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MAYORS AND COUNCILMEMEBRS EXECUTIVE FORUM
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Last modified
7/19/2019 1:37:53 PM
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City Clerk
Date
5/28/2008
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League of California Cities <br />Mayors & Councilmembers Executive Forum <br />May 28, 2008 <br />Page 2 <br />separately billed local services, and eliminated the tax on bundled charges for both taxable and <br />non-taxable calls, despite express language in the FET and in the Mobile Telecormnunications <br />Sourcing Act of 2000, 4 U.S.C. §§ 116 et seq. (MTSA), that the FET applies to bundled charges <br />and that state and local telephone taxes on cellular telephony may be applied to bundled charges. <br />In response to the concerns raised by local governments about Notice 2006-50, the IRS <br />issued its ,Revenue Bulletin 2007-5 on January 29, 2007 stating in § 10: "Neither Notice 2006- <br />50 nor this notice affect the ability of state or local governments to impose or collect <br />telecommunication taxes under the respective statutes of those governments." <br />Several suits raising these same issues are pending in the Court of Appeal in Los <br />Angeles. The same plaintiffs' counsel are involved in all the LA cases, and we assume the <br />defendants were chosen due to their very large shares of California's telecommunications <br />market. The details of these cases follow. <br />Class Actions Against the City of Los Angeles the City of Long Beach and the County <br />of Los Angeles: Three class-action lawsuits were filed against the City of Los Angeles, the City <br />of Long 'Beach and the County of Los Angeles in Los Angeles County Superior Court: <br />Estuarado Ardon et al. v. City of Los Angeles; John McWilliams et al. v. City of Long Beach, and <br />Willy Granados et al. v. County of Los Angeles. The complaints in these cases all involve the <br />same theories. <br />All three defendants demurred, arguing that a line of cases led by Woosley v. State of <br />California, 3 CalAt" 758 (1992), prohibits a class action for tax refunds in the absence of explicit <br />legislative authorization. The trial court granted Long Beach's and Los Angeles County's <br />demurrers, with leave to amend, holding that the class plaintiffs had failed to exhaust their <br />administrative remedies by filing a claim under local claiming ordinances. Los Angeles also <br />won its demurrer in the Ardon case and the plaintiffs there appealed the dismissal of their class <br />claims (in an interlocutory appeal under the "death -knell doctrine") while maintaining their trial <br />court suit on the named plaintiffs' individual refund claims and a declaratory relief claim. <br />In County of LA v. Superior Court (Oronoz), 159 Cal.App.4tli 353 (2008), the Los <br />Angeles Court of Appeal considered a challenge to LA County's utility users tax (UUT) under <br />Prop. 62. LA County adopted its tax in 1991, when Prop. 62's requirement of voter approval of <br />local general taxes was unenforceable. The Guardino decision upheld Prop. 62 in 1995 and, <br />apparently, LA County never sought voter approval of its tax even though the California <br />Supreme Court made it clear in both Guardino and the 2001 HJTA v. La Habra case that <br />compliance was required. Perhaps because of these bad facts, the Court of Appeal decided an <br />issue the Oronoz parties had not briefed and opened the door to class actions against local taxes, <br />an ominous development for local government given the entire industry of talented lawyers who <br />seek class-action opportunities because of the lucrative '/s-share of the return often awarded <br />lawyers in such cases. <br />73647.18 <br />
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