Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Garg v. State Board of Equalization . . . (1997)

Attorney's Fees Awarded under the Taxpayers' Bill of Rights Should Not Be Offset Against Taxes Owed

In a Board-initiated action for collection of a tax lien, the trial court held in favor of taxpayer based on the statute of limitations. The court awarded attorney's fees to taxpayer under Revenue and Taxation Code section 7156, based on its finding that the Board's action was not substantially justified. The Board offset the court-ordered attorney's fees against the outstanding liability. Taxpayer filed suit, claiming in part that the action was for refund of tax.

The Court of Appeal agreed with the Board that the trial court lacked jurisdiction to decide the matter as a refund of tax because "the California Constitution forbids a court from adjudicating the validity of a tax before the tax, together with interest and penalties, has been paid in full." However, the appellate court held that litigation costs awarded under section 7156, a part of the Taxpayers' Bill of Rights, are not an ordinary debt to taxpayer which can be offset under Government Code sections 12419.4 and 12419.5. Garg v. State Board of Equalization (1997) 53 Cal.App.4th 199.