Annual Report 2010-2011
California Court of Appeal Decisions
The taxpayer was not entitled to penalty relief under Revenue and Taxation Code section 4985.2 because the late payment was caused by an error within the taxpayer’s control.
The Court of Appeal held that the taxpayer was not entitled to relief under Revenue and Taxation Code section 4985.2, subdivision (a) because the late payment was caused by the taxpayer’s cash manager overlooking a wire transfer request that had been authorized by its upper management. The taxpayer failed to institute proper control mechanisms, which could have prevented the late payment. Further, subdivision (b) of section 4985.2 was not applicable because this provision only allows for relief where there is an inadvertent error in the amount of payment.
AvalonBay Communities, Inc. County of Los Angeles (2011) 197 Cal.App.4th 890.
Appellant tax services company is not entitled to penalty relief under Revenue and Taxation Code section 4985.2 because the late payment was caused by an error within its control.
The Court of Appeal held that appellant tax services company was not entitled to relief under Revenue and Taxation Code section 4985.2, subdivision (a), even though the late payment was caused by the company’s inadvertent clerical error in formatting its spreadsheet, because the error was within the company’s control and could have been avoided. The appellate court further held that subdivision (b) of this section was inapplicable because the company did not make an inadvertent error in the amount of payment, but, instead, failed to make a timely payment in any amount on behalf of the taxpayer.
First American Commercial Real Estate Services, Inc. v. County of San Diego (2011) 196 Cal.App.4th 218.
Taxpayer’s contentions that the value of intangibles was improperly included in determining the hotel property’s assessed value constituted triable questions of material fact, and therefore, a summary judgment was inappropriate.
The Court of Appeal held that the trial court erred in granting the taxpayer's motion for summary judgment because the taxpayer’s contention that the county assessor failed to remove the value of intangibles, such as the hotel’s franchise license agreement and the workforce in place, in determining the full market value of its hotel property, presented triable issues of material fact. The appellate court also concluded that the trial court erred in failing to examine the entire administrative record to determine whether the assessment appeals board's findings were supported by substantial evidence.
EHP Glendale, LLC v. County of Los Angeles (2011) 193 Cal.App.4th 262.
Appellant tax service provider was not entitled to penalty relief under Revenue and Taxation Code section 4985.2 because the late payment was caused by an error within its control.
The Court of Appeal concluded that appellant tax services provider was not entitled to relief under Revenue and Taxation Code section 4985.2 for a late payment caused by appellant’s failure to send its client’s property tax payments to the correct address, and its failure to discover such error in time to prevent the delinquency from occurring. Appellant failed to establish that it had an adequate system in place to prevent and timely discover this type of clerical mistake. The appellate court noted that a higher level of ordinary care applies to a professional office providing tax payment services than to an individual taxpayer.
ZC Real Estate Tax Solutions Ltd. v. Ford (2010) 191 Cal.App.4th 378.
Sales and Use Tax
California Court of Appeal Decisions
Decision reallocating local sales tax revenue is final in absence of timely administrative appeal.
The Court of Appeal held that a city’s failure to file timely an administrative appeal caused BOE’s decision reallocating local sales tax revenues to become final. Absent a timely administrative appeal, BOE had a ministerial duty to reallocate the revenues. The court further held that the exhaustion of remedies doctrine did not preclude the petitioning cities from seeking mandate relief because BOE’s jurisdiction to consider an administrative appeal was disputed.
City of Fillmore v. State Board of Equalization (2011) 194 Cal.App.4th 716.
Certain telephone switching software qualifies for treatment under technology transfer agreement statutes.
The Court of Appeal held that certain agreements, under which the taxpayer licensed software programs to run telephone switches it sold to its customer, qualified as technology transfer agreements (TTAs), so that the portions of the lump-sum charges attributable to licenses of intangible patent and copyright interests were excluded from tax. The Court of Appeal further held that licenses of certain prewritten programs that provided the taxpayer’s customer various administrative functions in connection with the operation of the switches also qualified for TTA treatment. In so holding, the Court of Appeal held invalid a portion of Sales and Use Tax Regulation 1507 providing that sales of prewritten software could never qualify for TTA treatment.
Nortel Networks Inc. v. State Board of Equalization (2011) 191 Cal.App.4th 1259.
Special Taxes and Fees
California Court of Appeal Decisions
Shareholders lack standing to recover taxes paid by corporation on their behalf.
The Court of Appeal held that shareholders lacked standing to recover taxes paid by the corporation on their behalf because refunds may be made only to the party who paid the tax. BOE’s acceptance of payments from the corporation on the shareholders’ behalf did not equitably estop BOE from raising the standing issue.
Parmar v. State Board of Equalization (2011) 196 Cal.App.4th 705.
Childhood Lead Poisoning Fee constitutional since reasonable basis existed to allocate fee based on gasoline industry’s responsibility for contaminating the environment.
The California Childhood Lead Poisoning (CLPP) fee, as applied to the feepayer, was constitutional since there was a reasonable basis for the Department of Public Health to allocate the CLPP fee based on the gasoline industry’s responsibility for contaminating the environment with lead. The court disagreed with the feepayer’s assertion that the CLPP fee had to be proportional to the gasoline industry’s responsibility for cases of childhood lead poisoning since the purpose of the Childhood Lead Poisoning Prevention Act (Health and Safety Code, section 105275 et seq.) is to address environmental lead contamination that results in childhood lead exposure, which in turn only sometimes results in childhood lead poisoning.
Equilon Enterprises LLC v. State Board of Equalization (2010) 189 Cal.App.4th 865.
Nonadmitted surplus line insurers not required to pay premium taxes for doing business in California.
Surplus line premiums charged by nonadmitted surplus line insurers for insurance on risks located in California are not subject to the 2.35 percent premium tax because the insurers are not "doing business" in California under article XIII, section 28 of the California Constitution. Nonadmitted surplus line insurers operating lawfully in this state are precluded from "doing business" in the state since they are not licensed in California, have no presence in the state, and may not transact any insurance on property located or operations conducted within California, other than through licensed surplus line insurance brokers.
Silvers v. State Board of Equalization (2010) 188 Cal.App.4th 1215.