Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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R

490.0000 RETURNS, DEFECTS AND REPLACEMENTS—Regulation 1655

Annotation 490.0512.300

(c) WARRANTIES

(1) In General

490.0512.300 Lemon Law Reimbursement—Court Settlement. A customer purchased a new vehicle from a new car dealer for her personal and family use. About a year after purchasing the vehicle, the customer filed a complaint against the dealer and distributor of the vehicle in a Superior Court in California. In the complaint, the customer alleged that she began experiencing numerous problems with the vehicle and that the vehicle was defective. The complaint further alleged: (1) breach of implied warranty under the Song Beverly Act, Civil Code section 1792; (2) breach of express warranty under the Song-Beverly Act Lemon Law, Civil Code sections 1793.2(d) and 1794; (3) breach of obligation imposed by the Song Beverly Act; and (4) against the dealer only—negligence in repair.

The parties subsequently entered into a settlement agreement which provided that the customer would release any interest that she had in the vehicle and dismiss her complaint and to release the distributor and the dealer from any claims, demands, actions, etc., asserted in the lawsuit or otherwise relating to the vehicle. In return, the distributor agreed to pay the customer the amount paid for the vehicle less an amount for damage to the vehicle. The distributor also agreed to pay the attorney fees and costs of the customer. The settlement agreement also provided that it was a compromise of a disputed claim and that the execution of the agreement and payment of the consideration would not be deemed to be, nor construed as, an admission of an inability to service or repair the vehicle, as admission of a breach of warranty, or as admission of any other liability to the customer. The distributor of the vehicle then filed a claim for refund of sales tax reimbursement that it refunded to the customer under the California Lemon Laws. A manufacturer is entitled to a refund under Civil Code section 1793.25(a) if the payment made to the customer is restitution under Civil Code section 1793.2(d)(2)(B). The fact that provisions in the settlement agreement state that the manufacturer does not admit any nonconformity or failure to comply with the repair, disclosure, or warranty requirements of Civil Code section 1793.22(f)(1) does not preclude a finding that the settlement was pursuant to the Lemon Law and thereby prevent a refund to the manufacturer under Civil Code section 1793.25. In this case, it can be reasonably inferred from the facts that the payment made to the customer was restitution under Civil Code section 1793.2 (d)(2)(B) and, thus, the refund should be allowed. 10/13/95.