Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Redding Ford v. State Board of Equalization . . . (1983)

Federal Tax Injunction Act Bars Action to Enjoin Collection of State Taxes

Plaintiff leased motor vehicles to the U.S. Government, and the Board imposed sales and use taxes on the leases. Plaintiff filed an action in federal court to enjoin the collection of the state taxes. The U.S. District Court dismissed the action.

The Ninth Circuit U.S. Court of Appeals affirmed, holding that the federal Tax Injunction Act, 28 U.S.C. Section 1341, bars the federal courts from enjoining the collection of state taxes where the taxpayer has a plain, speedy, and efficient remedy in state courts. The taxpayer in the instant case had such a remedy because it could have paid the taxes and sought a refund in state court. Thus, the Tax Injunction Act bars this action despite plaintiff's claim that it did not have sufficient assets to pay the taxes.

The court also held that the federal district court did not have ancillary jurisdiction over this action as a result of United States v. California State Board of Equalization (1981) 650 F.2d 1127 (Ninth Circuit), aff'd 456 U.S. 901 (1982), in which the court held that taxes on certain leases to the United States were unconstitutional. The United States was not a party to this action, and there was not an identity of interest between taxpayer and the United States to allow taxpayer to assert the federal interest in federal court. Redding Ford v. State Board of Equalization (1983) 722 F.2d 496 (9th Cir. 1983), cert den. (1984) 469 U.S. 817.