McCLAIN v. SAV-ON DRUGS

Amicus Curiae Brief of Alina Bekkerman, Jenny Lee, Brandon Griffith, and Charles Lisser

Cal.May 21, 2018

Case No. 8241471 SUPREME court a IN THE SUPREME COURT OF CALIFORNIA MAY 21 2018 Michael McClain,etal., Jorge Navarrete Clerk Plaintiffs and Appellants, e Deputy Vv. Sav-On Drugs,et al., Defendants and Respondents. After a Decision of the Court of Appeal of the State of California, Second Appellate District, Division 2 Appeal Nos. B265011 and B265029 Superior Court of Los Angeles County, Nos. BC327216 and BC325272, John Shepard Wiley, Jr., Judge Presiding APPLICATION TO FILE AMICUS CURIAE BRIEF AND PROPOSED BRIEF OF AMICI CURIAE ALINA BEKKERMAN,ET AL. IN SUPPORT OF PLAINTIFFS-APPELLANTS Tony Jerome Tanke (SBN 74054) Daniel M. Hattis (SBN 232141) Law Offices of Tony J. Tanke Hattis Law 2050 Lyndell Terrace, Ste. 240 P.O. Box 1645 Davis, CA 95616 - Bellevue, WA 98009 (530) 758-4530 (650) 980-1990 appeals@tankelaw.com dan@hattislaw.com - Attorneys for Amici Curiae A. Bekkerman, B. Griffith, J. Lee, and C. Lisser Case No. 8241471 IN THE SUPREME COURT OF CALIFORNIA Michael McClain,et al., Plaintiffs and Appellants, Vv. Sav-OnDrugs,et al., Defendants and Respondents. After a Decision of the Court of Appeal of the State of California, Second Appellate District, Division 2 Appeal Nos. B265011 and B265029 Superior Court of Los Angeles County, Nos. BC327216 and BC325272, John Shepard Wiley, Jr., Judge Presiding APPLICATION TO FILE AMICUS CURIAE BRIEF AND PROPOSED BRIEF OF AMICI CURIAE ALINA BEKKERMAN,ET AL. IN SUPPORT OF PLAINTIFFS-APPELLANTS Tony Jerome Tanke (SBN 74054) Daniel M. Hattis (SBN 232141) Law Offices of Tony J. Tanke Hattis Law 2050 Lyndell Terrace, Ste. 240 P.O. Box 1645 Davis, CA 95616 Bellevue, WA 98009 (530) 758-4530 (650) 980-1990 appeals@tankelaw.com dan@hattislaw.com Attorneys for Amici Curiae A. Bekkerman, B. Griffith, J. Lee, and C. Lisser TABLE OF CONTENTS TABLE OF AUTHORITIES 00... cece ceccessssssnesscseeceeeeseeneeeereeesenereeenanans 4 APPLICATION TO FILE AMICUS CURITAEBRIEF...ceeeeeees 8 INTRODUCTIONuu...cece eccsecsecsessnsnnceneesecseessssesererenseneaaeaaensaneneessenenee 11 DISCUSSION..........cceecssessssssssccescnsccsscnseeesecesensseseeseseenseeneeenessaneesesesoasses 14 I. CONSUMERS WHOPAY SALES TAX REIMBURSEMENTS SHOULD BE ACCORDED THE LEGAL RIGHTS OF TAXPAYERS....cccccccesesseeecsssnenes 14 A. The Legal Incidence of Sales Tax in California Falls On Consumers Who Routinely Reimburse Sellers For 100%of the Tax Paid...........cccccsssessececeeecssscensvessssssseaceststsoscessesnensees 16 B. Any Purported Question of Consumer Consent to Sales Tax Reimbursements Raises Issues of Fact That Cannot Be Resolved on DOMUPFTLlL. ........ccccsecesccessscceucecsescecesceetsusecessaseaeceansccesesceseens 29 II. CONSUMER-TAXPAYERS HAVE CONSTITITIONAL RIGHTS TO EFFECTIVE RETROSPECTIVE REFUND REMEDIES TO SAFEGUARD BOTH THEIR DUE PROCESS RIGHTS AND THEIR RIGHTS TO BE FREE FROM UNCONSTITUTIONAL TAKINGS OF PRIVATE PROPERTY........ccccccccccscesesssserercnesesseeveecevsessseenessens 32 WY. WITHOUT THE AVAILABILITY OF JUDICIALLY-SUPERVISED REFUND REMEDIES AS RECOGNIZED IN THIS COURT’S DECISIONS IN JAVOR AND LOEFFLER, CALIFORNIA’S SALES TAX SCHEME WOULD BE UNCONSTITUTIONAL......ee 39 A. Consumer-Taxpayers’ Rights Were Recognized in Javor and Loeffler. ...ccccccsssessecsseeesssneeessens 39 B. Apart from Equitable Remedies Under Javor, There are No Clear and Certain Remedies to Obtain Consumer Tax Reimbursement Refunds...........ccssccccccccceccessseseseesssssneenes 43 CONCLUSION...ccccesssssssscesecesesseccccssssceueesnssaecesneesecesseeeeseseescessarsensnes 44 CERTIFICATE OF WORD COUNT....cecccsscsstsecessssrnnneneneeesseacesaes 47 PROOF OF SERVICE .......:cccsscssccssssceeceecessseeusnsesensnsessessenssensessnseeseneees 48 we 3 TABLE OF AUTHORITIES STATE CASES 1926 North Ardmore Avenue, LLC v. County ofLos Angeles (2017) 3 Cal.5319 iccccccsecscescetseerecsecesensscerssnettenteenirestereseetieteeneetress 30 Ainsworth v. Bryant (1949) 34 Cal.App.2d 465onceeres 18 American Corporate Security, Inc. v. Su (2013) 220 Cal.App.4th 38 occcenntereeecnir secre tenreeeeresseeeeneeeeeeeenietnneeeery 32 Ardonv. City ofLos Angeles (2011) 52 Cal.4th 241oes33 Cooper v. Cooper (1959) 168 Cal.App.2d 326.0...ceener neeeees 3] De Aryan v. Akers (1939) 12 Cal.2d 781 ooo. ccceceseeeeceeneenereeeres 18 Diamond Nat. Corp. v. State Bd. ofEqualization (1975) AO Cal.App.3d 778.0... .ccccccceccseesenteceneeeeesenieeesneenneeecivesepenneeeesesenieeneeens 19,20 Ehrlich v. City ofCulver City (1996) 12 Cal.4th 854oe37,38 Glasser v. Glasser (1998) 64 Cal.App.4th 1004.0... iisessesceeneeseneees 31 GMRI, Inc. v. CDTFA (2018) 21 Cal.App.Sth LLeeeeeees 21 Guy v. Washburn (1863) 23 Cal. V1 Liceenereeeeeeeteeeteetnettteeennns 31 Hess v. Ford Motor Co. (2002) 27 Cal.4th S16... eeceeeeeteeeettseees 3] Hillsboro Properties v. City ofRohnert Park (2006) 138 Cal.App.4th 379... cccccccceccceseserereeeeeteeetiiseseeeeeseeseeticeneseneees 32 Horn v. City of Ventura (1979) 24 Cal.3d 605 oo...cttteeeeeees 32 Irvine v. Citrus Pest Dist. No. 2 (1944) 62 Cal.App.2d 378 .....e 30 Jacks v. Santa Barbara (2017) 3 Cal.5th 248.0000... ccceceeeees 21 w 4 Javorv. State Board ofEqualization (1974) 12 Cal.3d 790 ...... passim Julian v. Mission Community Hospital (2017) 11 Cal.App.5th 360........... 35 Kleffner v. Vonage Holdings Corp. (2010) 49 Cal 4th 334.0...cee 32 Loeffler v. Target Corp. (2014) 58 Cal.4" 1081.21,39,40,42 Long Beach Firemen’s Credit Union v. Franchise Tax Board (1982) 128 Cal.App.3d 50 oie cccccecnceereieenenseeteeeeiietriner citi rnetnerebesieteastertee rie: 30 McClain v. Sav-On Drugs (2017) 9 Cal.App.Sth 684.000.0000 35 Myers v. Phillip Morris Companies, Inc. (2002) 28 Cal.4th 828... 32 National Ice v. Pacific Fruit Express Co. (1938) 11Cal.2d 283... 18 Pacific Coast Eng. Co. v. State of California (1952) 111 Cal.App.2d 31a...criteiirc 19 Palma vy. Leslie (1935) 6 Cal.App.2d 70231 Roth Drug, Inc. v. Johnson (1936), 13 Cal.App.2d 720.00...ee 18 San Remo Hotel v. City and County ofSan Francisco (2002) QT Cal. 4th 643 ciiciccccccccccccscecssseeeee scence ener nee renneeeeeeeee eee nnnnseetitestiiees 37,38 Water Replenishment Dist. ofSo. Cal. v. City of Cerritos (2013) 220 Cal. App.4th 1450 oo. ccccnceee rere eci cin ennsrireeieeniiiseieieeiee 34 Western Lithograph Co.v. State Bd. ofEqualization (1938) 1] Cal.2d 156 icc cccceccce cree cere ern teernEEE eter ern n reeset ereeee eens 18 Western States Bankcard Assn. v. San Francisco (1977) 19 Cal. 3d 208 oo.cccccecccccccccceee cece tere ete e ee eeeeeerrrssssesaaaeeneneeeeeeetesensiteeeeeeeees 20 STATE STATUTES Cal. Constitution, Article XT], § 32.0...ieeett etntterre tis 1] Civil Code, § 1656.1 ...cceccceeecer cree ere ren tener tices sce ne eee 22,29,26 Civil Code, § 1656.1() cessestere sree tenses secs rr see seeeeee 24 Civil Code, § 354 8...cccccccecsssecccecenenetseseeesisenteene neste ser esses e tree geese ees 30 Evid, Code, § 660 ..cccccccceeecseenee en en ere reine ee en enter eeEge30 Evid. Code, § 664 c.cccccccsceccsccene sense eens rete ee eee e30 Gov. Code, § 15570.24(a)..cccccccccecee eee etre eett ees8 Rev. and Tax Code, § 6012.....:cccccceer een te reree reeres 22 Rev. and Tax Code, § 6092.......ccccceeec eerste steer ntene csc s reer series 35 Rev. and Tax Code, § 648]...cccrereitern rg ese reeg 44 Rev. and Tax Code, § 6483.....:cccccccerr ene ener sree rne eter rien se ne ene se gn sees 44 Rev. and Tax Code, § 6591-6597 ......cccceciriete rnaseein 36 Rev. and Tax Code, § 6597(a) ....cccecccceecece nine r rire en ent ree rere sneer nn es 36 Rev. and Tax Code, § 6901.5 ......ccccccce eine re eiee ttre rir is te tase se ane 36 Rev. and Tax Code, § 6931-6937. ...cccccceicererni ertees 35 Rev. and Tax Code, § 7054.....:ceccccccc ccc te eeeenr eeset 44 FEDERAL CASES Bailey v. CIR (1987) 88 T.C. 900...c.cccce treet estes trent st sce 27,28 California State Bd. ofEqualizationv. Chemehuevi Tribe (1985) 474 U.S.9 vices essere esis ees ees eenecenneesenecenet esas sce ect etter gn s cage ee 28 Carpenterv. Shaw (1930) 280 U.S. 363 occeett treee 33 6 - Chemehuevi Tribe v. State Bd. ofEqualization (9th Cir. 1985) 757 F.2d 1 OY.SsEEOOEE EEEEESESSST OE OOOSESOISS 33 Coeur D’Alene Tribe v. Hammond (9" Cir. 2004) 384 F.3d 674... 28 Diamond Nat’l Corp. v. State Bd. ofEqualization (1976) 425 U.S. 268 cece eeeveeneneeeeeeeeeeeeeeseeeeeeeeeseeesc:CEUE DEUCES EDEL EEE DDEEI DELCO Gaseeeeeeeeeeeeeeeseniaeegs 16,19,20 First Agricultural Nat'l Bank v. Tax Comm’n (1968) 392 U.S. 339... 16 Harperv. Virginia Dept. ofTaxation (1993) 509 U.S. 86 weet 24 Jensen v. Lane County (9th Cir. 2000) 222 F.3d 570.0...eeeeee 35 Kern-Limerick, Inc. v. Scurlock (1954) 347 U.S. L1O.eee 16 McKesson v. Division ofAlcoholic Beverages (1990) 496 U.S. 18......066 34 Meyer Const. Co. v. Corbett (N.D.Cal. 1934) 7 F.Supp. 616 oceeee 18 Munnsv. Kerry (9th Cir. 2015) 782 F.3d 402 oo...cccetter teenies 32 Nollan v. California Costal Com’n, (1987) 483 U.S. 825 vce38 Reich y, Collins (1994) 513 U.S. 106...ccceect eneee tte erecertaeensees 32 U_S. v. State Bd. ofEqualization (9th Cir, 1981) 650 F.2d 1127......... 23,25 United States v. City ofDetroit, 355 US. 466.0...cetteeee 24 United States v. Nevada Tax Com. (9th Cir. 1971) 439 F.2d 435 oo. 17 United States v. N.M. (10" Cir. 1978) 581 F.2d 803 wees 17 United States v. Tax Comm'n ofMiss. (1975) 421 U.S. 599.cece 25 FEDERAL CONSTITUTION U.S. Const., art. XIV; Cal. Const. art. I, §§ 7(a); 15...eee 32 U.S. Const., Sth Amend.; Cal. Const., art. 1, § 19(a) ..ccceeectecces 35 _- 7 -- APPLICATION TO FILE AMICUS CURIAE BRIEF OF AMICI A. BEKKERMAN,B. GRIFFITH, J. LEE, AND C, LISSER IN SUPPORT OF PLAINTIFFS-APPELLANTS Alina Bekkerman, Brandon Griffith, Jenny Lee, and Charles Lisser (collectively, “Bekkerman”or “Bekkerman Plaintiffs”) are the named plaintiffs in a putative class action lawsuit entitled Bekkermanv. California Department of Tax and Fee Administration,’ Sacramento Superior Court No. 34-2016-80002287, on appeal Third District Court of Appeal No. C085695, as well as a companion action, Sacramento Superior Court No. 34-2015-80002242, still pending. The BekkermanPlaintiffs’ class action suit was brought against the Department as wellas severalretail sellers of mobile phones who are also carrier-service providers of mobile phoneservices. It alleges that the Departmentis illegally charging sales taxes on mobile phonesales based on non-existent phantom sales commissions. Those commissions are never actually paid on sales madein retail stores owned by mobile phoneservice 1 The Taxpayer Transparency and Fairness Act of 2017 createdthe California Department of Tax and Fee Administration (CDTFA) and transferred to it most of the California Board of Equalization’s tax-related duties, powers, and responsibilities. (Assem. Bill No. 102 (2017-2018 Reg. Sess.) § 1.) Referencesto the “Board of Equalization”in the sales tax laws “shall be deemed to refer to the Department of Tax and Fee Administration.” (Gov. Code § 15570.24(a).) For simplicity, this brief will refer to both the CDTFAand the Board as the “Department.” -- 8. providers. Nonetheless, the Department assumes the commissions are paid and taxes accordingly. In their suit, Plaintiffs have encountered the same arguments from the Department as madein the present action, i.e., that consumer payers of sales tax reimbursements based on illegally-imposed sales taxes are not entitled to refund remedies. They have advanced constitutional due process arguments similar to those advanced in the presentaction. Based on their experiencelitigating against the Departmentin their ownclass action, the Bekkerman Plaintiffs are uniquely positioned to offer additional legal arguments and theories regarding the issues raised in the present action. Those argumentsare included in the proposed Amicus Curiae Brief attached to this Application. AUTHORSHIP AND FUNDING Noparty or attorney in this litigation authored the proposed brief or any part of it. No one other than the Law Offices of Tony J. Tanke and Hattis Law have made any monetary contribution (or, indeed, any contribution) towards the preparation or submission of this brief. The brief was written entirely by counsel for the Bekkerman Plaintiffs in order to support Plaintiffs-Appellants in this action andto protect the Bekkerman Plaintiffs’ interests in their own lawsuit. For the foregoing reasons, the Bekkerman Plaintiffs respectfully request this Court’s permissiontofile the attached Brief of Amici Curiae. 9 - Dated: May 14, 2018 Respectfully submitted, LAW OFFICES OF TONY J. TANKE7 p — Daniel M. Hattis HATTIS LAW --10-- BRIEF OF AMICI CURIAE ALINA BEKKERMAN,ET AL.IN SUPPORT OF PLAINTIFFS-APPELLANTS INTRODUCTION Taxationis vital to the efficient and effective operation of government. The law favors prompt collection of taxes to ensure the availability of public funds. But taxpayers have rights as well. They also have remedies when they are subjected to taxes that contravene the law. The system is kept in balance by a state constitutional provision prohibiting courts from enjoining tax collection pending litigation, but ensuring that, after paymentof a tax claimedto beillegal, the payor can bring an action for a refund of the tax paid plus interest — according to procedures established by the Legislature. (Cal. Const., art. 13, § 32.) The present case calls upon this Court to decide what happens when legislative proceduresfal] short in providing refund relief to one of the most numerousclasses of California taxpayers — ordinary consumers who pay the lion’s share of sales taxes imposed on hundredsofbillions of dollars in sales. California sales taxation is defined by the complex character of tax statutes and regulations, the massive scale and diversity of millions of consumertransactions across our state, and persistent governmentefforts to increase the flow of public revenue into the state’s coffers. On occasion, those efforts overreach and giverise to instances ofillegal imposition and -- 1] -— collection of tax revenues. Whenthis occurs, California taxpayers have constitutional due processrights to “clear and certain” judicial relief in the form of refunds of amounts illegally paid. Our tax statutes do not provide clear and certain refund remedies to California consumers who are the economic taxpayers of illegal sales taxes. Instead, they expressly allow only retailers to claim refunds and to prosecute lawsuits to secure them. They do so even thoughstatutes and regulations allow retailers to obtain reimbursementof all taxes paid by simply passing the amounts on to consumersas partofsales transactions. Consumers are accustomed to paying sales taxes and seeing them appear on sales slips and receipts. But they are not accustomedtoillegal and unauthorized taxes on their purchases of goods and undoubtedly assume that all amounts they are charged assales taxesare legitimately imposed. Amici are consumers who wererequired to pay 100% ofthe sales taxes due on their purchases of mobile phone devices and mobile phone services in retail stores owned by the major mobile phoneservice providers. They are seeking refundsarising out of an illegal attempt by thestate, acting through its Department of Tax and Fee Administration, to charge them sales taxes on non-existent sales commissions charged ontheir purchases. Those phantom commissionsare not paid to anyone. They cannot be the basis ofa sales tax. This happens because the major mobile phoneservice providers owntheirretail stores and do not pay themselves --12-- sales commissions on their own sales. Amici, like other similarly situated consumer-taxpayers, are now confronting the Department’s contention that they have no rights and no remediesat all that will secure to them what there are entitled to — a refund of taxes illegally charged and collected. Amici will show below that they and other consumersare legally and equitably entitled to tax refund relief. They base their entitlement on the following propositions which are more fully discussed below: Consumers who paysales tax reimbursements are legal taxpayers who should be accordedthe rights of legal taxpayersin their dealings with the Department — especially when the Departmenthasacted oris acting illegally in imposing and collecting tax. Consumer-taxpayers in California have due processrights to clear and certain remedies in the form of refundsofillegal taxes paid by them. Theyare also protected from takings of their property without compensation. Both sets of rights are violated by the Department’s statutes and modesofoperation. This Court has in the past made up for these statutory deficiencies in California law by establishing equitable judicial remedies by which consumer-taxpayers can compel their retailers to file tax refund claims with the Department and can compel the Departmentto insure that refunds are -- [3-- given to those who actually paid illegal taxes. The Second District Court of Appeal in this case eviscerated these remedies by employing an erroneousinterpretation of this Court’s precedents. If its decision is upheld, California’s system ofsales taxation will be unconstitutional. DISCUSSION I. CONSUMERS WHOPAY SALES TAX REIMBURSEMENTS ARE LEGAL TAXPAYERS WHO SHOULD BE ACCORDED THE LEGAL RIGHTS OF TAXPAYERS. The typical California retail sale that generates a sales tax is devoid of bargaining. It is a standard transaction with seller-dictated terms and prices. The consumerenters a sales establishment, selects an item for purchase, pays a stated price, and is given a sales receipt showing a charge to the consumerof the full amount of California sales tax attributable to the transaction. This typical retail sale was madein all of the transactions involved in the present action as well as all those involved in the actions referred to in the amicusbriefs filed in support of Plaintiffs and Appellants. UnderCalifornia law, the sales tax is remitted to the Department by the retailer. The retailer files tax returns, forwards tax payments to the Department, and interacts with the Department aboutthe taxes due. Becausethe law allowsretailers to do so, they routinely pass 100% ofthe tax along to consumers. Consumers thus becomethe actual economic --14-- taxpayers of all amountspaid in tax. While there are occasional exceptions (e.g., promotions wheretheseller offers to pay the tax itself), the standard approachis typical. The Department counts on it to obtain the funds California governments require to operate. As amici will discuss, the law regarding the incidenceofsales taxation is a morass. While state statutory and case law generally provide that the incidence ofsalestaxesfalls onretail sellers, federal due process and other federal law is to the contrary. The simplereality is that consumers pay sales taxes; therefore, they alone have an incentive to challenge illegalities in the imposition and collection of those taxes. The Department’s motivation to collect potentially illegal taxes — without opposition by the only affected parties — is supported and reinforced by the statutory tax refund remedies accorded only to retailers and not to consumers and economic taxpayers. This section will discussthe legal incidence of sales taxation in California; the next will explain the due process and takings consequences from the operation of the California sales tax scheme as envisioned, designed, and enforce by the Department. --|5- A. The Legal Incidenceof Sales Tax in California Falls On Consumers Who Routinely Reimburse Sellers For 100% of the Tax Paid. For purposesoffederal constitutional rights and legal protections, federal law determinesthe legal incidence of a tax. In California it places that incidence on the consumers whoactually pay the tax. In Diamond Nat’l Corp. v. State Bd. ofEqualization (1976) 425 U.S. 268, (“Diamond I’) the Supreme Court held that federal courts were not boundby either the California legislative or state court determinations as to wherethe legal incidence ofa tax fell. (/d. at 268 (specifically referring to the California sales tax).) Diamond J held that the Departmentviolated federal law by improperly imposingsales tax on a national bank. (/d., citing First Agricultural Nat'l Bank v. Tax Comm'n (1968) 392 U.S. 339, 346- 348.) “Because the question here is whetherthe tax affects federal immunity,it is clear that for this limited purpose, we are not bound by the state court’s characterization of the tax.” (First Ag., supra, 392 U.S. at p. 374.) While First Agricultural Nat’! Bank addressed an issue of federal immunity, Kern-Limerick, Inc. v. Scurlock (1954) 347 U.S. 110 (“Kern- Limerick’) had previously espoused a broader standard: “One might conclude this Court was saying that a state court might interpret its tax statute so as to throwtaxliability whereit chose... -- 16-- Such a conclusion ... would deny the long [established] principle that the duty rests on this Court to decide for itself facts or constructions upon which federal constitutional issues rest.” ? (Id. at p. 121-122 (emphasis added). See also United States v. N.M. (10" Cir. 1978) 581 F.2d 803, 806. The Court conducted its own analysis and determinedthe legal incidence of excise tax was ontheseller not the consumer), aff'd. (1982) 455 U.S. 720, 738; United States v. Nevada Tax Com. (9th Cir. 1971) 439 F.2d 435, 439-440 (“The constitutional question involved discriminatory application of [use tax] provisions” andits resolution depended on the interpretation of wherethe legal incidence ofthe tax fell, which “is a question of federal law upon which decisions of the states are not binding.’’) In the 1930s, the California Legislature, this Court, and the federal district courts uniformly agreed that: California’s sales tax imposeda fixed rate of tax on the retailer’s gross receipts and not on the individual sale of merchandise, that the tax created a relationship between the State and the retailer and not between the State and the consumer, and that it did not matter that the retailer was required to pass the burden on to the consumer. (California Retail Sales Tax Act (Stats. 1933, ch. 1020, pp. 2599, 2600, All emphasis is added unless otherwisestated. - {7 - 2602 Stats. 1935, p. 1252); Western Lithograph Co. v. State Bd. of Equalization (1938) 11 Cal.2d 156, 161-163; Meyer Const. Co. v. Corbett (N.D.Cal. 1934) 7 F.Supp. 616, 617-618.) From the outset, the courts have had trouble with the pass-through provisions the Legislature enacted, which stated, “tax hereby imposed shall be collected by the retailer from the consumerin so far as it can be done.” (California Retail Sales Tax Act (Stats. 1933, ch. 1010 § 84), (“section 6052”).) In Roth Drug,Inc. v. Johnson (1936) 13 Cal.App.2d 720, “shall” was interpreted to mean “to merely authorize the retail merchantto reimburse himself from the consumerin so far as it may be consistently done. Heis not required to do so. He may waivethatright.” (/d. at 736.) In National Ice v. Pacific Fruit Express Co. (1938) 11Cal.2d 283, this Court expressed concern about the constitutionality of the taxing scheme, particularly the pass-through requirement. (11 Cal.2d 283 at 291- 292 (focusing on contract rights).) In De Aryan v. Akers (1939) 12 Cal.2d 781, this Court stated that section 6052 “charged the seller taxpayer with the mandatory duty to add the amountofthe tax to his sales price, and to collect if from the purchaser along with the sales price” except for the limited cases where following that duty would infringe on the consumer’s existing contractual or other Constitutionalrights. (Id. at 786.) By 1949, this Court had adopted the Roth view ofthe incidenceof retail sales taxes. (See Ainsworth v. Bryant (1949) 34 Cal.2d 465, 474 (comparing the -- 18 -- structure and requirements of California’s Retail Tax to a San Francisco ordinance); see also Pacific Coast Eng. Co. v. State of California (1952) 111 Cal.App.2d 31 (‘Since the tax is levied upon the retailer and his right of reimbursementis optional and may be waived by him,it follows, we think, that reimbursement of the amountofthe tax rests upon the contractual agreementof the parties. The buyer-consumerhas no obligation in reference to the tax. ... [E]ven though a contract is silent as to whether [the] price includes or excludesa sales tax, the law will not by implication add to the burden of the buyer.”’) Subsequently, a series of U.S. Supreme Court cases beganto scrutinize state taxing statutes as applied to banks. (See e.g., Diamond I supra.) The Court of Appeal in Diamond Nat. Corp. v. State Bd. of Equalization (1975) 49 Cal.App.3d 778 (“DiamondIP’) stated: “Unlike [recently invalidated schemes], this state has no mandatory requirementthat its sales taxes be “passed on”to the purchaser.... Section 6052 provides that ‘[the] tax hereby imposedshall be collected by the retailer from the consumerin so far as it can be done.’ It is well settled that ‘[this] section merely allows a retailer to reimburse himself for payment of the tax. He is /imited in doing so where the consumer’s contractual or constitutional rights are infringed.’ The retailer is permitted to pass the tax on to the consumer, but he is not charged with a mandatory duty to collect the -- 19 -- tax. Moreover, ‘[while] the act authorizes the retailer to collect the tax ... that does not make it a consumer’s tax.’” (/d. at 783 (original italics, internal citations omitted).) In Diamond J, the U.S. Supreme Court reversed the Court of Appeal as applied to federal issues. (Diamond I, supra, 425 U.S. 268.) This Court almost immediately seized on that distinction: “The San Francisco tax ordinances before us contain no mandatory pass-on provisions, andit is equally clear that the mere ability to recoup the loss by raising prices will not necessarily shift the legal incidence ofthe tax. ... Diamond Nat. Corp. v. State Bd. of Equalization (1975) 49 Cal.App.3d 778 [123 Cal.Rptr. 160], revd. on issue of fed. immunity; 425 U.S. 268.” (Western States Bankcard Assn. v. San Francisco (1977) 19 Cal.3d 208, 217.) Despite this Court’s observation just quoted in Western States, the California Legislature repealed the mandatory reimbursementrequirement of section 6052 and replaced it with Civil Code section 1656.1, which created a presumptive contract betweenthe retailer and the consumerfor sales tax reimbursement. (Stats. 1978, Ch. 1211.) Since then, California courts are still guided by this principle: “Under California’s sales tax law, the taxpayeris the retailer, not the consumer. ... As for the interests of consumers, ... retailer/taxpayers are permitted, but not required, to contract with consumers to charge -- 20 -- a reimbursement amountto reimbursetheretailer for its own payment ofsales tax on a transaction. Alternatively, the retailer may choose simply to absorb the tax.” (Loeffler v. Target Corp. (2014) 58 Cal.4" 1081, 1103; See also,e.g., GMRI, Inc. v. CDTFA (2018) 21 Cal.App.Sth 111, 118 (retaileris taxpayer).) However, even some members of this Court appear to have trouble with this idea. “The City is correct to focus on the ... legal incidence, but its argumentfails because, under the Ordinance, both the legalincidence and the economic burden... fall on [the] consumers... The rule in California is that where the government mandates payment of a charge by one party and imposes a duty on someotherparty to collect that payment and remitit to the government, the legal incidence of the charge falls, not on the party collecting the payment—whoacts merely as the governments collection agent or conduit—but on the party from whom the paymentis, by law, collected.” (Jacks v. Santa Barbara (2017) 3 Cal.5th 248, 279 (dis. opn. of Chin, J.) While we agree with Justice Chin that this should be the case,it is also worth noting that throughout mostof the history ofthe sales tax in California, the courts have had to force the word “shall” to mean “may”in order to prevent the existence of such a mandate. 2] - California claims that its sales tax is placed upon the retailer and that the consumeris not the taxpayer. Yet fiscal reality showsthat this is a convenient fabrication. Section 6012 states, in part, “For the purposesofthe sales tax, if the retailers establish to the satisfaction of the Board that the sales tax has been addedto thetotal amount of the sales price and has not been absorbed by them,the total amountofthe sale price shall be deemed to be the amount received exclusive ofthe tax imposed. Section 1656.1 of the Civil Code shall apply in determining whetheror notthe retailers have absorbed the sales tax.” In 2016, taxable sales within the State of California exceeded $649 billion. (Taxable Sales in California 2016, Table 1: Statewide Taxable Sales, By Type of Business, California Board of Equalization, https://www.boe.ca.gov/news/tsalescont16.htm, last accessed Apr. 29, 2018.) Ifall retailers did not charge sales-tax reimbursement and the statewide tax rate of 7.25% were assumedto be charged, California retailers would lose over $47 billion in revenue.’ Access to more than an 3 The actual loss could be substantially higher. As an example, consider a retailer that has gross receipts of $1,000,000 in the City of Commerce, whichhas a 10.000% sales tax rate. (See California City & County Sales & Use Tax Rates, supra.) If the retailer charges sales tax reimbursement on the consumers, the retailer will have an additional $100,000 of receipts upon whichthe retailer will not owe sales tax. Thus, after paying the sales tax, the retailer would have $1,000,000 net. If, however, the retailer does not charge sales tax reimbursement on its consumers,the retailer would -- 22 -- additional $47 billion is an incredibly powerful incentive for California businesses to seek sales-tax reimbursements from al] their customers. This powerful incentive for retailers challenges the presumptionthat consumers consent to pay sales tax reimbursementandare not the actual taxpayers. Amici urge this Court to recognize that $47 billion peryearis a sufficient “foot on the scale” to make California’s “may” obtain reimbursementinto “shall” and to follow the federal courts’ view that the consumers are the taxpayers. That view will now be explored. In United States v. California State Bd. ofEqualization (9th Cir. 1981) 650 F.2d 1127 (“US v. BOE”), affd 456 U.S. 901 (1982), the Ninth Circuit determined that, when looking at California’s sales tax statutory schemeas a whole, the legal incidence fell on the consumer and not on the retailer. With respect to resolving federal constitutional issues, the Ninth Circuit stated: “In determining whothe legislature intends will pay the tax, the entire state taxation scheme and the context in which it operates as well as the express wording of the taxing statute must be considered.” (/d. at 1131.) As the Supreme Court has observed, “determining whethera tax is actually laid on the [consumer] [requires going] beyondthe bare face ofthe owe $100,000 of the $1,000,000, leaving the retailer with only $900,000 net. That retailer has a $100,000 incentive to pass the tax burden on to the consumerinstead of the $72,500 incentive it would have paying just the California state tax. For retailers typically working with 1-3% profit margins, this is significant. -- 23 -- taxing statute to consider all relevant circumstances.” (U.S. v. City of Detroit, 355 U.S. 466, 469 (1958).) In US v. BOE, the particular taxed transactions were betweenlessors and lessees. However, the same analysis applies when sales tax transactions 100% and the relationship of retailers and consumersare at stake: The California sales tax scheme... 1s unlike statutes struck down in previous cases becauseit is facially neutral as to who is to pay the sales tax. ... [T]he presumptionsset forth in [Cal. Civ. Code § 1656.1 (a) and (b)] do not appearto be a subtle legislative attempt to require the seller to pass the tax on to the buyer. 4 The seeming neutrality ofsection 1656.1 is rendered illusory, however, by the interaction of California Revenue and Taxation Code sections 6012 and 6051. ... If the lessor requires the lessee to pay the tax, the amount ofthe tax is deducted from the lessor’s gross receipts. If the lessor pays the tax himself[,] absorbs the tax and passes the economic burden ofthe tax on to the lessee as an increase in the lease price, the amount of tax paid by the lessor is not deducted from his gross receipts. Since the sales tax is levied on the basis of the lessor gross receipts, the lessor must remit a larger sum ofmoney to the state as taxes ifhe absorbs the _ 24 -- tax himselfthan ifhe collects the taxfrom thelessee. Therefore, the lessor maximizes his profit only ifhe separately states and collects the taxfrom thelessee... J Despite the facial neutrality of Section 1656.1, the strong economic incentive created by Section 60/2 all but compels the lessor to collect the taxfrom the lessee. In sum, the California sales tax scheme manifests alegislative intent that the lessee pay the sales tax.” (US v. BOE, supra, 650 F.2d at 1131-1132). The Supreme Court summarily affirmed the US v. BOE decision without comment. (Ba. ofEqualization v. U.S. (1982) 456 U.S. 901.) The significance of the summary affirmanceis readily apparent. The only way the Supreme Court could have upheld the Ninth Circuit’s ruling was by accepting the premise that the California sales tax schemeplacedthelegal incidence on the lessee/consumer. The High Court’s decision in U.S. v. Tax Comm'n ofMiss. (1975) 421 U.S. 599 throws additionallight on the matter. Discussing why the /egal incidence of an alcoholtax fell on the consumer and not the vendor, the Court there observed: Wecannot accept the reasoning of the court below that simply because there is no sanction against a vendor who refuses to pass on the tax (assuming thisis true), this means the tax is on the vendor. ... Finally, even in the absence of -- 25 -- this clear statement of the Tax Commission’s intentions, the obvious economicrealities compelled the distillers to pass on the economic burden of the markup.” (id. at 609 and fn.8.) Thus, if the economic realities imposed by the state compelthe retailers to pass on the tax, the legal incidence ofthe tax falls to the consumers. In Coeur D'Alene Tribe v. Hammond (9" Cir. 2004) 384 F.3d 674 (“Hammond”), the court reaffirmed and expandedthis idea: The incidence of a sales tax on a sovereign Indian nation is inescapably a question of federal law that cannot be resolved by the state legislature’s mere statement. (/d. at p. 682-683.) Specifically, permitting a state legislature hide its “intent about wherethe incidenceofthe tax lies ... merely be reciting ipso facto that the incidenceofthe tax falls upon anotherparty” would undermine Supreme Court precedent and “permitstates to set policy in a way that risks undermining”federal questions of law. (Id at 683 (original emphasis).) “[L]egislative declaration ... cannot be viewed as entirely ‘dispositive’ of the legal issue that the federal courts are charged with determining as to the incidence of the tax. And this is not merely a technical tax issue.” (/d. at 684.) While federal courts give great deference to a state court’s definitive determination of the operating incidence ofa tax, it will only be deemed conclusive where it is consistent with the statutory scheme’s “reasonable interpretation.” (/bid.) -- 26 -- “We believe that automatic deference [to the state court] cannot [sic] follow where the incidence was previously determined to be on[one party] _.. and the state legislature’s subsequent amendmentsto the law, though adding a statementof legislative intent on incidence, did not materially alter the operation ofthe statute orits probably impact.” (/d. at 685 (emphasis added).) That is, minimal and cosmetic changes to the tax law without altering key substantive tax provisions regarding legal incidenceare insufficient. (/bid.) Those modifications to state tax provisions that mirror those present in, or conspicuously absent from, those foundin prior schemastruck down by U.S. Supreme Court rulings bear special consideration. (/d. at 688.) For those changesthat, “{ijn light of the probable operational effects of [the tax law] in its context” do notalter the “pass through quality of the prior statute,” the result is “still a collect and remit scheme which passes [on] the incidence ofthe tax.” (/bid. (internal citations removed).) Thus, for federal constitutional consequencesof the California Sales Tax scheme, the legal incidence ofthe tax falls on the consumercontrary to legislative declarations that it falls on the retailer.“ * Bailey v. CIR (1987) 88 T.C. 900 (“Bailey”) recognized that “the California State courts and the Ninth Circuit have conflicting viewsas to whom(i.e., the retailer or consumer) the incidence of the Californiasales tax falls.” (id. at 905.) The Bailey court specifically rejected the assertion that Diamond National Corp. (1975) 425 U.S. 268 and U.S. v. BOE are both narrow in scope, but rather extended those findings to federal tax law --27- In a subsequent case, Chemehuevi Tribe v. California State Bd. of Equalization (9th Cir. 1985) 757 F.2d 1047, the Ninth Circuit appeared to changeits position whenit stated that California’s cigarette tax statute “does not contain any [] explicit ‘pass-through language,” (/d. at 1056.) and that such “legislative intent to impose even a collection burden should be explicitly stated” (/d. at 1056 n.11.) before a finding of legal incidence on the purchaser is appropriate. (/d. at 1055.) In its petition for writ for certiorari, the Department argued that explicit pass-through language was neither required by the Supreme Court “norrationally justifiable so long as the shift of incidence or“pass-through”is contemplated by the statutory scheme. The Supreme Courtpartially reversed in California State Bd. of Equalization v. Chemehuevi Tribe (1985) 474 U.S. 9: “None of our cases has suggested that an express statement that a tax is to be passed onto the ultimate purchaser is necessary ... Nor do our cases suggest that the only test for whether the legal incidence of such a tax falls on purchasers is whether the taxing statute contains an express ‘pass on or collect’ provision. ... We thinkthat the fairest as well. (Bailey, supra, 88 T.C. at 905-906.) Specifically, “[f]ollowing the principle established in Golsen v. Commissioner (1970), affd 445 F.2d 985 (10th Cir. 1971), cert. denied 404 U.S. 940 (1971), we shall apply herein the view of the Court of Appeals for the Ninth Circuit. We thus hold that for federal purposes the legal incidence ofthe California sales tax falls on the consumer.” (Bailey, supra, 88 T.C.at 906.) -- 28 -- reading of California’s cigarette scheme as a whole isthat the legal incidence of the tax falls on the consuming purchasers... We think that, in the context ofthe entire California statutory scheme, interpreted without [requiring an explicit pass on or collect provision] evidences an intent to impose ... such a ‘pass on and collect’ requirement.” (Id. at 11-12 (internal citations omitted.) B. Any Purported Question of Consumer Consentto Sales Tax Reimbursements Raises Issues of Fact That Cannot Be Resolved on Demurrer. In response to DiamondI, the Legislature enacted Civil Code section 1656.1 which provides that whether sales tax reimbursement maybe added to the retail sale price of goods “dependssolely upon the termsofthe agreementof sale.” An agreement for sales tax reimbursementis presumed if the agreementitself so states, a “sales check” or other proof of sale so provides, or the seller posts or includesin its advertising a notice that so states. (§ 1656.1 (a).) It is likewise presumedthat the property is sold at a price whichincludessales tax reimbursementif the retailer posts or includes on a price tag or in an advertisement one oftwo specified notices. Thestatute also declares that “/t/he presumptions created by this section are rebuttable.” The statute neither alters the legal incidence of the tax under Diamond I nor worksa forfeiture of a consumer-taxpayer’s right to an 29 -- effective remedy for paymentof a sales tax reimbursement founded on an illegally imposed or collected sales tax. This follows for two fundamental and alternative reasons: First, consumer contractual consentto pay a sales tax reimbursement may depend on whether the tax has been legally imposed andcorrectly calculated. Consumers generally believe the government operates legally and properly when it imposes taxes. They consent to pay a reimbursement because they believe the underlying tax to be correctly determined — something that their retail seller is legally required to pay to the Department. Indeed, California law includes a presumptiontothis effect: “It is presumed that official duty has been regularly performed.” (Evid. Code, § 664.) This presumption affects the burden of proof. (Evid. Code, § 660.) It is also presumedthat: “The law has been obeyed.” (Civ. Code,§ 3548.). Both presumptions apply to the conduct of the governmentofficers — including the Department. (Urvine v. Citrus Pest Dist. No. 2 (1944) 62 Cal.App.2d 378, 383 [It is presumed that an officer charged with a duty will perform it in accordance with the requirements of the Constitution and the law.”]; 1926 North Ardmore Avenue, LLC v. County ofLos Angeles (2017) 3 Cal.5th 319, 328 [“In a tax refund action, the burden of proofis on the taxpayer, who must demonstrate that the assessmentis incorrect and produce evidenceto establish the proper amountof the tax.”]; see also Long -- 30 — Beach Firemen’s Credit Union v. Franchise Tax Board (1982) 128 Cal.App.3d 50, 55 [same effect]; Guy v. Washburn (1863) 23 Cal. 111, 114-115 [presumed that State Board of Equalization duly performedits duty of equalizing assessmentroll].). Second, a presumption that the consumer consentedto anillegal sales tax reimbursement,if triggered by section 1656.1, can be rebutted by evidence that no such consent and no such agreement wasreached. (Glasser v. Glasser (1998) 64 Cal.App.4th 1004, 1010-1011 [whether rebuttable presumption was rebutted is question of fact]; Cooper v. Cooper (1959) 168 Cal.App.2d 326, 335 [same effect]. For example, consumers could supply extrinsic evidence that the parties believed that sales tax was legally and properly imposed in the transaction — a mutual mistake that is material to an agreementto pay sales tax reimbursement. (Hess v. Ford Motor Co, (2002) 27 Cal.4th 516, 525; Palma v. Leslie (1935) 6 Cal.App.2d 702, 709.) 3] I. CONSUMER-TAXPAYERS HAVE CONSTITITIONAL RIGHTS TO EFFECTIVE RETROSPECTIVE REFUND REMEDIES TO SAFEGUARD BOTH THEIR DUE PROCESS RIGHTS AND THEIR RIGHTS TO BE FREE FROM UNCONSTITUTIONAL TAKINGS OF PRIVATE PROPERTY. Both the United States and the California Constitutions prohibit the state from taking a person’s property without due process of law. (U.S. Const., art. XIV; Cal. Const. art. I, §§ 7(a); 15.) Moneyis a property interest. (American Corporate Security, Inc. v. Su (2013) 220 Cal.App.4th 38, 46-47.) An illegal exaction by a government agency or a confiscation of money by government action violates due process. (Munns v. Kerry (9th Cir, 2015) 782 F.3d 402, 414; Hillsboro Properties v. City ofRohnert Park (2006) 138 Cal.App.4th 379, 384-385.) Statutes must be construed to avoid “any doubt”as to their constitutionality under due process provisions. (Kleffner v. Vonage Holdings Corp. (2010) 49 Cal.4th 334, 346; Myers v. Phillip Morris Companies, Inc. (2002) 28 Cal.4th 828, 846-847.) Due process requires reasonable notice and an opportunity to be heard before governmental deprivation of a significant property interest. (Horn v. City of Ventura (1979) 24 Cal.3d 605, 612.) A state court’s denial of a recovery of taxes exactedin violation of constitutional law “is itself in contravention of the Fourteenth Amendment.” (Reich v. Collins (1994) -- 32 -- 513 U.S. 106, 109, quoting Carpenter v. Shaw (1930) 280 U.S. 363, 369.) A state can provide either pre-deprivation or post-deprivation remedies (or both) for illegal taxation. (Id.). California law does not provide — and indeed prohibits — pre- deprivation remedies that disrupt the collection of taxes before a final judgmentofinvalidity. This allows an uninterrupted flow of tax revenues while litigation is pending — followed by paymentofpost-deprivation refunds in an orderly process authorized by the Legislature. (Ardon v. City ofLos Angeles (2011) 52 Cal.4th 241, 252.). Article 13, section 32 of the California Constitution provides: “No legal or equitable process shall issue in any proceeding in any court against this State or any officer thereof to prevent or enjoin collection of any tax. After paymentofa tax claimedto beillegal, an action may be maintained to recover the tax paid with interest, in such manner as may be provided by the Legislature.” This provision makes clear that one who pays whatheor she claims to be an illegal tax (not necessarily the legal incidence taxpayer) can sue in court to obtain a refund plus interest. The Legislature is empoweredto specify the ““manner’” in which this happens, but it has no powerto refuse effective post-deprivation refund relief. To do so would contravenethe plain meaning of our constitution. In California, “the sole avenue for resolving tax disputes is a postpayment refund action.” (Water -- 33 -- ReplenishmentDist. ofSo. Cal. v. City of Cerritos (2013) 220 Cal.App.4th 1450, 1465.) The United States Supreme Court has also confirmed that “refund of excess taxes paid”(or offsetting charges on previously and illegally favored taxpayers) is the “clear and certain remedy”for unconstitutional deprivation of tax monies. (McKesson v. Division of Alcoholic Beverages and Tobacco (1990) 496 U.S. 18, 51-52; see also Harperv. Virginia Dept. ofTaxation (1993) 509 U.S. 86, 100-101, and cases cited in both opinions.) With the sole exception of an equitable action to compelretailers to file refund claims and the Department to make refunds — brought under Javor v, State Board ofEqualization (1974) 12 Cal.3d 790 and discussed in Section II below — the Department submits that consumers have nodirect right to postpayment refund actions to recoverillegal sales taxes paid by them. In other words, they have no right to recover the refunds of amounts illegally paid as guaranteed by both the United States and the California Constitutions. If, as the Bekkerman Plaintiffs argue in Section I above, they and other consumersare entitled to be treated as taxpayers with post- deprivation refund rights, their due process and other rights have been clearly and egregiously transgressed. This Court should recognize and vindicate those rights here and now. The United States and California Constitutions also proscribe the “taking” of private property for public use without just compensation. -- 34-- (U.S. Const., 5th Amend.; Cal. Const., art. I, § 19(a).) The Court of Appeal maintained that consumer payments ofsales tax reimbursement could not result in a “taking” because “the retailer is not a governmententity” and “the taking of moneyis different [| under the Fifth Amendment.” (McClain v. Sav-On Drugs (2017) 9 Cal.App.Sth 684, 703.) Neither of these observations withstands scrutiny. While retailers are not governmententities per se, that distinction makes no difference here. Private entities and governmentinstitutions can act jointly or in “close nexus” with each otherto perpetrate violations of federally-protected rights when governmentand otherwise private actors act with “interdependence” and government“insinuatesitself’ into complex processes that deprive individuals and businesses oftheir rights. (Julian v. Mission Community Hospital (2017) 11 Cal.App.5th 360, 396- 400; Jensen v. Lane County (9th Cir. 2000) 222 F.3d 570, 575-576.) The Departmenthas, in interdependence with retailers, perpetrated a scheme to immunizeitself from otherwise patently illegal taxation by depriving the only real taxpayers of the ability to challenge wrongful exactions. The schemeconsists of the following elements: The statutory schemeprovidesthat only retailers can file refund claims and sue. (Rev. and Tax Code, §§ 6092 & 6931-6937.) It then ensures that they will have no incentive to do so. They are permitted — indeed expressly authorized by the Department — to pass 100% ofall taxes (legal or illegal) on to their -- 35 - customers. (Civ. Code, § 1656.1.) Retailers are given a safe harbor that protects them fromsuit as long as they surrenderto theState all taxes (again legal or illegal ones) they collect from consumers. (Rev. & Tax Code § 6901.5.) Of course, if they do not, they will subject to interest and a whopping 40% penalty if they cannot defeat the State in its efforts to collect taxes. (Rev. & Tax Code §§ 6591-6597, especially 6597(a).) Needless to say, no rational retailer would be willing to challenge illegal taxes underthe above rules. It is easier and cheaper simply to pay the Department whatever amountsit seeks in sales taxes, and then pass whateverthe retailer pays on to the customer who,as the sole economic taxpayer, bears the full brunt of the Department’s illegal conduct. After all, there is no point in suing to challenge an illegal tax if 100% of the injury from it can be inflicted on customers by the simply expedient of a cash register sales slip or posted notice. In a mass marketplace, consumers are accustomedto standardized pricing and to reimbursingretailers for legitimate sales taxes that represent an out-of-pocket expenseto retailers. But no consumer assumesthe State is cheating him orher by collecting taxes it has no legal authority to collect. Unless it is proven otherwise, we all assumethat the State acts within the law. As shown above, so does case law. And whenit does not, no oneis able to hold it accountable. Moreover, evenifthe retailers are treated as purely private actors, they are simply collection agents of the Department whoare exacting sales taxes from unwitting consumers and turning them overto the State. The State’s attempt, by the creation of statutory presumptionsthat defy reality, to convert what customers honestly and reasonably believe to be legal and legitimate taxation into voluntary consentto illegal confiscation is a sham. At a bare minimum, customer consent in this context givesrise to factual issues that cannot be resolved on demurrers (as happened here) or by summary judgments. (See Section 1(B) above.). The Court of Appeal also cited San Remo Hotel v. City and County ofSan Francisco (2002) 27 Cal.4th 643, 671 (‘San Remo”) as standing for the proposition that “the taking of moneyis different, under the Fifth Amendment, from the taking of real or personal property.” However, that statement is taken out of context and is misleading. Rather, San Remo, quoting Ehrlich, stated that “the imposition of various monetary extractions ... has been accorded substantial judicial deference.” (bid, quoting Ehrlich v. City of Culver City (1996) 12 Cal.4th 854, 892 (conc. opn. of Mosk, J.) (“Ehrlich”).) In Ehrlich, this Court specifically rejected the proposition that Fifth-Amendmenttakings were without application to monetary exactions, particularly those that were imposed on an individual and discretionary basis. (Ehrlich, supra at 876.) The issue in Ehrlich was whethera particular governmentprocess wasa valid regulation or “an out-and-outplan of 37 -- extortion.” (/d. at 878, quoting Nollan v. California Costal Com’n, (1987) 483 U.S. 825, 837 (“Nollan’’).) That is likewise the question here. Ehrlich recognized that “one of the fundamental principles of modern takings jurisprudence is to bar Government from forcing some people alone to bear public burdens which,in all fairness andjustice, should be borne by the public as a whole.” (Ehrlich, supra at 880.) While the courts have deferred to legislative and political processes to formulate “public program[s] adjusting the benefits and burdens of economiclife to promote the common good,” when government imposesspecial, discretionary conditions (whether they be possessory dedications or monetary extractions), they must be scrutinized under a heightened takings analysis. Ud. at 881.) While Ehrlich and San Remo both dealt specifically with monetary extractions relating to property development, a similar principle applies in sales tax reimbursementcases. Here, the State of California has effectively deputized retailers while granting them a level of discretion that the State would otherwise not possess. Any retailer can charge any sales-tax reimbursement it wants (whether based on legitimate or illegitimate sales taxes) so long as it passes those funds on to the state under the “safe harbor” provision in Revenue and Taxation Code section 6901.5. -- 38 -- Il. WITHOUT THE AVAILABILITY OF JUDICIALLY- SUPERVISED REFUND REMEDIES AS RECOGNIZEDIN THIS COURT’S DECISIONS IN JAVOR AND LOEFFLER, CALIFORNIA’S SALES TAX SCHEME WOULD BE UNCONSTITUTIONAL. A. Consumer-Taxpayers’ Rights Were Recognized in Javor and Loeffler. This Court has recognized consumer-taxpayers’ rights to obtain refunds of sumsthat were illegally exacted from them. Its decisions in Javor v. State Board ofEqualization (1974) 12 Cal.3d 790 and Loefflerv. Target Corp. (2014) 58 Cal.4" 1081, properly construed, allow consumer- taxpayers to use equitable remedies of unjust enrichment and constructive trust to protect the integrity of sales taxes in California and to vindicate the rights of those who havepaid illegitimate and illegal exactions. A proper construction of those decisions and the statutory schemes they address will avoid any ofthe constitutional questions posed in this case and discussed in Sections I and II above. The Court of Appeal misconstrued Javorin a fundamental waythat this Court can now correct. While it is true that the Department’s predecessor (the California Board of Equalization) admitted that tax refunds were due to consumers in Javor,it is not true that the holding in that case is confined to situations in which the Departmentitself admits its own -- 39 -- wrongdoing or mistaken collection of amounts that were not due as sales taxes. Javor was a class action brought in equity to achieve a remedy to address an otherwise intolerable situation. The Department was passing on refunds that did not belong in its coffers to retailers without requiring that they makeclaimsand pass those refunds on to consumers. This Courtfelt duty-boundto protect the honesty and integrity of the sales tax system as well as the rights of consumers by devising an equitable remedy. It maintained that: “The integrity of the sales tax requires not only that the retailers not be unjustly enriched . . ., but also that the state not be similarly unjustly enriched.” (Javor, 12 Cal.3d at 802.) Despite the fact that the statutory schemeofretailer refund claims, Board adjudication and judicial action, and refund paymentsto retailers did not provide any reliefforillegal consumertax reimbursements, the Court believed it was essential to provide suchrelief in equity. The samerationale applies here and in any case in which consumers were required to pay,as part of a sales transaction, sums that the Departmentillegally imposedas sales taxes. While Javor did not expressly decide constitutional issues, it effectively avoided them by using equitable powers — outside the statutory scheme — to provide a remedy to aggrieved consumers and prevent unjust and illegal enrichmentofretailers and the Department. The sameis called for in this case and in the other cases involved in amicuspresentations to -- 40 -- S o p a this Court here. Without Javor remedies, the statutory scheme would operate in a way that is not only inequitable, but unconstitutional as well. (See Sections I and IT above.) According to the Department and the Court of Appeal, Javoris confined to situations in which the Departmentitself admits that taxes have been mistakenly or intentionally assessed or collected in a mannerthatis illegal and merits recompense to someone. In other words, the Department, in its unbridled discretion, becomes judge, jury, and sole decisionmakerin determining whenits own taxes are illegal. Because there is no judicial remedy,there is no effective judicial review. This is the ultimate in arbitrary governmentaction. It is, effectively, tyranny by administrative determination. The buck stops with the Department — and stays in the Department’s coffers — unless the Departmentitself decides otherwise. Nothing in California law — let alone in the United States or California Constitutions — justifies what is described aboveorthe results it produces. At some stage, courts must intervene to protect rights and to accomplish justice. That is what due processis all about. It is the responsibility and province of this Court in the present action. Loeffler did not overrule, disapprove, or limit Javor. Nothing in Loeffleris at odds with the application of Javor here (or in any case) in which California courts determine that the Departmenthas taxedillegally to the detriment of California consumers. In such cases, refunds need to be 4] --. paid and equity can prevent unjust enrichmentto retailers or to the Department. Loeffler did not grant relief for reasons that do not apply here or in many other cases where consumer-taxpayers have proceeded prudently and in deference to the Department’s expertise and authority. The Loeffler plaintiffs lost because they sued retailers who had done no more than what the tax statutes require and allow — collect taxes as the Departmentassesses them and turn any collections over to the Department. And they did so under consumer protection statutes not designed to resolve tax cases or determine whetherillegal taxation has taken place, Here, and in other cases properly posited by amici in this Court, consumer-taxpayers went to the Department, asked it to determine the propriety and legality of its taxes, and received expressions of denial or disinterest. In this way, the Department’s statutory role and its administrative expertise in the complex world of sales taxation were fully respected and vindicated. The Department wassatisfied with what it had done and did not want any further opportunities to make legal determinations. The California judicial system — and ultimately this Court — were the only remaining recourse to full and fair enforcementof the tax laws. -- 42 -- B. Apart from Equitable Remedies Under Javor, There Are No Clear and Certain Remedies To Obtain Consumer Tax Reimbursement Refunds. As the Bekkerman Plaintiffs observed in Section II above, due process requiresthat, in states like California where pre-deprivationreliefis not allowed, clear and certain post-deprivation remedies must be awarded. The California Constitution entitles the payers ofillegal taxes to refunds. Case law also so provides. But the Court of Appeal insisted that due process was not implicated in this case because there were other adequate remedies. The court was wrong. The only “clear and certain”judicial remedy allowed in California is an equitable remedy under Javor. No other remedy posited by the court gives consumer-taxpayers the only effective post-deprivation remedy they can obtain: a refund of illegally-paid sales taxes. The Court of Appeal concedes that due process requires a “clear and effective” post-deprivation remedy in the form of a “postpayment refund action.” (9 Cal.App.5"at 703-704.) It also acknowledgesthat California law does not provide such a remedy to consumer-taxpayers: “If the customerbelieves it has paid a sales tax reimbursementfor items on which no sales tax is due, the customer has no statutory tax refund available to her—either administrative or judicial—against the Board ortheretailer.” (9 Cal.App.5th at 694.) .- 43 -- The court’s admission is apt. As the Bekkerman Plaintiffs will show, the so-called remedies posited by the court are neither“clear” nor “effective.” None of them expressly or implicitly applies to claims of illegal taxation brought by consumer-taxpayers whopaid sales tax reimbursements based onillegal taxes. Initially, the court says that consumers may urge the Departmentto initiate “an audit” of the retailer’s practices in collecting sales tax or to conduct a “deficiency determination” under Revenue and Taxation Code sections 6481, 6483, and 7054. (id. at 700-701.) Section 6481 empowers the Department,if it is “not satisfied with the return. . . or the amount of tax,” to “compute and determine the amount[of tax] required to be paid” based on the return or other information. Based on its computation, the Department can issue “[o]ne or more deficiency determinations” for one or more periods. (Id.) Nothing requires the Department to determine the legality of sales taxes on the application of a consumer-taxpayer. Moreover, the only remedy referred to is an assessment of a deficiency against the retailer. Thestatute is thus an attempt to collect revenue due to the Department, not a deviceto holdit accountable for massive amounts of illegal taxes that were forwarded by retailers, but actually owed to consumers. Finally, and critically, the words “refund,” “tax reimbursement,” or “consumer”are notably absent. Nothing in its text, or any case law interpreting it, specifies that a tax refund can be -- 44 -- secured by audit for a consumer who neverfiled a “return” of any kind with the Department. It is neither “clear” nor “certain” on these vital points. Section 6483 allows the Department to offset overpayments against underpayments for different periods and addresses interest and penalties on such amounts. Again, the provision deals entirely with retail taxpayers who report their sales to the Department. Nothing inits terms clearly or certainly gives a consumera right to a refund. Finally, section 7054 allows the Department to examine the books, papers, records, and equipmentofpersonsselling tangible personal property or liable for use tax “in order to verify the accuracy of any return made,or, if no return is made by the person, to ascertain and determine the amount required to be paid.” Retailers file returns; consumers do not. Nothing in the statutory scheme empowers the Department to determine the tax owed by a consumerwhois not required to file any return or pay any tax to the Department. And absolutely nothing in the statute entitles consumers to refunds or authorizes the Board to grant them. Only Javor doesthis. .- 45 - R O M P 3 CONCLUSION For the reasons stated above, the decision of the Second District Couyt of Appeal should be reversed and remanded with directions to reversed the trial court’s dismissal order. Dated: May 14, 2018 Respectfully submitted, LAW OFFICES OF TONY J. TANES;K Loa,]ow — Tony( Daniel M.t HATTIS LAW __ 46 -- CERTIFICATE OF WORD COUNT (Cal. Rules of Court, rule 8.204(c)(1)) The text of this brief consists of 8165 words as counted by the Microsoft Word for Mac version 16.12 word-processing program used to generate the brief. The font is 13 point Times New Roman. DATED: May 14, 2018 LAW OFFICES OF TONY J. TANKE paneer gs a . iy Js heVigA(a c C47” Tony J. Aanke, Attorneys foF’Amici Alina Bekkermanetal. -- 47 -- PROOF OF SERVICE STATE OF CALIFORNIA - COUNTY OF YOLO I am employed in the City of Davis, County of Yolo, State of California. I am overthe age of 18 and not a party to this action; my business addressis: 2050 Lyndell Terrace, Suite 240, Davis 95616. On May14, 2018 I served the document(s) described as: APPLICATION TO FILE AMICUS CURIAE BRIEF AND PROPOSED BRIEF OF AMICI CURIAE ALINA BELKKERMAN,ET AL. IN SUPPORT OF PLAINTIFFS-APPELLANTS in this action by placing true copies thereof enclosed in sealed envelopes addressed as indicated in the attached servicelist. [X] (BY MAIL)I am “readily familiar” with the firm’s practice for collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. Postal Service on that same day with postage thereon fully prepaid in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. [X] (STATE)I declare under penalty of perjury under the lawsofthe State of California that the above is true and correct. _- 48 Executed on May 14, 2018 at Davis, California OU Elizaten Tanke -- 49 .- PROOF OF SERVICE STATE OF CALIFORNIA - COUNTY OF YOLO Thomas Alistair Segal The Kick Law Firm, APC 201 Wilshire Boulevard, Suite 350 Santa Monica, CA 90401 Bruce Russell MacLeod McKool! Smith Hennigan, P.C. 255 Shoreline Drive, Suite 510 Redwood Shores, CA 94065 Steven J. Bernheim The Bernheim Law Firm 6220 West Third Street, Apartment 423 Los Angeles, CA 90036 Taras Peter Kick The Kick Law Firm 201 Wilshire Boulevard, Suite 350 Santa Monica, CA 90401 Robert James Dart The Kick Law Firm 201 Wilshire Boulevard Santa Monica, CA 90401 Shawna Lee Ballard McKool Smith Hennigan P.C. 255 Shoreline Drive, Suite 510 Redwood Shores, CA 94065 Gerald James Strenio The Kick Law Firm APC 201 Wilshire Boulevard, Suite 350 Santa Monica, CA 90401 Nhan T. Vu Office of the Attorney General 300 South Spring Street, #1702 Los Angeles, CA 90013 Attorneys for Plaintiff and Appellant, Michael McClain, Avi Feigenblatt, Gregory Fisher Attorneys for Defendants and Respondent California Department of Tax and Fee Administration Phillip Jon Eskenazi Hunton & Williams LLP 550 South Hope Street, Suite 2000 Los Angeles, CA 90071 Kirk Austin Hornbeck Hunton & Williams LLP 550 South Hope Street, Suite 2000 Los Angeles, CA 90071 Robert Paul Berry Berry & Silberberg, LLC 16150 Main Circle Drive, Suite 120 St Louis, MO 63017 Carol Michelle Silberberg Berry & Silberberg LLC 16150 Main Circle Drive, Suite 120 St. Louis, MO 63017 David F. McDowell Morrison & Foerster, LLP 707 Wilshire Boulevard Suite 6000 Los Angeles, CA 90017-3543 Miriam A Vogel Morrison & Foerster LLP 707 Wilshire Boulevard Suite 6000 Los Angeles, Ca 90017-3543 Joseph Duffy Morgan Lewis & Bockius, LLP 300 South Grand Avenue, 22nd Floor Los Angeles, CA 90071-3132 James C. Martin Reed Smith LLP 355 South Grand Avenue Suite 2900 Los Angeles, CA 90071 Attorneys for Defendant and Respondent, Sav-On Drugs, Albertson's, Inc., Wal-Mart Stores, Inc., Target Corporation, Rite Aid Corporation, Walereen Co., CVS Caremark Corporation, Longs Drug Stores Corporation, Longs Drug Stores California, Inc., Safeway Inc., The Vons Companies, Vons Food Services, Inc. Douglas C. Rawles Reed Smith LLP 355 South Grand Avenue Suite 2900 Los Angeles, CA 90071 Joseph Henry Bias Morgan Lewis & Bockius, LLP 300 South Grand Avenue 22nd Floor Los Angeles, CA 90071-3132 Kasey James Curtis Reed Smith LLP 355 South Grand Aveue, Suite 2900 Los Angeles, CA 90071-1514 Shelley Gershon Hurwitz Holland & Knight LLP 400 South Hope Street, 8th Floor Los Angeles, CA 90071 Richard Thomas Williams Holland & Knight LLP 400 South Hope Street 8th Floor Los Angeles, CA 90071 Theodore Keith Bell Safeway Inc. 5918 Stoneridge Mall Road Pleasanton, CA 94588 Daniel Berko Law Office of Daniel Berko 819 Eddy Street San Francisco, CA 94109 o e ) Pub/Depublication Requestor