The opinion
TO BE PUBLISHED IN THE OFFICIAL REPORTS
OFFICE OF THE ATTORNEY GENERAL
State of California
DANIEL E. LUNGREN
Attorney General
______________________________________
OPINION :
: No. 90-928
of :
: JUNE 12, 1991
DANIEL E. LUNGREN :
Attorney General :
:
RODNEY O. LILYQUIST :
Deputy Attorney General :
:
__________________________________________________________________
THE STATE BOARD OF EQUALIZATION has requested an opinion
on the following question:
Is the San Diego City "transient transportation tax" a
sales or use tax or is it a substantially different tax for
purposes of administering local sales and use tax ordinances?
CONCLUSION
The San Diego City "transient transportation tax" is a
use tax for purposes of administering local sales and use tax
ordinances.
ANALYSIS
Revenue and Taxation Code section 7203.51 provides:
"The State Board of Equalization shall not
administer and shall terminate its contract to administer
any sales or use tax ordinance of a city, county,
redevelopment agency, or city and county, if such city,
county, redevelopment agency, or city and county imposes
a sales or use tax in addition to the sales and use taxes
imposed under an ordinance conforming to the provisions
of Sections 7202 and 7203.
1
All section references are to the Revenue and Taxation
Code unless otherwise specified.
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"The board shall give such city, county,
redevelopment agency, or city and county written notice
of termination, stating the reasons therefor .... If the
cause for termination is not cured within the time
specified in the notice, the board shall not administer
the ordinance until the cause for termination is removed
....
"Nothing in this section shall be construed as
prohibiting the levy or collection by a city, county,
redevelopment agency, or city and county of any other
substantially different tax authorized by the
Constitution of California or by statute or by the
charter of any chartered city." (Emphasis added.)
The City of San Diego imposes a use tax upon persons
leasing automobiles from car rental agencies located within the
city. (§ 7202, subd. (a)(8)(A) ["... a use tax of 1 percent or
less ... upon the storage, use, or other consumption of tangible
personal property ... in the city"], see also §§ 6006.3, 6009,
6010, 6010.1, 6201; Cal. Code of Regs., tit. 18, § 1660.) This 1
percent use tax is imposed upon total rental charges, collected by
the rental agency at the same time as other rental charges, and
becomes the obligation of the rental agency if not collected from
the customer or transmitted to the Board. (See §§ 6011, 6201
6204.)
San Diego also imposes a "transient transportation tax"
upon persons renting automobiles for a period of 30 or fewer days
from car rental agencies located within the city. The tax rate is
3 percent of the total rental charges, and the tax is collected by
the rental agency at the same time as the other rental charges. The
tax becomes the obligation of the rental agency if not collected
from the customer or transmitted to the city. It is deposited in
the city's general fund for general governmental services.
The question presented for analysis is whether the
"transient transportation tax" adopted by the City of San Diego is
an additional "sales or use tax" or a "substantially different tax"
as those terms are used in section 7203.5. If the former, the
State Board of Equalization ("Board") must notify the city that the
contract to administer the city's sales and use tax ordinances will
be terminated unless the transient transportation tax ordinance is
rescinded. We conclude that the city's transient transportation
tax constitutes a use tax.
The Sales and Use Tax Law (§§ 6001-7176) imposes a state
sales tax (§ 6051) on retail sellers and a state use tax (§ 6201)
on persons storing, using, or consuming tangible personal property
within the state. (See generally Rivera v. City of Fresno (1971)
6 Cal.3d 132, 137; Century Plaza Hotel Co. v. City of Los Angeles
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(1971) 7 Cal.App.3d 616, 623.) These taxes are administered by the
Board. (§ 7051.)
The Bradley-Burns Uniform Local Sales and Use Tax Law (§§
7200-7212) provides a mechanism for the imposition of sales and use
taxes by cities and counties in addition to the state taxes.
(§§ 7202-7203.) All local sales and use tax ordinances are
administered by the Board. (See §§ 7203.5-7204.3, 7209-7211.) As
explained in Geiger v. Board of Supervisors (1957) 48 Cal.2d 832,
837:
"The act contemplates an integrated, uniform system
of city and county sales and use taxation. The counties
are given authority to impose sales and use taxes as a
means of raising additional revenue, and the cities are
furnished with a plan of state administration which will
relieve them from operating collection systems of their
own. The taxpayers will receive the benefit of a scheme
which will free them from the burden of complying with
differing regulations of state and local taxes, avoid the
necessity of making payments and reports to several
governmental bodies, and permit all auditing to be done
by a single agency."
Returning to the provisions of section 7203.5, we find
that it limits the amount of local sales and use taxes that may be
imposed, but has no effect upon the authority of a city or county
to impose a "substantially different tax." The legislative
purposes of section 7203.5 are to prevent "situations which
complicated tax collection, reporting, auditing and accounting" for
local businesses and "varying and conflicting sales tax rates
[that] have an adverse effect on the general business climate in
California." (Stats. 1968, ch. 1265, § 2; see Rivera v. City of
Fresno, supra, 6 Cal.3d 132, 136-138; Century Plaza Hotel Co. v.
City of Los Angeles, supra, 7 Cal.App.3d 616, 624-625, fn. 6.)2
2
The full text of the declared purposes is as follows:
"The Legislature finds that the overlapping tax
structures of the federal, state and local governments
are seriously hampering the functioning of the State of
California. Due to the high rate of the federal income
tax, the state is precluded from making the personal
income tax and bank and corporation taxes its chief
sources of revenue, as high state taxes, when combined
with the high federal tax, would make the income and
franchise taxes prohibitive in this state. Moreover, the
state in the past has allowed local government to make
the property tax its chief source of revenue and for the
state again to rely on this source of revenue would cause
great consternation among property owners.
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"Therefore, the state must rely on sales and use
taxes as its chief source of revenue.
"In addition, the Legislature is well aware that
prior to the enactment of the Bradley-Burns Uniform Local
Sales and Use Tax Law in 1955 the differences in the
amount of sales tax levied among the various communities
of the state created a very difficult situation not only
for retailers but also created fiscal problems for the
cities and counties. The retailer was faced with many
situations which complicated tax collection, reporting,
auditing and accounting. Because of the differences in
taxes between areas, the retailer was affected
competitively. Many areas advertised `no city sales tax,
if you buy in this area.' This factor distorted what
would otherwise have been logical economic advantages or
disadvantages. It is apparent that enactment of the
Bradley-Burns Law has brought about reduced costs to the
retailer and has corrected illogical competitive
situations.
"Moreover, the Legislature finds that recent
amendments to the state's Sales and Use Tax Law, which
are incorporated into the ordinances of local government
operating under the Bradley-Burns Law, have complicated
the administration of sales and use taxes in such areas
as prepayments and the taxing of certain occasional sales
and leases. The increasing complexity of these taxes has
made it more and more apparent that a return to the
conflicting systems in existence prior to the adoption of
the Bradley-Burns Law would be disastrous in California
today.
"In the big metropolitan areas where most taxable
sales occur, local officials have shown the most interest
in returning to the older system of independent sales and
use tax administration. And it is in these areas that
most of the poor and the minority groups are
concentrated, and it is these persons who are least able
to pay increased consumer taxes. In addition, the recent
trend of business to locate outside of metropolitan areas
can only be accelerated by a system which grants them a
competitive advantage by locating in the suburbs. And
the fact should not be overlooked that varying and
conflicting sales tax rates will have an adverse effect
on the general business climate in California.
"Therefore, the Legislature declares that the state,
by enactment of the Sales and Use Tax Law and the
Bradley-Burns Uniform Local Sales and Use Tax Law, has
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With this general background in mind, we examine the
"transient transportation tax" ordinance adopted by the San Diego
City Council. First, the label placed upon the tax is not
controlling as to its basic character. In Flynn v. San Francisco
(1941) 18 Cal.2d 210, 214-215, the Supreme Court observed:
"The character of a tax must be determined by its
incidents, and from the natural and legal effect of the
language employed in the act. [Citations.] The
nomenclature is of minor importance, for the court will
look beyond the mere title or the bare legislative
assertion ... to see and determine the real object,
purpose and result of the enactment. [Citations.]"
The San Diego transient transportation tax and the city's
use tax have the same taxpayers (customers of the rental agencies),
taxable events (rentals of the automobiles), measure of the taxes
(total rental charges), collection mechanisms (rental agencies
collect and transmit the taxes), and ultimate city expenditure of
the funds (for general governmental purposes of the city).
It has been suggested, however, that certain differences
between these city taxes compel the conclusion that the transient
transportation tax is not an additional use tax. First, the city's
transient transportation tax is limited to automobile leases of 30
or fewer days, while its use tax ordinance is not so limited. The
transient transportation tax is imposed even though some of the
rental use may occur outside the boundaries of the city, whereas
the city's use tax only applies to rental use within the city's
jurisdictional limits. (See § 7202, subd. (a)(8)(A).) Third, the
transient transportation tax is imposed regardless of whether the
rental agency has paid sales tax reimbursement on the vehicle; the
city's use tax ordinance exempts vehicles for which sales tax
reimbursement has been paid. (See § 6010, subd. (e)(10).)3
We disagree with the proposed suggestion. These minor
differences do not transform the city's transient transportation
tax into something other than a use tax. It remains a tax upon the
use of tangible personal property. The differences do not change
the "real object, purpose and result of the enactment." (Flynn v.
San Francisco, supra, 18 Cal.2d 210, 218.)
preempted this area of taxation."
3
We are informed by the Board that car rental agencies do
not have an economic incentive to pay sales tax reimbursement at
the time they purchase their vehicles. Accordingly, a state and
local use tax is imposed upon their rental receipts in the ordinary
course of business.
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We find support for this conclusion in the cases that
have examined the provisions of section 7203.5. In Century Plaza
Hotel Co. v. City of Los Angeles, supra, 7 Cal.App.3d 616, the
court ruled that a tax of 5 percent upon the purchase price of
alcoholic beverages sold by a retailer for consumption on the
premises where sold was not authorized under the terms of
section 7203.5. The court concludes:
"... the taxes imposed by [the Sales and Use Tax
Law] are levied by the state not, as here, by a chartered
city. [The Bradley-Burns Uniform Local Sales and Use Tax
Law] allows a maximum 1 percent rate for sales and use
taxes, whereas the ordinance adopted by the city imposes
a 5 percent tax, thus failing to qualify ...." (Id., at
p. 623.)
Cases interpreting the phrase "substantially different tax" are
equally supportive of the conclusion reached herein. (See A.B.C.
Distributing Co. v. City and County of San Francisco (1975) 15
Cal.3d 566, 575 [payroll expense tax]; Rivera v. City of Fresno,
supra, 6 Cal.3d 132, 138-140 [utility user tax].)
In summary, we find that the transient transportation tax
in question is imposed upon the same use of tangible personal
property as is currently subject to taxation under the Sales and
Use Tax Law and the city's own sales and use tax ordinances. The
city is limited to a 1 percent tax upon car rental charges (§ 7202,
subd. (a)(8)(A)); it is not authorized to add an additional 3
percent. Section 7203.5 was designed to prevent such "increased
consumer taxes." (Stats. 1968, ch. 1265, § 2.)
Consequently, the Board has the statutory duty to give
the City of San Diego "written notice of termination" of its
contract to administer the city's sales and use tax ordinances, and
"[i]f the cause for termination is not cured within the time
specified in the notice, the Board shall not administer the
ordinance until the cause for termination is removed and a new
contract for the administration of the ordinance executed."
(§ 7203.5.)
In answer to the question presented, therefore, we
conclude that the San Diego City "transient transportation tax" is
a use tax for purposes of administering local sales and use tax
ordinances.
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