McCLAIN v. SAV-ON DRUGS

Non-Title Respondent, California Department of Tax and Fee Administration, Response to Amicus Curiae Brief

Cal.July 12, 2018

Jn the Supreme Court of the State af Calitu SUPREME COURT FILED JUL 12 2018 geNavarrete Clerk ta Deputy MICHAEL McCLAIN,etal., Plaintiffs and Appellants, Vv. SAV-ON DRUGS,etal., Defendants and Respondents. Case No. $241471 Second Appellate District, Div. Eight, Case Nos. B265011 and B265029 Los Angeles County Superior Court, Case Nos. BC325272 and BC327216 . John Shepard Wiley, Judge RESPONDENT CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION’S CONSOLIDATED ANSWER TO AMICUS CURIAE BRIEFS | XAVIER BECERRA Attorney General of California EDWARD C. DUMONT Solicitor General *JANILL L. RICHARDS Principal Deputy Solicitor General State Bar No. 173817 DIANE S. SHAW Senior Assistant Attorney General LisA W.CHAO Supervising Deputy Attorney General MAXCARTER-OBERSTONE Assoc. Deputy Solicitor General State Bar No. 304752 NHAN T. VU Deputy Attorney General State Bar No. 189508 300 South Spring Street, Suite 1702 Los Angeles, CA 90013 (213) 269-6230 Nhan.Vu@doj.ca.gov Attorneysfor Defendant and Respondent California Department ofTax and Fee Administration TABLE OF CONTENTS Page Introduction and SUMMary.......:.cecceecsseesssssesesesseseeseeecssesessoecessesessessassaseees 8 ATQUMEMN20... eee ceeeneceeeeeesseeceseeseeeeesceeesessssscseeeeesees be ssseecueeeesesaseesseeeeeeenes 10 Javor Should Not Be Extended to Allow Consumers to Pursue Claims Challenging Retailers’ Routine Applications of Sales Tax Exemptions.........ccccccsesesseceees 10 I. IL. A. The Absence of a Statutory Refund Action for ConsumersIs a Consequenceofthe Legislature’s Decision That Retailers—Not Consumers—Are Taxpayers..0.....ceccseceesesseseeees The Unique Circumstances of Javor, Which Caused the Court to Recognize an Extra-statutory Consumer Claim, Are Not Present Here .0........cccccsssscscceceecesescesseccsesecacecsestencs Referral to the Department of Taxability Questions Raised in Consumer-Initiated Refund Lawsuits Would BeInconsistent with the Tax Code and Unworkable as a Practical Matter........ Javor Must Be Limited to Circumstances Where the Department Has Already Determined, Pursuant to Normal Statutory Procedures, That a Sales Tax Refund Is Due....... Declining to Extend Javor to the Circumstances of This Case Does Not Violate Due Process .........::csscsseeecees 22 A. While Consumers Benefit Indirectly from Sales Tax Exemptions, SuchIndirect Interests Are Not Protected by Due Process...........ccccccsceseeeees Federal Cases Addressing Federal Tax Immunity Are Inapposite .......eee ceeeeeseeteeteees Consumers Are Not Effectively Forced to Pay Sales Tax; They Engage in Voluntary Transactions Governed by Contract Law............. bevee 10 veeee 12 eee 16 bees 20 veses 22 eee 23 eves 25 TABLE OF CONTENTS (continued) Page D. Contractual “Consent” Does Not Mean That Consumers Must Be Given an Opportunity to Dispute the Routine Application of Sales Tax EX@MptiOMs .........cccceseesseseeeesceeeseeeceeeseneesersetserseneeneeess 27 COMCIUSION .......ceccccessesceescecesteeesscecsteecassseeasesecsacecescnaneceeereeceaeeesessateneeeeeneaes 28 TABLE OF AUTHORITIES Page CASES Cal. State Bd. ofEqualization v. Chemehuevi Indian Tribe (1985) 474 U.S. 9 (per CUTIAN) ....eee eeteeeeeeeeteceeecaeceseseseectsenseesesseecsnaaas23, 25 Coeur D’Alene Tribe v. Hammond (9th Cir. 2004) 384 F.3d 674 oeceeesessececeneeseceeeseeecesseeeseneessesenseeessseeenee23 De Aryan vy. Akers (1939) 12 Cal.2d 781 woesceeeeeccesetetsesseeesecscceeeeeescseeseeseaseaeesessseesees26, 27 Decorative Carpets, Inc. v. State Bd. ofEqualization (1962) 58 Cal.2d 252 ooo eececcesccereeedeseseeceeceeseeeeeeaesateseeeeesenseeraeeaeeats 11, 13,21 DiamondNational Corp. v. State Board ofEqualization (1976) 425 U.S. 268 (per CUTIAM)oeeeeects eeeeeeneteeeeeceseecateeeseeateneeseaaae23, 24 Farmers Ins. Exchange v. Superior Court (1992) 2 Cal.4th 377 ooo. eceeeeccccenecseeceseesecseeeeeesaeeeeeeessessaceaeecseeeeteeseessesaceeesesens 18 First Agricultural Nat. Bank vy. State Tax Com. (1968) 392 U.S. 339ee ecccccessecsseesecessrsesessceceesseeseeeeesesecseeseeeeseeteeseeseeseneeeneses23 ' Gurley v. Rhoden (1975) 421 US. 200eeeeeeceeeceeceseteesesseeceeeseesesseesaeesueeecsseeseseeseesseeeeeensaess24 Javor v. State Bd. ofEqualization (1974) 12 Cal.3d 790 woo. cecccccecseceessceecssseescsessseessseeseeseeecsssesseasenesenes 8 et passim Kern-Limerick, Inc. v. Scurlock (1954) 347 U.S. Lleeeeeeeceeseecseeeseesceseseeesecseecseesesesuecseeeaeseseetsessecaeeseseenss23 Kuykendall v. State Bd. ofEqualization (1994) 22 CalApp.4th 1194 eeeceessesseeesecseeseeseesesseesseeesssesseseesecenseeeseeres21 Loeffler v. Target Corp. (2014) 58 Cal.4th 108]eeeeeceeseseeeeeeeeesesseeeetseeseeeaeeeseseeseees 11 etpassim McClain v. Sav-on Drugs (2017) 9 Cal.App.Sth 684, 691 oo.ceeecescesessesccnecseseseeneessenerseeeessesseeseeenees 15 National Ice & Cold Storage Co. v. Cal. Pacific Fruit Express Co. (1938) 11 Cal.2d 283 ooieceeeesceeeeeerecsecsseaeesesseeseeseeseneeerseeees 12 etpassim TABLE OF AUTHORITIES (continued) Page National Shooting Sports Foundation, Inc. v. State ofCalifornia (June 28, 2018, S239397) — Cal.Sth — [2018 WL 3150950]...eee17 O’Bannon v. Town Court Nursing Center (1980) 447 U.S. 773eeecesceeseceecsceeeesececenecseeaceererseeaseeestesesaceeeeeesesesseseeaeeseees22 Paine v. State Bd. ofEqualization (1982) 137 CalApp.3d 438 ooo. ceceecscceccseeceeecenreceessesesseseseesessseeseceeeseeseeesess 19 South Carolina v. Regan (1984) 465 U.S. 367oeeescecescececeeeeecseeecsecaceseseeaeseeasseeseseeseaseascsesenesenssseaes22 Town ofCastle Rock v. Gonzales (2005) 545 US. 748eessecseeeeesscceeseececeeeeeeeeeaesaesesaeeseeeneeeessieteeeteeeeeeeees24 Tulare County v. Kings County (1897) 117 Cal. 195 (per Curiam) oo... eee eeeteseceeseeecssssaceessseeeeseesssesseeeeeesensenaas 17 U.S. v. Cal. State Bd. ofEqualization (9th Cir. 1981) 650 F.2d 1127, affd. (1982) 456 U.S. 901 wesc23, 25 U.S. v. Nevada Tax Com. (9th Cir. 1971) 439 F.2d 435 isc ccecceseeeeeecsessceeecseeecesesesestecsseasesecseseeasscnees23 U.S. v. New Mexico (10th Cir. 1978) 581 F.2d 803 oo. ceceeeseececeseescceeesseesessenesseeseesceeeseeeneessssseaes23 U.S. v. State Tax Com. ofMiss. (1975) 421 USS. 599cececeeceseeesseceeecesesseeseesssenatsecersesaeeesseesteseseesessssenss23 Wagnon v. Prairie Band Potawatomi Nation (2005) 546 US. 95 eeeceeeeeeececceeesesecteeeeneeseeesaeecaesaeecessesensssessaeeaseateseeseetaeass25 STATUTES Civil Code § LOSLecceeseseeensececeeceeeceeeeseceeeseeressessessecaeeeseseesseesceecosseseaeaessatsaseaseseeeeesees28 § 1656. Leccccccssssessesssssssecseecsensssssssssesseesssvsenssasseeseeee sessestunsenseseeestanseseee24, 28 § 523eeecessecsecseeerecsecesceaeceeeeceseeceeseaseatssecesseseeeesesensasieeaeeeeescateeseeeteneeeaeeate 17 TABLE OF AUTHORITIES (continued) Page Revenue & Taxation Code § GOLQeetseeseceseereseteeesesessssesesessaesenesessassaesseasssesnsssnseseseensesseeeeesesueseseterses28 § GOS Loeeceeteescecseeecssccestscseesessseeaseesesenseseneceesesecesscseeseectessssseeensaesenes 12, 18 § 6052 (repealed) eeeee eessessesstcssesececsecsseeeseecseeaecsessessesseeesesesseesseesesaesensesessns24 § 6053 (repealed) ceccccsccsssseussssssssssssesssssiussesssssssssussssusssasssseusseese veseesend4 § 6054.5 (repealed) oe. eseeeeeeeeeeceeeeceeeeeeesteeseeeneseenessesestenaeseeneesssesseeseresesneey 17 § 609 Loveeccsscsssssssesssesssecosecsscssssssssesesssacsssssesssssssusessusssssssssesevssuusesserssucseseauesennees 19 § COOL Ct SOQ.eeececeecercesecesesseseseseeeceressanenseseceessecsescensseceeessestseseesaecaeensecstess 12 § O9OL 5oeesececeesseeeesssseeseteeseereesSeessceeeseeseeeetenseeeeseneceateeaaeeeeteas 11, 16, 17, 19 § 6905S vcccssescssssscscsssessecssscssvessssssessessssuessesssssssvessucssvssssusssesssassveserarsesuseaeereesssneecs 19 § 6932cessccsseeeensssesessseesssssessseesissessivantuunssssssuieiseesessissseetisessisinsanneteeesieiee 16 § 6933 cccccsssussssussiesssianusnnnssssane secaececeseeseseseesesecensecesseseeesaeenseaesasas 19 § 705 Lecceccsessssssseessseeesesssusessecsesssestsssesessssssssesseeesuessssesesssuissnensneesesaaseuessse 11 § TTDasescssessvssssvesseccssevssvessessnsssssssssssecsesesssenessuessecssssesssssussssnecsuetsareaeeseeesueces21 § 7279 Gcsecscssssssessecsseessesevessesessssssessssssusessssussnessscsnecesssasessseseseesesdssseessessseeesen21 CONSTITUTIONAL PROVISIONS Cal. Const., art. XIE, § 32cccccsssssssssssssssessecsssssssssssssssasesssssssssesusessssssssssceesssseve 12, 19 Cal. Const., art. XID], § 33 ...ceccccceccssesesecessessessseenceeseceeeesseseesecueescenseseceeatensessenee12 U-S. Const., 14th amend, § Lo o.cccececccccsccsecsssssssceeecesseseesecssecesecssssssssessesssees 10, 22 OTHER AUTHORITIES Cal. Code Regs., tit. 18 § 1603, subd. (c)(2)(B)..sccssessssssssssssssscssesessssssecsssssusssssssecsscesscesessusessecanesaeswal S A M A R I A 6 oO dae ! atd ad ia e TABLE OF AUTHORITIES (continued) Page § 1700.eeeeeeeteeeeeeeeereteeee becesesessceuseeceecsecesseeaeeneessessiteenecaseseseeessesseessaeeseneeensses 1] Sen. Bill No. 472 (1977-1978 Reg. Sess.) ..cccccccccssesssssseeesseseeensecseeseseseersssersssesees24 State Bd. of Equalization, Audit Manual (Aug. 2007) YJ OL01 03eeccceeeeseseeseseeeescesesenesenessesesaessecaessesesessseseceseeesssaeenesesserseenesas 11 O1020eeceeeeeeeecesseseecseesesseecseessesessesseesesenseseseseseeesseesseessneeeeeessnsenses 11 State Bd. of Equalization, Business Taxes Law Guide, Sales & Use Tax Annots. Ammot. No. 460.002800.eccceeseeenecesseecesesesensesscenessaesarecsseeseesenesseeeeesssenens 17 Anitiot. No. 460.0180: ....sssssssssssussssseeessssssssssssessseseessss sesssesseeeseseussssssnssewesc27 INTRODUCTION AND SUMMARY In this consolidated answerbrief, defendant and respondent the California Department of Tax and Fee Administration responds to amici Alina Bekkerman,et. al.; Consumer Attorneys of California, et al.; Howard Jarvis Taxpayers Association, et al.; Larry Littlejohn; and Public Citizen, Inc. (collectively, amici). In the main, these amici repeat plaintiffs’ arguments, which the Department fully addressedin its answerbrief.! Asset out in the Department’s answerand further discussed below, consumers havethe ability to influence the content, interpretation, and application of sales tax exemptions through interactions with retailers, and through requests for discretionary action madeto the Department, consistent with the tax code, or to the Legislature. (ABM 39-43.) But neither the tax code northe state or federal Constitution confers on consumersthe right to-institute tax refund-related proceedings—a right which belongs only to retailers as taxpayers. (/d. at 18-20.) Creating such aright in the circumstances of this case would be both unworkable and unwise. Allowing consumersto bring extra-statutory claims against the Department seeking a return ofsales tax reimbursementpaid, based on consumers’ claimsthat retailers could have asserted sales tax exemptions, but did not do so, where the Departmenthas not already determinedthat a tax refund is due underits normal statutory procedures(e.g., in the context of an audit, deficiency determination, or taxpayer refund action), would substantially expand the relief recognizedin the “unique” circumstances of ! The Department was not namedin plaintiffs’ breach-of-contract claim, and, therefore, continues to leave the briefing on the viability of this claim largely to the retailer defendants. (See Answer Brief on the Merits (ABM)15,fn. 2; id. at 38, fn. 18.) Javorv. State Bd. ofEqualization (1974) 12 Cal.3d 790, 802. (ABM 30- 34.) Such judicial expansion would work against the objectives of the tax code; interfere with the Legislature’s constitutional prerogative to set tax policy; encourage extensive, complex, andcostly litigation; and disrupt sales tax revenues essential to government operation. (ABM 34-39; see also Amicus Brief ofLeague of California Cities and California State Assn. of Counties 10 [noting adverse effects to local government finance from broad ruling that would recognize a “refund remedy for those who bear the economic, but not legal, burden of a revenue measure”’].) Declining to expand consumer Javor remedies to allow consumers to file suit against retailers and the Departmentto dispute in the first instance the routine application of sales tax exemptions would not violate due process. (ABM 43-50.) Due process requires that taxpayers be afforded an opportunity to dispute the imposition of taxes. From the first iteration of the Retail Sales Act in the early 1930s, through reforming amendments in the late 1970s, the Legislature has been clear that retailers, not consumers, paysales tax. While retailers may seeksales tax reimbursement from consumers by contract, only retailers are responsible for paying sales tax to the State. Accordingly, only taxpaying retailers may decide whether to meet any required conditions of, document, and assert particular sales tax exemptions, and whetherto pay sales taxes underprotest and file claims for refunds where the application of an exemption is unclear or disputed. Underthe system designed by the Legislature, the burdens of sales taxes, and the benefits of sales tax exemptions,fall on retailers as taxpayers, affecting consumers only indirectly. Andit is well settled that the right to due process does not protect against the indirect adverse effects of governmental action. (ABM 49-50.) Federal cases addressing federal tax immunity cited by amici Bekkerman and Howard Jarvis do not require the Court to reject the state Legislature’s express and unequivocal decision to makeretailers, not consumers, legally responsible for paying sales tax, and to provide only retailers with the type of concrete statutory interestthat is constitutionally protected by the Due Process Clause. The Department continues—within the limits of its authorizing statutes—to facilitate retailers’ efforts to take advantage of the conditional sales tax exemption for glucosetest strips and lancets that the Department itself created by regulation. If in the future the Legislature chooses to enact different or broader exemptions for these products, the Department will of course take appropriate action to implement and administer those policy decisions. But consumers’ dissatisfaction with the extent, clarity, or administration of the existing statutory exemptions provides no ground for the courts to create new consumer remedies. ARGUMENT I. JAVOR SHOULD NOT BE EXTENDED TO ALLOW CONSUMERS TO PURSUE CLAIMS CHALLENGING RETAILERS’ ROUTINE APPLICATIONS OF SALES TAX EXEMPTIONS A. The Absenceof a Statutory. Refund Action for ConsumersIs a Consequenceof the Legislature’s Decision That Retailers—Not Consumers—Are Taxpayers The Department’s answer brief detailed the ways in whichit encouragesretailers to claim sales tax exemptionsfor the benefit of consumers, and how consumers can both influenceretailers, and request Department action related to such exemptions. In the latter category, consumers may, for example, petition the Department for a rulemaking to clarify a statutory exemption, request a Department audit ofa retailer’s sales tax exemption practices, or file a declaratory relief action challenging 10 a Departmentregulation as inconsistent with a statute or the Constitution.’ (ABM39-43; Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1123.) Amici express frustration with the limited nature of consumers’ statutory options, which do not include consumer-initiated sales tax refund actions against the Department. (See Bekkerman 44-45; Howard Jarvis 12, 14-15, 16-17; Public Citizen 1-2, 5-7; see also Reply Brief on the Merits (RBM) 38-39.)* These limits are, however, the natural result of the Legislature’s * The record does not reflect, and the Departmentis not aware, that plaintiffs or amici have taken any such actions related to the sales tax exemptionsat issue in this case. 3 When the Department ascertains by audit, in a deficiency determination, or in a refund action that a retailer has collected excess sales tax reimbursement, it can also order prospective relief—for example,that a retailer not collect sales tax reimbursement on certain future sales, and it can order the retailer to return any unremitted tax reimbursementtoits customers. (Rev. & Tax. Code, §§ 6901.5, 7051 [Department“shall enforce” sales and use tax provisions]; Loeffler, supra, 58 Cal.4th at pp. 1118-1121 [discussing § 6901.5].) With respect to amountsthattheretailer has remitted to the Department, the Department conditions any refund to _ the taxpayingretailer on the retailer’s return of the excess reimbursement payments to the retailer’s customers. (Loeffler, supra, 58 Cal.4th at p. 1117 [discussing Decorative Carpets, Inc. v. State Bd. ofEqualization (1962) 58 Cal.2d 252, 254-255]; see also ABM 41; Cal. Code. Regs., tit. 18, § 1700 (“Reimbursementfor Sales Tax”].) * Public Citizen asserts that the Department has “an incentive”to “ignore a request to conduct an audit or deficiency determination”if the _ process “might result in a refund.” (Public Citizen 6; see also Littlejohn 4, - 6; Consumer Attorneys 6; RMB 39.) In fact, the Department’s audit program “has resulted in the correction of tax underpayments and overpayments of many millions of dollars.” (Audit Manual(Aug. 2007), 4 0101.20, italics added, available at [as of July 10, 2018]; see also id. at ¢ 0101.03 [stated mission to “serve the public through fair, effective, and efficient tax administration’].) Indeed, the facts of this case show that the Department doesnot view its responsibility as simply maximizing tax revenues. The - regulatory exemption for glucosetest strips is an extension ofthe statutory (continued...) 1] decision to makeretailers—not consumers—the taxpayersin retail sales transactions, and to restrict refund actions to taxpayers, as the Legislature is authorized to do. (See, e.g., Cal. Const., art. XII, § 32 [authorizing post- paymentaction to recoverillegal tax “in such manner as may be provided by the Legislature”); id. at § 33 [authorizing Legislature to “pass all laws necessary to carry out”art. XIII, governing taxation]; Rev. & Tax. Code, § 6051 [providing that sales tax is “hereby imposed uponallretailers”); § 6901 et seq. [setting out administrative procedure for taxpayer refund claims]; National Ice & Cold Storage Co. v. Cal. Pacific Fruit Express Co. (1938) 11 Cal.2d 283, 289-290; ABM 15-21 [summarizingsales tax law and observingthatthe retailer is the taxpayer]; Loeffler, supra, 58 Cal.4th at pp. 1101-1104 [same].) B. The Unique Circumstances of Javor, Which Caused the _ Court to Recognize an Extra-statutery Consumer Claim, Are Not Present Here To avoid this result, amici argue that the limited, extra-statutory claim recognized by this Court in Javor should be broadly available to allow consumers to challengeretailers’ routine application of sales tax exemptions and to seek refunds of sales tax reimbursement for completed transactions. For legal and practical reasons, the Court should decline to extend Javor thatfar. In Javor, the Court held that a class of automobile purchasers was entitled to bring an action against auto retailers for a refund ofsales tax reimbursement, and to join the Board of Equalization (the predecessor (...continued) exemption for prescription medicines, and, as an exemption, necessarily operates to reduce tax revenues. (See ABM 21-23.) > All further references are to the Revenue and Taxation Code unless otherwise specified. 12° agency to the Department) to that suit. (Javor, supra, 12 Cal.3d at p. 802; see also ABM 30-33 [summarizing Javor].) In Javor, a post-sale change in federal law reduced the federal excise tax on certain vehicles that had been sold in California. (Javor, supra, 12 Cal.3d at p. 794.) The agency interpreted that change in federal law to have effected under state law a retroactive reductionin the vehicles’ sales price on whichstate sales tax had been calculated. (/bid.) The agency then implemented the law by promulgating a rule recognizing a retroactive sales price adjustment caused by a change in federal law, which in turn reducedthe sales tax that auto retailers owed to the State. (Jbid.) The regulation further provided that excess sales tax would berefunded to affectedretailers, provided retailers repaid to consumers any associated excess sales tax reimbursement. (/bid.) The regulation was supplemented by a “notification and ‘operations memo’”to dealers and interested parties and a “newsrelease” informing consumers that they could demand andreceive refunds from dealers. (/d. at p. 801.) | The Court expressed concern that auto buyers might not learn of the sales tax reimbursement refund process,as retailers were not required to notify their customers. (Javor, supra, 12 Cal.3d at p. 801.) The Court also noted that even though “[t]he Board has admitted that it must pay these refundstoretailers[,]” because “the retailer cannot retain the refund himself, but must pay it over to his customer, the retailer has no particular 6 Amicus Bekkerman misstates the facts of Javor. (Bekkerman 40.) In that case, there was no suggestion that the agency returnedsales tax refunds to retailers without conditioning the return on the retailers’ making corresponding refundsofsales tax reimbursement to consumers. Indeed, 12 years before, in Decorative Carpets, supra, 58 Cal.2d 252, the Court had approved the Board’s practice of conditioning refundsto retailers on the retailers’ returning the reimbursement to paying customers. 13 incentive to request the refund on his own.” (/d. at pp. 801, 802.) Andit observedthat “[t]he 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.” (dd. at p. 802.) The Javor Court held that in these “unique circumstances,” the class of consumers whohadpaid sales tax reimbursement calculated on the pre- adjustment sales price were entitled to sue to “compel defendantretailers to make refund applications to the Board” and for the Board to take the “minimal action” of “pay[ing] the refund owedtheretailers into court or provid{ing] proof to the court thatthe retailer had already claimed and received a refund from the Board.” (Javor, supra, 12 Cal.3d at p. 802.) The considerations underlying recognition of a special consumer remedy in Javor do notjustify the judicial creation of a more general, consumer-initiated cause of action seeking the return ofsales tax reimbursementon the theory that retailers could have claimedsales tax exemptions, but did not do so. There is not, for example, the same type of incentive problem present in Javor, which involved a post-sale retroactive sales tax adjustment. In that case, while there were sales tax refunds simply waiting for the auto dealers to claim them and to pass correspondingsales tax reimbursement back to auto buyers, there was no ongoing relationship between the dealers and the affected buyers. In that case, there waslittle incentive for retailers to search out buyers in completed transactions who had already taken delivery of their vehicles and departed. In contrast, retailers generally have an incentive in every prospective transaction to claim sales tax exemptionsso that they may attract consumersby offering goodsat a lowertotal cost and gain a market advantage. (See ABM 39 & fn. 19.) Nor do sales tax exemptionspresent the type of unintended windfall at issue in Javor. Bystatute,all retail sales are presumptively taxable, and sales tax exemptions may be waived. (See ABM 37-38.) 14 Accordingly, the State’s receipt of tax on a sale as to which an exemption arguably could have applied is not unjust, but rather the natural result of a legislative design that presumes taxability and allows exemptions to be waived. Andthere can of course be no unjust enrichmentto the retailer in these circumstances, providedall sales tax reimbursementcollected is reflected in the retailer’s remittance to the State—asthe law requires. Most importantly, the agency in Javor had already determinedthat sales tax refundsto retailers, and the retailers’ return of corresponding sales tax reimbursement to customers, were appropriate for a defined set of transactions based on a post-sale change in the law, and no question of taxability was left to decide. That is not true in this case. Whether a sales tax exemption could apply in any given transaction is often a complex, fact- intensive inquiry. (Loeffler, supra, 58 Cal.4th at pp. 1103, 1105-1106 [citing examples], 1127; ABM 21-24, 37 [citing examples]; see also Cal. Code Regs., tit. 18, § 1603, subd. (c)(2)(B) [determination of taxability of sales of cold food “to go” is determined on a location-by-location basis].) Here, plaintiffs seeka determination of whether the conditionalsales tax exemption for the sale of glucosetest strips and lancets could apply in a variety of complex and diverse factual circumstances—sold off the shelves or rather from a controlled space; by a licensed pharmacyor a registered | pharmacist; with or without written proof of being under a doctor’s care. (ABM 24-25, 37.) The potential taxability of the sale of these itemsin these various scenarios “was ‘very hotly in dispute.’” (McClain v. Sav-on Drugs (2017) 9 Cal.App.Sth 684, 691 [quoting the trial court].) Asthis Court held in Loeffler, disputes about whether an exemption might apply to a specific transaction cannot be resolvedin thefirst instance by a court, | because “{t]he Legislature has subjected such questions to an administrative exhaustion requirement precisely to obtain the benefit of the Board’s expertise, permit it to correct mistakes, and save judicial resources.” 15 (Loeffler, supra, 58 Cal.4th at p. 1127; see generally § 6932; ABM 19-20.) Bystatute, the vehicle for exhaustionis a taxpayer-initiated administrative claim for refund. (/bid.) C. Referral to the Department of Taxability Questions Raised.in Consumer-Initiated Refund Lawsuits Would Be Inconsistent with the Tax Code and Unworkable as a Practical Matter Amici suggest that to address the above concerns, a court might refer consumers’ contentions about the application of sales tax exemptionsto the Department for decision in the first instance. (ConsumerAttorneys 18 [discussing primary jurisdiction doctrine and suggesting referral of taxability question to Department]; Littlejohn 6-7 [suggesting that consumer-initiated court action should trigger administrative proceeding on taxability]; Public Citizen 9-10 [similar]; see also RBM 16-17, 30 [similar]; Loeffler, supra, 58 Cal.4th at p. 1140 (dis. opn. of Liu, J.) [proposing joinder of Boardinlitigation of consumer UCL claims challenging sales tax reimbursement].) This approach is flawed forat least three reasons. First, the Legislature has not charged the Department with resolving consumers’ disagreements with taxpaying retailers’ routine business decisions not to assert sales tax exemptions as to specific transactions. As this Court noted in Loeffler: The tax code does not permit consumers to require the Board to ascertain whether excess reimbursement charges have been made. Rather, with respect to excess reimbursement charges, section 6901.5 contemplatesthat it is for the Board to ascertain under its normal procedures whether any mistake has been made. If the matteris not raised through an audit or a deficiency determination,it is for the taxpayer to claim a refund from the Board, which mayin turn require the taxpayer to refund excess reimbursement to consumers. 16 (Loeffler, supra, 58 Cal.4th at p. 1128, original italics;’ see also State Bd. of Equalization, operations memo No.611 (Oct. 23, 1978) p. 4 [observing that after the 1978 amendment repealing former section 6054.5, the agency has “no statutory duty to police the retail trade to ensure that only the correct amountoftax reimbursementis collected from the customers on retail sales”], cited in Loeffler, supra, 58 Cal.4th at p. 1117; State Bd. of Equalization, operations memo No. 754 (Jan. 12, 1983) pp. 1-3 [explaining that under section 6901.5, a taxpayer/retailer has not collected excess sales tax reimbursement from a consumer where the amount collected does not exceed the amountofthe retailer’s own tax-related liabilities on the same transaction—in the form of sales or use tax owedto the State, or sales or use tax reimbursement owedto another], discussed generally in Loeffler, supra, 58 Cal.4th at p. 1119.)® “[U]nder the Board’s annotations, the consumer lacks standing in disputes over the application of the tax law to particular transactions.” (Loeffler, supra, 58 Cal.4th at p. 1128, citing State Bd. of Equalization, BusinessTaxes Law Guide, Sales & Use Tax Annots., 7 To beclear, the “normal procedures”for ascertaining any such excess are those established by statute—specifically, in the main, audits, deficiency determinations, and refund proceedings. (See Loeffler, supra, 58 Cal.4th at p. 1120.) 8Howard Jarvis argues that the tax code, by failing to provide for any cause.of action by consumers to seek refundsrelated to sales tax exemptions,“is in irreconcilable conflict with Civil Code section 3523,” an 1872 maxim ofjurisprudence that “promisesthat ‘[f]or every wrong there is aremedy.’” (Howard Jarvis 10, 22-23.) Amicus misunderstands the function of the maxims. While maxims mayassist a court in exercising its equitable powersor in construing statutes, they cannot be employed to override legislative intent (National Shooting Sports Foundation, Inc. v. State ofCalifornia (June 28, 2018, S239397) _ Cal.5th __ [2018 WL 3150950, *2], or create remedies not intended by the Legislature (see Tulare County v. Kings County (1897) 117 Cal. 195, 202-203 (per curiam)). 17 Annot. No. 460.0028 [“There is no provision in the law for an action on the part of a nontaxpayerto dispute the application of tax.”].)? Thereis, therefore, no established “‘pervasive and self-contained system of administrative procedure’”ready to accept court-referred _ questions presented in consumer-initiated actions. (Compare Farmers Ins. Exchange v. Superior Court (1992) 2 Cal.4th 377, 396.) And requiring the Department to hear and resolve such consumer-initiated disputes on court referral could substantially interfere with the Department’s ability to carry out its statutory responsibilities, which likely would be displaced by “a huge volumeoflitigation overall the fine points of tax law as applied to millions of daily commercial transactions in this state” taking place “outside the system set up by the Legislature[.]” (See Loeffler, supra, 58 Cal.4th at p. 1130 [declining to recognize similar claims under the Unfair Competition Law and Consumer Legal Remedies Act based in part on the potential effect on the courts]; see also id. at p. 1103 [whether a particular sale is subject to or is exempt from sales tax, is exceedingly closely regulated, complex, and highly technical”]; ABM 36-37; cf. RBM 27 [suggesting that the Department should review the taxability of all sales of glucosetest strips and lancets by defendantretailers in California since 2000].)° ? All annotations bearing onsales tax reimbursementare availableat [as of July 10, 2018]. . 10 Resolving the referral would likely involve a numberof steps and could cause significant delay to the court proceedings. To take one example, sales taxes are calculated based on gross receipts received during E the taxable period (§ 6051) and, therefore, retailers’ reporting to the Departmentis not segregated by type of sale. In order to determine whetherretailers paid tax on particular types of sales at issue in the referral, the Department would need to audit each relevant retailer. As a result, the (continued...) » e e n s A N E 18 Second,the referral approachfails to recognizethat all coveredretail sales are presumptively taxable (Loeffler, supra, 58 Cal.4th at p. 1107; § 6091); the retailer bears both the burden ofestablishing any exemption (id. at p. 1107; § 6091) and the administrative costs of doing so (see Paine v. State Bd. ofEqualization (1982) 137 Cal.App.3d 438, 443); and the retailer reasonably may decline to assert sales tax exemptions, even where they apply—or might arguably apply (§§ 6901.5, 6905, 6933). (See Loeffler, supra, 58 Cal.4th at p. 1105 [discussing exemptions and noting “complicated and fact-specific exemptions for some sales of food or medicine”]); id. at p. 1129 [notirig that in light of these circumstances,“it would not be unreasonable if the retailer’s tax payment to someextent erred on the side of considering sales taxable”]; see also id. at p. 1141 (dis. opn. of Liu, J.) [similar].)"! Finally, referral to the Department does nothing to address the uncertainty caused by a multiplicity of large-scale consumerclass actions challenging taxpayer-retailers’ decisions about whetherto claim sales tax exemptions on completed transactions that are otherwise settled as between retailers and the Department. (ABM 38.) With or without referral, recognizing such claims could severely undermine the predictability of the State’s sales tax revenues and contravene the purposes of Section 32, which 295include “‘avoid[ing] unnecessary disruption of public services’” dependent (...continued) court case would likely have to be stayed until the audits, and any appeals taxpaying retailers might pursue (includinglitigation), were final and non- appealable. 11 Amici imply without citation thatit is “illegal” for a retailer to collect sales tax reimbursement on a transaction that could in theory be claimed as tax exempt. (Consumer Attorneys 12; see also Bekkerman 36, 40, 43.) In fact, as section 6901.5 provides, there is nothing illegal in such a practice—provided the retailer remits the amountto the State. 19 on tax revenues and allowing “‘governmental entities [to] engage in fiscal planning based on expected tax revenues.’” (See Loeffler, supra, 58 Cal.4th at pp. 1101, 1102, 1131, quoting Woosley v. State of California (1992) 3 Cal.4th 758, 789.) D. Javor Must Be Limited to Circumstances Where the Department Has Already Determined, Pursuant to NormalStatutory Procedures, That a Sales Tax Refund Is Due For these reasons, Javor claims should belimited to situations where, at the time offiling, the Department or the Legislature has already defined or recognized a set of sales transactions that require a sales tax refund, and the Department has already completed any necessary interpretation of law and application of fact to law such that “[t]here [is] no controversy over the taxability question” and there can be no dispute that “an excess had been collected” and “the amountofthe excessalso [is] not in dispute.” (See Loeffler, supra, 58 Cal.4th at p. 1115, fn. 10 [summarizing Javor]; ABM 34, fn. 15.)!* Issues of taxability must be sufficiently settled such that on receipt of the retailers’ court-compelled refund requests, the only thing the Department needsto do is to check each request for refund against the established criteria, and calculate or confirm the refund due using basic math. This rule makes the Javor remedy a limited one, but one that follows from Javoritself, which recognized that the remedy would not be common. (Javor, supra, 12 Cal.3d at p. 802 [allowing for equitable remedy “under 2 Amicus ConsumerAttorneysasserts that without broad Javor relief, there is “no meaningful incentive to businesses”to assert sales exemptions (and therefore refrain from collecting sales tax reimbursement). (Consumer Attorneys 5; see also id. at 7.) The Department disagrees. In general, there is a marketincentivefor retailers to offer goods at a lower total cost (ABM 39), andretailers routinely claim sales tax exemptions—as a review of anytypical set of household receipts will confirm. 20 the unique circumstancesofthis case”].) To maintain that limited scope, no Javor claim may lie where the consumer-plaintiff’s only allegation is that a retailer could have asserted a sales tax exemption, but did not do so. Contrary to amici’s suggestions, limiting Javor relief to situations where the Departmenthasalready settled any open issues of taxability and has concludedthat sales tax refunds are dueto retailers in a set of identified transactions (and therefore that sales tax reimbursement must in turn be refunded to consumers) would not sanction or encourage the Department to obstructvalid, Javor-type reimbursementrefund actions simply by failing to take action. (See Bekkerman 39, 41; Howard Jarvis 12; Littlejohn 1, 4, 9; Public Citizen 10-11; RBM 34-35, 37.) As this Court has observed, the Department“has a vital interest in the integrity” of the sales tax system. (Decorative Carpets, supra, 58 Cal.2d at p. 255.) In the unusual circumstances presented in Javor, this interest motivated the Departmentto | determinethat sales tax refunds were due—even though many retailer/taxpayers did not request refunds (becausethe retailers would not benefit from refunds, but would be required to pass the amounts back to buyers whohad paid sales tax reimbursement). And, to the extent the Legislature decides that the Department should makesales tax refund determinations for the benefit of non-taxpayers (consumers), it can by statute direct the Department to take action. (See, e.g., § 7277 [where local sales tax determined to be unconstitutional, establishing procedure for consumers to seek return of sales tax reimbursement from State impound account]; § 7279.6 [providing that “[a]n arbitrary and capricious action of the board in implementing the provisions of this chapter shall be reviewable by writ”]; see also Kuykendall v. State Bd. ofEqualization (1994) 22 Cal.App.4th 1194, 1211-1215, discussed at ABM 20, fn. 8, 48.) Once the agency has taken the action required by the Legislature, and if the other 21 conditions noted aboveare satisfied, a Javor claim—if necessary—could follow. II. DECLINING TO EXTEND JAVOR TO THE CIRCUMSTANCES OF THIS CASE DOES NOT VIOLATE DUE PROCESS Asthis Court recently confirmed, it is the Legislature’s prerogative to decide that sales tax is imposed onretailers for the privilege of selling tangible personal property, and not on consumers, notwithstanding that consumers commonly reimbursesellers for sales tax as a matter of contract. (See Loeffler, supra, 58 Cal.4th at pp. 1104, 1127-1129.) A. While Consumers Benefit Indirectly from Sales Tax Exemptions, Such Indirect Interests Are Not Protected by Due Process Amici Bekkerman and Howard Jarvis reassert plaintiffs’ argument that unless a refund remedy is extended to consumers on the facts of this case, California’s sales tax system violates consumers’ right to due process. (Bekkerman 16-29, 32-45; Howard Jarvis 16-18, 20-23; see also RBM 4- 13.) Amici’s constitutional arguments presumethat consumersare the true taxpayers because, amici assert, they bear the ultimate economic burden of retail sales taxes. Amici’s due process arguments fail for the reasons stated in the Department’s answer brief—chief among them being that consumers, by statutory design, are not the taxpayers; they are burdenedbysales taxes, and benefit from sales tax exemptions, only indirectly. (ABM 17-18, 43- 50.) The Due Process Clause “does not apply to the indirect adverse effects | of governmental action.” (O’Bannon v. Town Court Nursing Center (1980) 447 U.S. 773, 789; cf., South Carolina v. Regan (1984) 465 U.S.367, 394, fn. 11 (concur. opn. of O’Connor, J.) [thoughtaxes “inevitably have a pecuniary impact on nontaxpayers[,]” the “indirect impacts of a tax, no matter how detrimental, generally do not invade any interest cognizable under the Due Process Clause”].) (ABM 49.) 22 B. Federal Cases Addressing Federal Tax Immunity Are Inapposite Contrary to amici’s arguments, federal decisions concerning the legal incidenceof sales taxes for purposes offederal immunity, including the U.S. Supreme Court’s decision in DiamondNational Corp. v. State Board ofEqualization (1976) 425 U.S. 268 (per curiam), do not require this Court to disregard the Legislature’s decision to designate retailers, and not consumers, as taxpayers. (See Bekkerman 16-29; Howard Jarvis 12, 14-16; ABM 47-48 & fn. 29.) ; In Diamond National, the Court held that for purposes of federal immunity, the incidence of California’s sales tax (as state tax law was then structured) fell on a national bank as the purchaser of forms and other tangible personal property, rather than on the vendor; under federal law,the bank was therefore exempt from state taxes. (425 U.S. 268.) A decision does not, of course, stand for propositions not considered by the court. (Loeffler, supra, 58 Cal.4th at p. 1 134.) Diamond National’s holding with respect to federal tax immunity thus doesnot establish that California consumersare retail sales taxpayers for the more general purposes of due process. Wherean interest asserted to be protected by due process is grounded - in state law, courts look to the provisions of that law to determine whether 13 The many additional cases cited by amicus Bekkermanthat involve federal and tribal tax immunity—not due process—arethusoflittle assistance. (See Kern-Limerick, Inc. v. Scurlock (1954) 347 U.S. 110; First Agricultural Nat. Bank v. State Tax Com. (1968) 392 U.S. 339; U.S. v. State Tax Com. ofMiss. (1975) 421 U.S. 599; Cal. State Bd. ofEqualizationv. Chemehuevi Indian Tribe (1985) 474 U.S. 9 (per curiam); U.S. v. Nevada Tax Com. (9th Cir. 1971) 439 F.2d 435; U.S. v. New Mexico (10th Cir. 1978) 581 F.2d 803; U.S. v. Cal. State Bd. ofEqualization (9th Cir. 1981) 650 F.2d 1127, affd. (1982) 456 U.S. 901; and Coeur D’AleneTribe v. Hammond(9th Cir. 2004) 384 F.3d 674.) 23 the interest amounts to a constitutionally protected liberty or property right, as opposed to a mere desire or “unilateral expectation.” (Town ofCastle Rock v. Gonzales (2005) 545 U.S. 748, 757, quotation omitted; see also Gurley v. Rhoden (1975) 421 U.S. 200, 203, 208 [rejecting gasoline distributor’s due process claim premised on theory that legal incidence of state excise tax was on consumer; holding state court’s interpretation ofits tax law placing legal incidence on distributor “conclusive” because interpretation was “consistent with the statute’s reasonable interpretation”]; see ABM 49-50.) As noted, by its terms, California sales tax law affects consumers only indirectly, expressly designating retailers and not consumers as taxpayers, and, therefore, consistent with state and federal due process requirements, does not provide consumers with tax refund remedies. In addition, Diamond National doesnotreflect the current state of California sales tax law. As summarized in Loeffler, the Legislature responded to Diamond National “‘by removing from the code those’ provisions of law which have characteristics of laws which impose the tax upon the consumer.’” (58 Cal.4th at p. 1116, quoting Assem. Com. on Revenue & Taxation, Analysis of Sen. Bill No. 472 (1977-1978 Reg. Sess.) as amended June 15, 1977, p. 3 [italics in Loeffler].) Provisions removed include former sections 6052 and 6053, which contained language suggesting that the retailer was required to collect reimbursement. (Loeffler, supra, 58 Cal.4th at pp. 1116-1117.) And the Legislature added language to Civil Code section 1656.1 clarifying that retailers could, but were not required to, seek reimbursementfor sales tax fromconsumers by contract. (id. at p. 1117.)"* 4 Shortly after these amendments, the Ninth Circuit held for purposes of federal tax immunity that the legal incidence ofstate sales tax (continued...) 24 C. Consumers Are Not Effectively Forced to Pay Sales. Tax; They Engage in Voluntary Transactions Governed by Contract Law HowardJarvis further contends that consumerseffectively are forced to pay sales tax but have no meaningful opportunity for a hearing or review. (Howard Jarvis 8-9, 12, 13-14, 18; see also RBM 3.) That argument misunderstands the case on whichit relies, National Ice and Cold Storage Co. ofCalifornia v. Pacific Fruit Express Co. (1938) 11 Cal.2d 283. (See Howard Jarvis at 8-9, 13, 15-16, 18, 19, 21.) In National Ice, the Court examined the initial iteration of the Retail Sales Act, which becameeffective in 1933. (National Ice, supra, 11 Cal.2d at p. 285.) The law imposeda tax on retailers for the privilege of selling tangible personal property, but also providedthat retailers had a right to add sales tax to the sales price andto collect it from the buyer. (/d. at pp. 285- 286.) Seven years before the law took effect, plaintiff, an ice purveyor, had entered into a written contract with defendant, an express shipping company, to provideice for the refrigeration ofrail cars. (/d. at pp. 286- — 287.) “At no time did the agreement contain any provisionrelative to the paymentby either party of any sales tax such as was contemplated by the (...continued) associated with equipment leasing remained on the United States as lessee. (U.S. v. Cal. State Bd. ofEqualization (1981) 650 F.2d 1127, affd. without opinion (1982) 456 U.S. 901.) (See Bekkerman 23-26; ABM 47-48,fn. 29.) Again, that decision is not helpful in analyzing a due process claim. Moreover, even as to federal tax immunity, the decision appears to be in tension with more recent U.S. Supreme Court decisions involving tribal tax immunity that rely on state legislatures’ use of “dispositive language” concerning the legal incidence of a state tax and the “‘fair interpretation” of the state taxing statute as written and applied. (Wagnon v. Prairie Band . Potawatomi Nation (2005) 546 U.S. 95, 102-103, quoting Cal. Bd. of Equalization v. Chemehuevi Tribe, supra, 474 U.S. at p. 11; see ABM 47- 48, fn. 29.) 25 provisions ofthe ‘Retail Sales Tax Act of 1933,’ or otherwise.” (Jd. at p. 286.) After the Act tookeffect, the ice company demandedthat the express company pay “an additional sum of money, equal to the amountofthe tax which had accrued on the gross amountofthe purchaseprice”ofthe delivered ice, which the express companyrefused to pay. (/d. at p. 287.) The seller then brought suit. (/bid.) The Court rejected the seller’s argument that—notwithstanding the Act’s statement that the tax was “imposed uponretailers” (National Ice, supra, 11 Cal.2d at p. 285)}the Legislature’s intent was “that in reality the consumershould paythe tax.” (/d. at p. 288.) “[I]t would have been within the powerofthe Legislature to have imposed a tax uponeither the retailer or the purchaser of such property[.]” Ud. at p. 290.) As the Court observed, the Legislature’s express choice was to imposethe tax “upon the retailer, and not upon the consumer[.]” (/d. at p. 289.) The Court struck down the provision of the Act that purported to create by statute “a legal right of the retailer to ‘pass on’ to the consumer a tax which by the terms of the statute has been imposeddirectly on the retailer[.]” (National Ice, supra, 11 Cal.2d at pp. 290, 291.) “[T]o baldly legislate that without, and in the absenceof either due or any process of law, a legal debt that is owed by one person must be paid by another,is quite at variance with ordinary notions of that which may be termed the administration ofjustice.” (d. at p. 291.) Still, the Court notedthatits ruling was “not intendedto indicate theillegality of authority which may be lodged in a retailer to ‘pass on’ the tax to a purchaser. with the latter’s consentthereto, either expressly or impliedly given. That sort of arrangement betweeninterested parties in such a sale is not here involved.” (Id. at p. 292,italics added; see also De Aryan v. Akers (1939) 12 Cal.2d 781, 786 [confirming that National Ice did not preclude reimbursement by contract].) 26 D. Contractual “Consent” Does Not Mean That Consumers Must Be Given an Opportunity to Dispute the Routine Application of Sales Tax Exemptions Contrary to amici’s assertions (see Bekkerman 30-31, 36-37; Howard Jarvis 17-18), “consent” in the context ofNational Ice does not mean that in every retail sale, the consumer, a non-taxpayer, must be given an opportunity to dispute issues of sales tax law that may touch the transaction—for example, that a sales tax is due, or that a sales tax exemption doesnot apply or will not be pursued. (See De Aryan, supra, 12 Cal.2d at pp. 783, 785 [rejecting claim by buyer againstseller that one-cent sales tax reimbursement addedto 15-cent sales price was and “exaction” and excessive].)!> Rather, “consent’ means that the consumer must contractually agree to the tax-related payment term. Theseller’s offer for sale may include an additional sum to be paid as sales tax reimbursement— a term that the consumer may either accept (by paying the sums requested and taking away the item on offer), or reject. Whentheseller’s offer includes sales tax reimbursement, “[t]he consumerstill has the right to purchaseornotat the asked price whichincludes the tax.” (Id. at p. 786.)!° 'S The De Aryan Court took the matter “because of what was deemed to have been a mistaken application of certain language appearing in our [National Ice] decision ....” (12 Cal.2d at p. 783.) 16 A consumer mayalso simply refuse to pay sales tax reimbursement—evenif required by contract—in which casethe retailer will still owe taxes. (See State Bd. of Equalization, Business Taxes Law Guide, Sales & Use Tax Annots., Annot. No. 460.0180 [purchaser DMV’s refusal to pay sales tax on papersold to it does not exempt paperretailer’s tax liability].) Accordingly, and contrary to the argument of Howard Jarvis, a consumeris never “forced to pay the ‘retailer’s’ tax obligations[.]” (See Howard Jarvis 18.) Neither does a contractual agreementto pay sales tax _ reimbursement amount to “extortion.” (See Bekkerman 37-38, quotation omitted.) 27 This understanding ofthe rule of National Iceis reflected in Civil Codesection 1656.1. The provision expressly providesthat “[w]hether a retailer may addsales tax reimbursementto the sales price of the tangible personal property soldat retail to a purchaser depends solely upon the terms of the agreementof sale[,]” and sets out conditions allowing for a rebuttable presumption that the parties agreed to include this term—for example, where “[s]ales tax reimbursement is shown onthe sales check or other proofof sale[.]” (Civ. Code, § 1656.1, subds.(a), (b), (d).) HowardJarvis further asserts that consumers “no longer have an effective opportunity to rebut the presumption”as provided by subdivision (d). (Howard Jarvis 11-12; see also RBM 1.) This argument ignores the primaryfunction of subdivision (d): It preserves the Department’s ability to rebut a retailer’s assertion that the retailer’s gross receipts (the amount on whichsales tax is calculated (§ 6012)) exclude sales tax reimbursement charges. (See ABM 17.) The argumentis also incorrect. Normalrules of contract interpretation apply as betweentheretailer and the consumer. If, for example, a contract for sale included a pre-printed statement that sales tax reimbursement would be added, but a handwritten addition to the contractstated that the seller would “pay the sales tax,” the consumer could makethe case that the handwritten term should control. (See Civ. Code, § 1651).!7 CONCLUSION The Department acknowledges the economic burdensfacing thousands of Californians whoare living with diabetes. Over the years, the Departmenthas taken a variety of actions within the limits of its statutory 17 Bekkerman also makes passing reference to takings jurisprudence (Bekkerman 37-38), but the property-developmentcases cited are not factually or legally similar to this case. (See ABM 50,fn. 50.) 28 authority to encourageretailers to claim sales tax exemptions for glucose test strips and lancets—evenas the Legislature considered but declined to enact a statutory exemption. (ABM 22-23.) The Department’s actions include promulgating a regulation expanding the statutory exemption for prescription medicines to reach these products (over objections that the regulation was overbroad); conducting a statewide surveyofretailers to understand whether and how its regulation was being implemented; issuing a letter to 13,000 retailers clarifying that a formal prescription was not required for these products; and issuing various plain-language guidance documents providing informal guidance on the regulatory exemption. (ABM 21-24.) Arguments that more could be done to encourageretailers to claim sales tax exemptions for these products speak to matters of policy, and mayalways be addressed either to the Departmentor to the Legislature. They do notjustify the creation of novel, unwieldy, and burdensome litigation-based remedies by the courts. Thetrial court did not err in sustaining defendants’ demurrer to plaintiff consumers’ complaint without leave to amend. The Court of Appeal’s judgment upholding that decision should be affirmed. 29 Dated: July, 12 2018 Respectfully submitted, XAVIER BECERRA Attorney General of California EDWARD C. DUMONT Principal Deputy Solicitor General /s/ Janill L. Richards - JANILL L. RICHARDS Principal Deputy Solicitor General DIANE S. SHAW Senior Assistant Attorney General LisA W. CHAO Supervising Deputy Attorney General MAX CARTER-OBERSTONE Assoc. Deputy Solicitor General NHAN T. VU Deputy Attorney General Attorneysfor Defendant and Respondent California Department ofTax and Fee Administration , 30 CERTIFICATE OF COMPLIANCE I certify that the attached Respondent California Department of Tax and Fee Administration’s Consolidated Answer to Amicus Curiae Briefs uses a 13 point Times New Romanfont and contains 6,886 words. Dated: July 12, 2018 XAVIER BECERRA Attorney General of California /s/ Janill L. Richards JANILL L. RICHARDS Principal Deputy Solicitor General Attorneysfor Defendant and Respondent California Department ofTax and Fee Administration 31 DECLARATION OF SERVICE BY U.S. MAIL Case Name: Michael McClain v. Sav-On Drugs, etal. Case No.: $241471 I declare: I am employed in the Office of the Attorney General, which is the office of a memberofthe California State Bar, at which member's direction this service is made. I am 18 years of age or _ older and nota party to this matter. I am familiar with the businesspractice at the Office of the Attorney General for collection and processing of correspondence for mailing with the United States Postal Service. In accordance with that practice, correspondence placed in the internal mail collection system at the Office of the Attorney General is deposited with the United States Postal Service with postage thereon fully prepaid that same day in the ordinary course of business. On July 12, 2018, I served the attached RESPONDENT CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION’S CONSOLIDATED ANSWER TO AMICUS CURIAEBRIEFSbyplacing a true copy thereof enclosed in a sealed envelopein the internal mail collection system at the Office of the Attorney General at 455 Golden Gate Avenue, Suite 11000, San Francisco, CA 94102-7004, addressedas follows: [See attached servicelist] I declare under penalty of perjury under the lawsofthe State of California the foregoingis true and correct andthat this declaration was executed on July 12, 2018, at San Francisco, California. M. Campos A. Barnbor Declarant Signature LA2017603374 42019645.docx Service List Michael McClain: PlaintiffandAppellant Avi Feigenblatt: PlaintiffandAppellant Gregory Fisher: PlaintiffandAppellant Bruce Russell MacLeod McKool Smith Hennigan,P.C. 255 Shoreline Drive, Suite 510 Redwood Shores, CA 94065 Steven J. Bernheim The Bernheim Law Firm 11611 DonaAlicia PI. Studio City, CA 91604 - Taras Peter Kick The Kick Law Firm 815 Moraga Drive Los Angeles, CA 90049 Robert James Dart The Kick Law Firm 815 Moraga Drive Los Angeles, CA 90049 Shawna Lee Ballard McKool Smith Hennigan P.C. 255 Shoreline Drive, Suite 510 Redwood Shores, CA 94065 Sav-On Drugs: Defendant and Respondent Albertson's, Inc.: Defendant and Respondent Phillip Jon Eskenazi Hunton Andrews Kurth LLP 550 South HopeStreet, Suite 2000 Los Angeles, CA 90071 Kirk Austin Hornbeck Hunton Andrews Kurth LLP 550 South HopeStreet, Suite 2000 Los Angeles, CA 90071 Wal-Mart Stores, Inc.: Defendant and Respondent 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 Target Corporation: Defendant and Respondent 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 Rite Aid Corporation: Defendant and Respondent Walgreen Co.: Defendant and Respondent 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 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 Avenue, Suite 2900 Los Angeles, CA 90071-1514 CVS Caremark Corporation: Defendant and Respondent Longs Drug Stores Corporation: Defendant and Respondent 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 Safeway Inc.: Defendant and Respondent The Vons Companies: Defendant and Respondent Vons Food Services, Inc.: Defendant and Respondent Theodore Keith Bell SafewayInc. 5918 Stoneridge Mall Road Pleasanton, CA 94588 The Law Office ofDaniel Berko: Pub/Depublication Requestor Daniel Berko Law Office of Daniel Berko 819 Eddy Street San Francisco, CA 94109 Public Citizens, Inc.: Amicus curiae Mark A. Chavez Chavez & Gertler, LLP 42 Miller Avenue Mill Valley, CA 94941 Larry Littlejohn: Amicus curiae Daniel Berko Law Office of Daniel Berko 819 Eddy Street San Francisco, CA 94109 | Alina Bekkerman: Amicus curiae Jenny Lee: Amicus curiae Brandon Griffith: Amicus curiae Charles Lisser: Amicus curiae Daniel Morley Hattis Hattis Law PO Box 1645 Bellevue, WA 98009-1645 Tony J. Tanke Attorney at Law 2050 Lyndell Terrace, Suite 240 Davis, CA 95616 Howard Jarvis Taxpayers Association: Amicus curiae Laura Elizabeth Murray Howard Jarvis Taxpayers Foundation 921 Eleventh Street, Suite 1201 Sacramento, CA 95814 League of California Cities: Amicus curiae California State Association of Counties: Amicus curiae Michael G. Colantuono Colantuono, Highsmith & Whatley, PC 420 Sierra College Drive, Suite 140 Grass Valley, CA 95945