Judicial Interpretation of State Tax Laws in California

California Revenue and Taxation Code section 19388 states: “Any action against the Franchise Tax Board under this article shall be commenced and tried in any city or city and county in which the Attorney General maintains an office.” The Attorney General does not maintain an office in Sonoma County, but it does maintain one in San Francisco County. (Porter Decl., ¶¶ 5 and 6.) The court rejects Petitioner’s arguments, including her reliance on common law.

Defendant seeks to transfer this action from the East District to the Central District pursuant to California Revenue and Taxation Code section 6933.

California Revenue and Taxation Code section 23301 provides for the suspension or forfeiture of “the corporate powers, rights and privileges of a domestic taxpayer” that is delinquent on payment of taxes owed to the state. A limited liability company is within the scope of the definition of “taxpayer.” (California Revenue and Taxation Code section 23305.5.)

Plaintiff, in its supporting Request for Judicial Notice, has produced a Certificate of Status executed 5/30/18 from the California Secretary of State, which reflects that the California Franchise Tax Board suspended “USM Investments, Inc.’s” (noted as formed on 1/9/15) powers, rights and privileges on 12/1/16, “pursuant to the provisions of the California Revenue and Taxation Code,” and that USM Investment, Inc.’s powers, rights and privileges remain suspended as of that date.

Under the California Revenue and Taxation Code Section 23301, C&T still has a duty to respond to these requests despite it being unable to defend against the legal claims against it. (See Kaufman & Broad Communities, Inc. v. Performance Plastering (2006) 136 Cal.App.4th 212, 217-18.) Thus, C&T is in essentially a legal coma where it both still has the obligation to respond to discovery requests, while at the same time being unable to do anything in the litigation until it resolves its suspended status.

Under the California Revenue and Taxation Code section 23301, however, a corporation still has a duty to respond to these requests despite it being unable to defend against the legal claims against it. (See Kaufman & Broad Communities, Inc. v. Performance Plastering (2006) 136 Cal.App.4th 212, 217-18.) Code of Civil Procedure sections 2030.290(b) and 2031.300(b) allow the propounding party to file a motion to compel responses to interrogatories and document demands if a response has not been received.

California Revenue and Taxation Code section 4675, subdivision (a) provides in relevant parts: Any party of interest in the property may file with the county a claim for the excess proceeds, in proportion to that person’s interest held with others of equal priority in the property at the time sale, at any time prior to the expiration of one year following the recordation of the tax collector’s deed to the purchaser.

Defendants argue that declaratory relief is prohibited by California Revenue and Taxation Code § 4807. Section 4807 conforms with California Constitution, article XIII, section 32, and expands it from the state to local authorities. Article XIII, Section 32 of the California Constitution provides as follows: “No legal or equitable process shall issue in any proceeding in any court against this state or any officer thereof to prevent or enjoin the collection of any tax.

California Revenue and Taxation Code ("R&T Code") §6016 defines "tangible personal property" as "personal property which may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses." The R&T Code requires all retailers that sell tangible personal property to consumers to pay sales tax based on the receipts or money that the retailer receives in the transaction." (R&T Code §§6007, 6051, 6051.1.)

California Revenue and Taxation Code Section 23304.1(b). Section 23304.1(b) states that if a foreign corporation that is required to be "qualified" to do business in California, and is not qualified, fails to file the requisite Franchise Tax Board return, any contracts "made in the state" during that period are "voidable" by the other party to the contract, subject to Section 23304.5.

In opposition, Plaintiff asserts that under the California Revenue and Taxation Code § 11930 and 62(d), a transfer to a trust does not change ownership, and is therefore not a taxable event. Additionally, Plaintiff asserts that the Trusts have named beneficiaries, and as implied by their titles, are "family trusts" and include spouses. As a result, Plaintiff argues that the spousal named Defendants are proper parties, and may have an interest in the transfer to their "family trust."

California Revenue and Taxation Code ("R&T Code") §6016 defines "tangible personal property" as "personal property which may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses." The R&T Code requires all retailers that sell tangible personal property to consumers to pay sales tax based on the receipts or money that the retailer receives in the transaction." (R&T Code §§6007, 6051, 6051.1.)

Plaintiff also cites to the California Revenue and Taxation Code §§ 11930 and 62(d) for the proposition that the transfers by the individual defendants to their status as trustees of a trust did not change ownership. Code of Civil Procedure § 872.550, entitled Joinder of all Persons Unknown Claiming any Interest is also of interest here.

Lastly, Defendants move for summary judgment on the ground that the Agreement is null and void for failing to comply with California Revenue and Taxation Code section 23304.1.

Subsequent to Truck, California Revenue and Taxation Code § 19719, which makes it a crime for any person “to exercise the powers, rights, and privileges of a corporation that has been suspended,” was amended. Section 19719(b) now specifically excludes “any insurer, or counsel retained by an insurer on behalf of the suspended corporation, who provides a defense for a suspended corporation” from coming within the scope of this statute. Cal. Rev. & T.

Here, by contrast, Nos. 15 and 16 do not require defendant to cite laws or regulations supporting the contention. ( See Sav-On, 15 Cal.3d at 5 [Both the California Revenue and Taxation Code and the California Administrative Code are as readily available to real party in interest as to petitioner and no purpose of discovery is served by compelling the latter to perform legal research for the former].) The Court finds that Nos. 15 and 16 permissibly seek defendants factual contentions.

Here, by contrast, Nos. 15 and 16 do not require defendant to cite laws or regulations supporting the contention. ( See Sav-On, 15 Cal.3d at 5 [Both the California Revenue and Taxation Code and the California Administrative Code are as readily available to real party in interest as to petitioner and no purpose of discovery is served by compelling the latter to perform legal research for the former].) The Court finds that Nos. 15 and 16 permissibly seek defendants factual contentions.

The language for the general COO statute under Prop 13 was enacted verbatim from The Task Force Report as Section 60 of the California Revenue and Taxation Code [1] . The California Supreme Court in Pacific, supra , at 1 Cal.4 th 162, cited to the fact that the language of Section 60 was adopted verbatim as evidence that the Legislature intended for section 60 to contain the overarching definition of a change of ownership for reassessment purposes.

Here, USMs powers, rights and privileges were suspended by the California Franchise Tax Board pursuant to the provisions of the California Revenue and Taxation Code as of December 1, 2016. (See Lauber Decl., Ex. 2.) Accordingly, USM lacks capacity to defend or sue in this matter. The courts only qualm with the motion is that USM has been a named Defendant since the commencement of the action in 2018.

Plaintiff maintains the Los Angeles County Assessment Appeals Board failed to timely comply with the provisions of California Revenue and Taxation Code sections 1604, et seq. [First Amend. Comp., ¶ 10.] The remaining first cause of action specifically and exclusively alleges an unlawful method of assessment seeking de novo review of the method of assessment applied... [First Amend. Comp., ¶ 16.]

Prior to the hearing on April 29, 2021, Defendant filed a declaration attaching a certified copy of the California Secretary of State Certificate of Status regarding Ivy Bridge, which certifies that the California Franchise Tax Board forfeited the entity's powers, rights and privileges on March 01, 2021 pursuant to the provisions of the California Revenue and Taxation Code, and that those powers, rights, and privileges remained forfeited as of April 22, 2021. (Cullen Decl. ¶ 2, Exh. A.)

In Sav-On the court found that a party cannot by discovery require disclosure of the specific statutes and administrative regulations supporting the tax deductions at issue because “the California Revenue and Taxation Code and the California Administrative Code are as readily available to real party in interest as to petitioner and no purpose of discovery is served by compelling the latter to perform legal research for the former.” (Id. at 5.)

California Revenue and Taxation Code §214 provides, “(a) Property used exclusively for religious... purposes owned and operated by community chests, funds, foundations, limited liability companies, or corporations organized and operated for religious, ...purposes is exempt from taxation...if: (1) The owner is not organized or operated for profit....(2) No part of the net earnings of the owner inures to the benefit of any private shareholder or individual. (3) The property is used for the actual operation of

Cross-Complainants argued that LLC is prohibited from defending in this action because LLC failed to register or pay fees to conduct business in California per California Revenue and Taxation Code section 23301 and Timberline, Inc. v. Jaisinghani (1997) 54 Cal.App.4th 1361; Ransome-Crummey Co. v. Superior Court (1922) 188 Cal. 393, 396-397; Alhambra-Shumway Mines, Inc. v. Alhambra Gold Mine Corp. (1957) 155 Cal.App.2d 46, 50-51.

. […] and as deemed appropriate by the board of directors of this corporation, to engage in the aforementioned contributional activities in support of and assistance to other organizations similarly qualified as exempt under the aforementioned provisions of the Internal Revenue Act of 1954 and the California Revenue and Taxation Code.” (Ibid. emphasis added.)

Therefore, Defendant cannot defend or participate in this action pursuant to California Revenue and Taxation Code Section 19719. Plaintiff also requests sanctions based on Defendant and Defendants counsel bad faith conduct under Code of Civil Procedure section 128.5 in pursuing litigation activities knowing that Defendant was a suspended entity. Based on the inadequate meet and confer process, the Court denies Plaintiffs motion to strike Answer and request for sanctions.

Background In this action, Plaintiff seeks a refund of taxes pursuant to California Revenue and Taxation Code section 6901 et seq. Plaintiff is an online retailer of weight loss and nutrition products. During the relevant time period, Plaintiff made sales in approximately 60 jurisdictions in the United States and Canada. In some of the sales to non-California customers, Plaintiff charged the customers a sales tax according to the tax rates of the customers’ jurisdiction.

[stating I am compelled to inform this court that United Clinical Research, Inc., is a suspended corporation due to its inability to prepare its taxes under California Revenue and Taxation Code § 23301].) A suspended corporation loses all rights and privileges under the law, including the right to prosecute a lawsuit. ( Granny Purps, Inc. v. Cnty. of Santa Cruz (2020) 53 Cal. App. 5th 1, 10.)

The Court will now restate the relevant statutes: California Revenue and Taxation Code ("R&T Code") §6016 defines "tangible personal property" as "personal property which may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses." The R&T Code requires all retailers that sell tangible personal property to consumers to pay sales tax based on the receipts or money that the retailer receives in the transaction." (R&T Code §§6007, 6051, 6051.1.)

On August 2, 2010, the California Franchise Tax Board forfeited Titan’s powers, rights and privileges pursuant to the California Revenue and Taxation Code. (RJN, exhibit 1.) Counsel for plaintiff, Jordan Porter, provides a declaration that he first learned of Titan’s corporate status at the end of January 2011, that he requested a certificate of status from the California Secretary of State on January 31, 2011, and received that certificate the week following April 14, 2011. (Porter decl., ¶¶ 2-4.)

Exhibits D, E, F, G, and H to Daly’s declaration are petitioner’s requests for information that were sent to CWI pursuant to California Revenue and Taxation Code Section 441, subdivision (d). (Flood Dec., ¶4.) Exhibits I, J, and L to Daly’s declaration and Exhibit C to Flood’s declaration are documents that were provided by CWI to petitioner in response to petitioner’s requests for information. (Flood Dec., ¶¶ 3, 4.)

As set forth above, NG Trucking provides evidence that the December 9, 2021 Certificate of Status concerning Plaintiff provides, inter alia , that [t]he records of this office indicate&the California Franchise Tax Board forfeited the entitys powers, rights and privileges on February 1, 2021, pursuant to the provisions of the California Revenue and Taxation Code; and the entitys powers, rights and privileges remain forfeited. (NG Truckings RJN, ¶ 1, Ex. M, p. 10.)

BACKGROUND: On September 13, 2021, Plaintiffs Jack Rimokh and Joelle Rimokh filed their Complaint against Defendant California Franchise Tax Board pursuant to California Revenue and Taxation Code section 19382. On October 12, 2021, Defendant filed its Answer. On December 19, 2022, Defendant filed its Motion for Summary Judgment.

On February 1, 2019, Smartvest’s rights and privileges to do business in California were forfeited by the California Franchise Tax Board for nonpayment of fees and taxes pursuant to the California Revenue and Taxation Code. (Dfds. RJN, Ex. C.) In California, “[a] corporation may not prosecute or defend an action while its corporate status is suspended.” Newport Harbor Ventures, LLC v. Morris Cerullo World Evangelism (2018) 4 Cal.5th 637, 641.

The Certificate states: “The limited liability company is hereby granted relief from contract voidability under section 23305.1 of the California Revenue and Taxation Code. All contracts entered into during the period for which relief is granted may be enforced in the same manner and to the same extent by all parties to any contracts and any third parties as if the contracts had not become voidable under section 23304.1 of the Revenue and Taxation Code.” (Dfd. RJN, Ex. D.)