing to qualify ...." (Id., at

     p. 623.)
 

Cases interpreting the phrase "substantially different tax" are

equally supportive of the conclusion reached herein. (See A.B.C.

Distributing Co. v. City and County of San Francisco (1975) 15
Cal. 3d 566, 575 [payroll expense tax]; Rivera v. City of Fresno,

supra, 6 Cal. 3d 132, 138-140 [utility user tax].)

          In summary, we find that the transient transportation tax

in question is imposed upon the same use of tangible personal

property as is currently subject to taxation under the Sales and

Use Tax Law and the city's own sales and use tax ordinances. The

city is limited to a 1 percent tax upon car rental charges (§ 7202,

subd. (a)(8)(A)); it is not authorized to add an additional 3

percent. Section 7203.5 was designed to prevent such "increased

consumer taxes." (Stats. 1968, ch. 1265, § 2.)

          Consequently, the Board has the statutory duty to give

the City of San Diego "written notice of termination" of its

contract to administer the city's sales and use tax ordinances, and

"[i]f the cause for termination is not cured within the time

specified in the notice, the Board shall not administer the

ordinance until the cause for termination is removed and a new

contract for the administration of the ordinance executed."

(§ 7203.5.)

          In answer to the question presented, therefore, we

conclude that the San Diego City "transient transportation tax" is

a use tax for purposes of administering local sales and use tax

ordinances.

                              ***** 

                                6.                            90-928