62 Cal.App.5th 928
Cal. Ct. App.2021Background
- Humboldt County voters adopted Measure S (Nov. 2016), creating a commercial marijuana cultivation tax that applied to “each person engaged in commercially authorized commercial marijuana cultivation” and defined “cultivation area” as the physical area where marijuana is actually grown.
- The Board of Supervisors amended Measure S in June 2017 and April 2018 to (1) make the taxpayer a “property owner whose property is subject to a commercial marijuana cultivation permit,” (2) redefine “cultivation area” to be the area stated on the county permit, and (3) change accrual so tax is owed for every year a permit is issued regardless of actual cultivation.
- Karen Silva (a property owner who did not cultivate) received and paid large tax invoices for 2017–18 and 2018–19, then joined a suit challenging the amendments; the trial court found the amendments impermissibly broadened the tax and issued a peremptory writ.
- After the appeal was filed, the Board adopted October 2020 amendments making the tax apply to “person[s] issued a commercial marijuana cultivation permit,” but leaving the permit-based area and permit-year accrual changes intact.
- The Court of Appeal affirmed: it rejected County procedural defenses and held the Board’s amendments impermissibly broadened Measure S by expanding who is taxed, what area is taxed, and when the tax begins to accrue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Procedural: exhaustion/standing | Silva argued court review was proper; County had no adequate administrative remedy and County stipulated Silva had standing | County argued plaintiffs failed to exhaust administrative remedies and must pursue refund/administrative process | Court rejected exhaustion requirement here (no adequate/admin process) and held County waived other procedural defenses by stipulation |
| Who is taxed (person engaged vs. owner/permit-holder) | Amendments broaden tax to non-cultivators (property owners/permit-holders) beyond electorate’s choice to tax cultivators | County said amendments only clarified ambiguous terms and later October 2020 change mooted owner issue | Court held voter-approved measure taxed persons engaged in cultivation; applying tax to permit-holders/owners broadened scope and is impermissible |
| What area is taxed (actual cultivation area vs. area on permit) | Taxable area must be physical space actually cultivated; permit-based area expands the tax | County claimed original language ambiguous and permit-based definition aids administration and prevents fraud | Court found original definition unambiguous (measured around perimeter of physical cultivation) and held permit-based definition impermissibly broadened the tax |
| When tax accrues (when cultivation begins vs. when permit issued) | Tax accrues when cultivation actually begins | County urged ambiguity permitting accrual on permit issuance; administrative reading supports earlier accrual | Court held accrual begins when cultivation starts; making tax automatic for each permit year impermissibly broadened Measure S |
Key Cases Cited
- Plantier v. Ramona Municipal Water Dist., 7 Cal.5th 372 (doctrine and limits of exhaustion of administrative remedies)
- Farmers Ins. Exchange v. Superior Court, 2 Cal.4th 377 (scope of judicial abstention pending administrative process)
- County of Los Angeles v. Southern Cal. Edison Co., 112 Cal.App.4th 1108 (waiver/invited error where party asked court to rule on issue)
- Hill RHF Housing Partners, L.P. v. City of Los Angeles, 51 Cal.App.5th 621 (issue-exhaustion required where an established administrative hearing/process exists)
- People v. Cooper, 27 Cal.4th 38 (initiative statutes may be amended only as the measure permits; courts ask whether legislation authorizes what the initiative prohibits)
- People v. Lopez, 51 Cal.App.5th 589 (statutory/initiative interpretation principles; use ordinary meaning and ballot materials if ambiguous)
- Association of Irritated Residents v. Department of Conservation, 11 Cal.App.5th 1202 (mootness principles where subsequent legislation modifies challenged provisions)
- United States v. Western Pacific Railroad Co., 352 U.S. 59 (quoted for the principle that courts defer to administrative processes when remedies exist)