The opinion
SCHAUER, J.
I dissent. Under the majority opinion herein, as under the opinion in Hughes v. Los Angeles (1914), 168 Cal. 764, 765 [ 145 P. 94 ], there are classes of business— those of local insurance agent and of bail bondsman—in which persons may engage without being subject to local license taxation. The express ground of decision of the Hughes case is that “in a direct and immediate sense a tax upon such agents [general and local insurance agents] for the right to do business is a tax upon the corporation’s right to do business” (p. 765 of 168 Cal.). But the theory of the Hughes case and this case cannot be logically limited to freeing local agents from local license taxes. The provision of the California Constitution (art. XIII, § 14 4/5) which imposes the state “in lieu” tax upon insurance companies does so “in lieu of all other taxes and licenses, state, county, and municipal, upon such insurers and their property, except [(1) taxes on their real estate; (2) taxes with, respect to a trust department operated by a title insurer; (3) as to foreign insurers doing business in this state, reciprocal taxes in accord with those imposed by the foreign state on California insurers doing business there; (4) the tax on ocean marine insurance].” (Italics added.) ,
If the Hughes ease is to be given consistent application then a state tax upon an insurance agent’s income derived from his insurance business is as invalid as a local license tax on the right to carry on such business. In Edward Brown & Sons v. McColgan (1942), 53 Cal.App.2d 504, 506-508 [ 128 P.2d *763 186 ], the District Court of Appeal was confronted with such a problem. There a corporate insurance agent contended that because of the Hughes decision it need not pay its franchise (state income) tax. This contention was rejected. The appellate court attempted to distinguish the Hughes ease on the ground that the Hughes license tax was upon the privilege of transacting insurance business and impinged directly on the insurance company, whereas the franchise tax was upon the corporate agent’s privilege of being a corporation.
The majority opinion in the present case recognizes the difficulty of drawing such a distinction and says (p. 756, supra), “the soundness of the last cited case may be questionable.” But, the majority opinion goes on to say, “it may be distinguished on the ground that, although the franchise tax is computed on the net income of the corporation, it is on the privilege of using the corporate mechanism to do business and hence has no relation to the nature of the business conducted. Thus the tax is not on the insurance business within the meaning of the Constitution.” The purported distinction made by the majority would have no application to a state income tax on an individual insurance agent.
I would, therefore, conclude that the Hughes decision is unsound and should be overruled. It is my further opinion that, even without overruling that case, the validity of Los Angeles Ordinance No. 77,000, as amended by Ordinance No. 92,414, could be upheld. If this latter conclusion were reached then, as will hereinafter appear, Groves would not be subject to the license tax because of the terms of the ordinance itself, rather than because of a strained application of section 14 4/5 of article XIII of the state Constitution. The ordinance provides-that “The term ‘gross receipts’ as used herein shall not include any insurance premiums received on behalf of any insurance company qualified to do business in the State of California, nor any commissions .paid out of such premiums. ’ ’ This provision appears to be designed to avoid any litigation such as that in the Hughes (1914) and Edward Brown (1942) eases, supra, by expressly excluding from the “gross receipts” which are the measure of the tax the entire amount collected by a bail bondsman as payment for a bail bond. It thus appears that while Los Angeles could have taxed the amount received by the bail bondsman as payment for his services (rather than as premium to the insurance company) it did not choose to do so.
*764 The judgment of the trial court does not recognize that it is because of the terms of the ordinance itself that certain taxes cannot be imposed on Groves; rather, it perpetually enjoins defendants from collecting any taxes from Groves under such ordinance. Since Groves may become liable for taxes other than those here discussed, I would reverse the judgment.
Appellants’ petition for a rehearing was denied May 21, 1953. Schauer, J., and Spence, J., were of the opinion that the petition should be granted.