Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Transactions And Use Tax Law

CHAPTER 4 REFUNDS OF UNCONSTITUTIONAL TAXES*

Section 7275

7275. Unconstitutional taxes levied; disposition of revenues. (a) Where a tax levied in a county in conformity with Part 1.6 (commencing with Section 7251) has been determined to be unconstitutional in a final and nonappealable decision of a court of competent jurisdiction and the revenues derived from that unconstitutional tax are paid to the board and held in an impound account, the board shall administer refunds and reimbursements of those illegally collected taxes in accordance with the provisions of this chapter.

(b) (1) Notwithstanding any other provision of law, on and after the effective date of the act adding this chapter, the procedures for refund or reimbursement of unconstitutional taxes contained in this chapter constitute the sole remedies for refund or reimbursement of illegal taxes as described in subdivision (a).

(2) Claims for refund of illegally collected taxes as described in subdivision (a) that were filed prior to the effective date of the act adding this chapter that have not been paid before that date shall be processed and paid to purchasers in accordance with the provisions of this chapter, regardless of whether the purchaser or the retailer filed the claim. Nothing in the act adding this chapter shall be construed to require refiling of those previously filed claims for refund.

(c) Notwithstanding the provisions of Section 6902, the period of limitations specified in subparagraph (B) of paragraph (3) of subdivision (b) of Section 7277 shall apply to any claims for refund that are payable from any revenues paid to the board and held in an impound account which are derived from the unconstitutional tax.

(d) No later than 10 days from the date the decision determining the contested tax to be unconstitutional is final and nonappealable, the court shall order the entity that levied the unconstitutional tax to pay the impounded revenues to the board which shall immediately deposit them in a segregated impound account in the Retail Sales Tax Fund. The moneys so deposited, together with any interest thereon, shall be used as follows:

(1) To satisfy in full all valid claims for refund filed prior to the effective date of the act adding this chapter, in amounts as verified by audit of the records of the board.

(2) To fund a reserve account, in an amount to be determined by the board, with the approval of the Department of Finance, to fund refund and reimbursement of moneys from illegally collected taxes as described insubdivision (a), liability for which arises out of audit assessments occurring after the date of the act adding this chapter.

(A) Moneys derived from the unconstitutional tax described in subdivision (a) received by the board after the date the board receives the impounded revenues as provided in subdivision (d) shall be deposited in the reserve account provided by this subdivision.

(B) This reserve account shall be maintained for 10 years from the date the board deposits the revenues in the segregated account in the Retail Sales Tax Fund provided by this subdivision.

(i) Any amount deposited in the reserve account shall be used to pay other refunds or reimbursements to taxpayers within 12 months of deposit. Amounts not used for refunds or reimbursements within 12 months of deposit shall be transferred to the county in which the unconstitutional tax was levied for deposit in that county's general fund.

(ii) Upon termination of the 10-year period, any moneys remaining in this segregated account shall be transferred to the county in which the unconstitutional tax was levied for deposit in that county's general fund.

(3) To satisfy valid claims for refund filed after the effective date of the act adding this chapter as described in Section 7277.

(4) To reimburse the board's actual and reasonable costs of administering the refunds and reimbursements provided in this chapter, as approved by the Department of Finance.

(5) To reimburse losses resulting from the tax credit provided by Section 7276. In reimbursing those losses, the board may use its best estimates, based on historical allocation information, as to the amount of those losses. Any entity receiving the impounded moneys rather than the taxes being credited shall suffer no impairment of revenues and the timing and receipt as well as the amount of revenues shall not be adversely affected by the credit. Any security arrangement that the board has with any entity receiving impounded moneys, including, but not limited to, provisions requiring the transfer of revenues to a bond trustee, shall remain in full force and effect during the period of the credit, and any pledge of tax revenues shall apply with equal force and effect to the impounded moneys distributed to those entities by the board in lieu of the credited tax revenues, without any further action required by the entity of the board.

(e) Any impounded moneys subject to refund or reimbursement pursuant to this chapter that are not used for that purpose or not deposited in the reserve account described in subdivision (d) shall be transmitted to the county in which the unconstitutional tax was levied for deposit in that county's general fund.

(f) For the purposes of bringing an action against the board for recovery of the whole or any part of the amount claimed as an overpayment of unconstitutional taxes as described in subdivision (a), the six-month period provided in Section 6934 shall not commence until the one-year claim period provided by Section 7277 has expired pursuant to the terms of this chapter. Suits for refund shall be brought in accordance with the provisions of Article 2 (commencing with Section 6931) of Chapter 7 of Part 1.

Statutory refund scheme constitutional.—The court of appeal held that the legislative scheme for refunds of unconstitutional district taxes displaced the trial court's refund plan, and that such displacement did not violate the separation of powers doctrine. Kuykendall v. State Board of Equalization (1994) 22 Cal.App.4th 1194.

Statutory refund scheme constitutional.—The court of appeal held that the statutory scheme for refund of unconstitutional district taxes was constitutional and that it clearly prohibited retailers not meeting its requirements from filing claims. Cod Gas & Oil Co., Inc. v. State Board of Equalization (1997) 59 Cal.App.4th 756.

* Chapter 4 was added by Stats. 1993, Ch. 1060, effective October 11, 1993.