6 Cal. 5th 951
Cal.2019Background
- Plaintiffs (McClain, Feigenblatt, Fisher) bought glucose test strips and lancets from retail pharmacies that charged and remitted sales tax reimbursement to the state.
- Section 6369(e) exempts insulin and insulin syringes; a Board regulation (Cal. Code Regs., tit. 18, § 1591.1(b)(5)) interpreted that exemption to include test strips and lancets when furnished per physician instruction.
- A 2003 Board program manager letter (Paliani Letter) narrowed the exemption’s application by imposing documentation and pharmacist-dispensing conditions; retailers treated most shelf sales as taxable.
- Plaintiffs sued retailers and the Board seeking (among other relief) a court order compelling retailers to file refund claims with the tax agency so overcharged consumers could be refunded.
- The trial court sustained defendants’ demurrer; the Court of Appeal affirmed. The Supreme Court granted review to decide whether consumers can compel retailers to seek refunds absent a prior administrative or judicial determination of entitlement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether consumers may sue retailers to compel them to file refund claims when taxability is disputed | Javor permits consumer suits to force retailer refund applications even if the taxability question is unresolved | Javor was limited to situations where the tax agency already determined refunds were owed; absent that, consumers lack such remedy | Court: Javor relief requires a prior legal determination establishing entitlement to a refund; plaintiffs’ suit fails because no such determination exists |
| Whether Javor’s rationale (protecting sales-tax integrity) supports broader consumer suits | Plaintiffs: denying suit undermines integrity and unjustly enriches the state | Defendants: orderly administration and administrative expertise favor agency processes; Loeffler requires administrative resolution of taxability disputes | Court: administrative framework and Loeffler favor limiting Javor; integrity concern does not justify expanding Javor here |
| Whether plaintiffs are deprived of due process or subjected to an unconstitutional taking by lack of a consumer refund remedy | Plaintiffs: no practical way for consumers to obtain refunds, so rights are denied | Defendants: retailers are the taxpayers; statutory scheme provides administrative avenues; no vested consumer right to exemptions | Court: no due process or takings violation shown because no administrative or judicial determination finding excess tax has been made |
| Whether plaintiffs may pursue breach of contract under Civil Code §1656.1 for alleged misrepresentation of taxability | Plaintiffs: allowing no contract claim would render the statutory rebuttable presumption effectively irrebuttable | Defendants: consumer contract claims seeking to resolve taxability are inconsistent with tax statutes and Loeffler | Court: Loeffler forecloses consumer suits to resolve taxability; rebuttable presumption not converted to irrebuttable one, but rebuttal must follow tax-code-consistent avenues |
Key Cases Cited
- Javor v. State Bd. of Equalization, 12 Cal.3d 790 (1974) (authorized consumer suit compelling retailers to seek refunds where the tax board had already determined refunds were owed)
- Loeffler v. Target Corp., 58 Cal.4th 1081 (2014) (limits consumer suits resolving taxability; emphasizes administrative-exhaustion and agency expertise)
- City of Pomona v. State Bd. of Equalization, 53 Cal.2d 305 (1959) (sales tax is a tax on the privilege of conducting retail business; retailer is the taxpayer)
- McKesson Corp. v. Division of Alcoholic Beverages & Tobacco, 496 U.S. 18 (1990) (due process requires taxpayers a fair opportunity and clear remedy to challenge tax obligations)