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Local Ordinance Isn't a Statute. Thanks for the Clarification.

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By Robyn Hagan Cain on April 29, 2013 4:11 PM

The California Supreme Court ruled last week that a Long Beach ordinance couldn’t save the seaside city from a tax refund lawsuit.

Long Beach resident John McWilliams sued the city on behalf of himself and similarly-situated individuals, challenging the city’s telephone users tax (TUT) and seeking refund of taxes paid.

He claimed that Long Beach Municipal Code Section 3.68.50(d) exempted from the TUT all amounts that “are exempt or not subject to” the federal excise tax on telephone service and that the city has been mischaracterizing the charges subject to the federal excise tax for some time. The city claimed that a local ordinance barred his class action.

Long Beach demurred to McWilliams' complaint, arguing that class claims for a refund were barred under Woosley v. State of California. While the trial court agreed, the Court of Appeal and the California Supreme Court decided that Long Beach wouldn't get off so easily.

California Code of Civil Procedure section 313 provides that the "general procedure" for the presentation of claims for money or damages against a local government entity is prescribed by the Government Claims Act. In Ardon v. City of Los Angeles, the California Supreme Court held that the Government Claims Act permits a class action claim by taxpayers against a local government entity for the refund of an unlawful tax "in the absence of a specific tax refund procedure set forth in an applicable governing claims statute."

But Ardon hadn't been decided when the trial court initially ruled in this matter. (The Court of Appeal actually stayed McWilliams' appeal for three years pending the Supreme Court's resolution of Ardon.)

The Cal Supremes explained in Ardon that Woosley had not erected a categorical bar to class claims for a tax refund: All that Woosley demands is that a court first examine the claims statutes at issue in a claim for a taxpayer refund to determine whether the legislature contemplated a class claim under the applicable California code.

Woosley didn't analyze the applicability of the Government Code section 910 tax refund limitations. Ardon, on the other hand, did. It explained that class claims for tax refunds against a local governmental entity are permissible under section 910 "in the absence of a specific tax refund procedure set forth in an applicable governing claims statute."

Since California defines a "statute" as "an act adopted by the Legislature of this State or by the Congress of the United States, or a statewide initiative act," and the Long Beach ordinance clearly did not fall within that definition, the California Supreme Court agreed that the ordinance cannot bar McWilliams' complaint.

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