Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2010
Sales And Use Tax Law
CHAPTER 7. OVERPAYMENTS AND REFUNDS
Article 2. Suit for Refund
proceeding in any court against this State or against any officer of the State o prevent or enjoin the collection under this part of any tax or any amount of tax required to be collected.
Suit for refund of partial payment.—Section 6931 does not bar a suit for refund where only a portion of the assessed tax is paid even though the decision in such suit may indirectly result in prohibiting the collection of the remainder. The court will not, however, issue its process to restrain collection of the balance of the tax. In the absence of statutory provisions allowing installment payments, such partial payments need not be accepted. Schaffer v. State Board of Equalization (1952) 109 Cal.App.2d 574. Disapproved in State Board of Equalization v. Superior Court (O'Hara & Kendall Aviation, Inc.) (1985) 39 Cal 3d 633.
Petition for declaratory relief does not lie.—A petition asking the Probate Court to construe the Retail Sales Tax Act is, in effect, a petition for declaratory relief. A declaratory judgment construing the act as requested would have the same effect as an injunction and is clearly contrary to the statutory prohibition against the issuance of such a writ. Estate of Schneider (1944) 62 Cal.App.2d 463.
Tax recovery denied when suit founded on illegality of business.—Although operators of tango games are not engaged in selling tangible personal property, they are not entitled to recover sales taxes paid under protest on their receipts from such games. Tango games constitute gambling devices, the operation of which is a violation of Section 330 of the Penal Code, and a court of law will not enforce a demand connected with an illegal transaction. Schur v. Johnson (1934) 2 Cal.App.2d 680; Asher v. Johnson (1938) 26 Cal.App.2d 403.
Adequacy of remedy.—The provisions of this article afford a "plain, speedy, and efficient remedy" within the meaning of Section 24 (1) of the United States Judicial Code, as amended, August 21, 1937 (28 U. S. C. A., Section 41 (1)). Consequently, the United States district courts do not have jurisdiction of suits to enjoin the enforcement of the use tax. Nevada-California Electric Corp. v. Corbett (1938) 22 F.Supp. 951. And see Corbett v. Printers and Publishers Corp., Ltd. (1942) 127 F.2d 195, refusing to enjoin collection of the sales tax.
A taxpayer is not entitled to injunctive relief to restrain the cancellation of its seller's permit for nonpayment of the tax assessed against it even though that tax is illegal, inasmuch as it had an adequate remedy at law. Helms Bakeries v. State Board of Equalization (1942) 53 Cal.App.2d 417.
Review of board's decision by prohibition and certiorari.—A writ of prohibition is exercised only to prevent official action of a judicial nature. Thus, a letter sent by the State Board of Equalization to a person engaged in the business of manufacturing ice stating that the board would consider ice companies as retailers and the independent distributors operating therefrom as their agents and would not issue individual retailers' permits to independent distributors, but would issue a single permit to the ice companies under which such companies would report and pay the tax on all business done by the independent distributors, would not call for the interposition of such a writ. Teed v. State Board of Equalization (1936) 12 Cal.App.2d 162.
A writ of certiorari will lie only to review the exercise of judicial functions and, in the absence of constitutional authority, the Legislature can not confer judicial power upon state-wide boards or commissions. Therefore, such a writ provided for by Section 33 of the Retail Sales Tax Act will not lie to review a ruling of the State Board of Equalization. Standard Oil Co. of California v. State Board of Equalization (1936) 6 Cal.2d 557.
An officer of a dissolved corporation may not obtain a declaratory judgment to determine, on the ground that any judgment against the corporation would be void, that he is under no fiduciary duty to petition for redetermination by the State Board of Equalization of sales tax determined against the corporation, and thereby obtain an adjudication against the board barring it from collecting the tax. Casey v. Bonelli (1949) 93 Cal.App.2d 253.
Propriety of declaratory relief questionable after transaction is entered into.—While a taxpayer may test the validity of a tax regulation by an action for declaratory relief before he has acted so that he may govern his conduct accordingly, it is very doubtful that such an action is appropriate after a taxpayer has entered into a transaction which the taxing authorities claim is taxable since Section 6931 prohibiting the granting of an injunction or writ of mandamus to prevent the collection of tax would thereby appear to be circumvented. The rule that a claimant must exhaust administrative remedies before initiating a judicial action applies to tax proceedings. Honeywell, Inc. v. State Board of Equalization (1975) 48 Cal.App.3d 907.
Eleventh Amendment bars federal suit.—U.S. Constitution, Eleventh Amendment bars taxpayer's suit in federal court to enjoin and declare as unenforceable the assessment of a state tax, regardless of taxpayer's claim that the assessment violated the immunity of the United States from state taxation. V. O. Motors, Inc. v. California State Board of Equalization (1982) 691 F.2d 871.
Tax Injunction Act.—Unless taxpayer does not have a plain, speedy, and efficient remedy in state courts, federal Tax Injunction Act bars federal court jurisdiction; taxpayer's demonstrated inability to pay tax assessments does not avoid jurisdictional bar of the Act. Redding Ford v. State Board of Equalization (1983) 722 F.2d 496, cert. den._U.S._
Partial payment insufficient for refund action.—Cal. Const. Art XIII, Sec. 32 barred the taxpayer from maintaining an action for refund of a partial payment before the full amount of the disputed tax was paid. Inconsistent prior decisions, Snoozie Shavings, Inc. v. State Board of Equalization (1979) 97 Cal.App.3d 771, and Schaffer v. State Board of Equalization (1952) 109 Cal.App.2d 574, are disapproved. State Board of Equalization v. Superior Court (O'Hara & Kendall Aviation, Inc.) (1985) 39 Cal.3d 633.
Tax Injunction Act.—Taxpayer and its shareholders, who were under federal criminal investigation, sought an injunction against the holding of a hearing on a petition for redetermination. The hearing and administrative proceedings on a petition for redetermination are an integral part of California's sales tax and collection scheme, and the state has provided taxpayers an adequate remedy. The Tax Injunction Act therefore divests the federal court of jurisdiction. Jerron West, Inc. v. California State Board of Equalization (9th Cir. 1997) 129 F.3d 1334.
Interest Due is not Part of the Tax.—Interest which accrues on a delinquent tax is not part of the tax within the meaning of California Constitution Article XIII, Section 32, or Revenue and Taxation Code section 6931, so that payment of accrued interest on the tax deficiency is not a prerequisite to either an administrative claim for refund or a subsequent court action for refund of taxes. Agnew v. State Board of Equalization (1999) 21 Cal.4th 310.
Eleventh Amendment does not bar federal suit by Indian Tribe.—Suit in federal court for declaratory relief by Indian Tribe permitted under the doctrine of Ex Parte Young. Agua Caliente Band of Cahuilla Indians v. Hardin (9th Cir. 2000) 223 F.3d 1041.