Metropolitan News-Enterprise


Wednesday, May 13, 2009


Page 3


C.A. Rejects Suit Against Target for Collecting Tax on Coffee ‘to Go’


By a MetNews Staff Writer


A retailer cannot be sued for collecting sales tax on an allegedly non-taxable item, the Court of Appeal for this district ruled yesterday.

Div. Three affirmed the dismissal of a putative class action against Target Corporation for collecting sales tax on takeout sales of hot coffee.

The court did not reach the issue of whether such sales are taxable. It held that the action was barred because the state Constitution does not permit injunctions against taxes, the only way to challenge a tax is to make a refund claim—which can be sued on if denied—and customers cannot claim sales tax refunds because the retailer is considered the taxpayer, although reimbursement of customers may be ordered by the State Board of Equalization if it finds the tax to have been improperly collected. 

“We reject plaintiffs’ argument [that they were not seeking to enjoin collection of a tax] and find that a court may not directly or indirectly enjoin or prevent the collection of a sales tax,” Justice Patti S. Kitching wrote. “...A determination by a court that sales tax is not due on ‘to go’ hot coffee purchases from Target, and an injunction against the collection of sales tax reimbursement by Target on such purchases, is effectively an injunction against the collection of sales tax by the state.”

Nor, she added, may a plaintiff circumvent the constitutional provision by pleading claims for unfair business practices or violation of consumer protection statutes.

The plaintiffs contended that by charging tax on their purchases of hot coffee drinks, Target violated a Revenue and Taxation Code provision that exempts “food products for human consumption” from sales tax unless “served as meals on or off the premises of the retailer,” “sold as hot prepared food products,” or, in some circumstances, “furnished in a form suitable for consumption on the seller’s premises.”

The suit was dismissed after Los Angeles Superior Court Judge Michael L. Stern sustained demurrers. Kitching said the trial judge was correct.

“There is no statutory or regulatory provision allowing purchasers like plaintiffs to file a claim for a sales tax refund with the Board,” the justice wrote. “Since only taxpayers may file a claim for refund and plaintiffs are not taxpayers, they have no standing to assert a claim with the Board. Consequently, plaintiffs cannot maintain a suit for a sales tax refund because the filing of a claim with the Board is a prerequisite to such a suit.”

Kitching rejected the argument that Sec. 6901.5 of the code, by requiring a retailer to refund overpayments of sales taxes, permits a private action to collect such refunds. She noted that the statute requires such refunds only if overpayment has been “ascertained,” which means determined by the board.

“[I]t would undermine the legislative scheme to interpret section 6901.5 to permit the customer to unilaterally ‘ascertain’ when excess sales tax reimbursement has been collected by a retailer,” the justice wrote. “This interpretation would disrupt the administration of the sales tax laws because it would allow customers to usurp the authority of the Board to determine the application of the law in the first instance.”

The appeal was argued by Joseph J. Lange of Lange & Koncius for the plaintiffs, by retired Court of Appeal Justice Miriam A. Vogel, now of Morrison & Foerster, for Target Corporation, by Gerald James Strenio of The Kick Law Firm for several individuals as amici in support of the plaintiffs, and by John L. Waid for the State Board of Equalization as amicus.

The case is Loeffler v. Target Corporation, B199287.


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