Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Jimmy Swaggart Ministries v. Board of Equalization of California . . . (1990)

Sales Tax Applies to Sales of Religious Books, Tapes, and Records

Taxpayer was a religious organization that sold religious books, tapes, records, and other religious and nonreligious merchandise at crusades it conducted in California. The Board informed taxpayer that religious materials were not exempt from sales tax, and requested taxpayer to register as a seller to facilitate reporting and payment of the tax. Taxpayer responded that it was exempt from such taxes under the First Amendment. The Board also asserted that taxpayer had sufficient nexus with the State of California to require it to collect and report use tax on its mail-order sales to California purchasers.

The U.S. Supreme Court held that California's generally applicable sales and use tax was not a flat license tax, which might operate as a prior restraint on the free exercise of religious beliefs. In addition, the sales and use tax represents only a small fraction of any retail sale and applies neutrally to all retail sales of tangible personal property made in the state. The court also found that the state's registration requirement does not act as a prior restraint on the exercise of religious beliefs, since no fee is charged for registering, the tax is due regardless of preregistration, and the tax is not imposed as a precondition of disseminating the religious message. The court found that, to the extent the imposition of a generally applicable tax decreased the amount of money taxpayer had to spend on its religious activities, that burden was not constitutionally significant. Since the collection and payment of the tax imposed no constitutionally significant burden on taxpayer's religious practices or beliefs, the court concluded that there was no violation of the Free Exercise Clause of the First Amendment.

The court also held that imposition and collection of the tax did not violate the Establishment Clause of the First Amendment. The tax has a secular purpose and neither advances nor inhibits religion, and California's imposition of the tax on taxpayer threatened no excessive entanglement between church and state. The imposition of sales and use tax does not require the state to inquire into the religious content of the items sold or the religious motivation for selling or purchasing the items, because the materials are subject to the tax regardless of content or motive.

Finally, the court refused to consider the merits of taxpayer's claim that the imposition of use tax liability on it violated the Commerce and Due Process Clauses of the U.S. Constitution because, as an out-of-state distributor, it had an insufficient "nexus" with California. The court found that taxpayer failed to properly raise this argument in its refund claim before the Board. Jimmy Swaggart Ministries v. Board of Equalization of California (1990) 493 U.S. 378; 107 L.Ed.2d 796.