Haman v. County of Humboldt

In Allied Stores of Ohio v. Bowers, supra, 358 U.S. 522 , the United States Supreme Court set down the governing principles with respect to exemptions. The state there had exempted from ad valorem property tax any property held in storage for a nonresident owner. Plaintiff contended that this exemption denied equal protection to resident owners of stored property. Noting that the state must justify such distinctions on a rational basis (358 U.S. at p. 527 [3 L.Ed.2d at p. 485]), the court upheld the tax statute because it could reasonably be said that the exemption would encourage the development of the warehouse business within the state: “[I]t has repeatedly been held and appears to be entirely settled that a statute which encourages the location within the State of needed and useful industries by exempting them, though not also- others, from its taxes is not arbitrary and does not violate the Equal Protection Clause of the Fourteenth Amendment.” (358 U.S. at p. 528 [3 L.Ed.2d at p. 485].)

In Central R. Co. v. Pennsylvania (1962) 370 U.S. 607 [ 8 L.Ed.2d 720 , 82 S.Ct. 1297 ], the state allowed railroad companies that had tracks outside the state a reduction in the amount of property tax charged for their railroad cars based upon the amount of time those cars were outside the state, but denied a similar reduction to railroads that only had tracks within the state. The court sustained the tax because it felt that there were reasonable bases to treat the two differently, since railroads with tracks outside the state would be more likely to encounter taxes and other costs in other states. (370 U.S. at pp. 617-618 [8 L.Ed.2d at pp. 728-729].)

It is also clear that administrative difficulties can justify different treatment under a tax statute. In Carmichael v. Southern Coal Co., supra, 301 U.S. 495 , the court upheld imposition of a social security tax that exempted employers of fewer than eight workers because the expense of collection from small employers could exceed the expected returns. (301 U.S. at pp. 511-512 [81 L.Ed. at pp. 1254-1255].)

There are, however, limits to the latitude afforded a state in demanding taxes. The equal protection clause applies to tax measures. (Wheeling Steel Corp. v. Glander (1949) 337 U.S. 562 , 571-572 [ 93 L.Ed. 1544 , 1550-1551, 69 S.Ct. 1291 ]; Concordia Ins. Co. v. Illinois (1934) 292 U.S. 535 , 549 [ 78 L.Ed. 1411 , 1420, 54 S.Ct. 830 ]; Liggett Co. v. Lee (1933) 288 U.S. 517 , 532 [ 77 L.Ed. 929 , 935-936, 53 S.Ct. 481 , 85 A.L.R. 699 ].) The distinction between classes drawn by a tax statute “must rest upon some ground of difference having a fair and substantial

In Liggett Co. v. Lee, supra, 288 U.S. 517 , the state charged a license tax based on the number of stores owned. The fee for each store was smaller where all stores owned were within one county than where the stores owned were in more than one county. The court found that there was no reason for the different treatment because county lines do not relate in any significant way to any factor important in calculating the tax. (288 U.S. at pp. 533-535 [77 L.Ed. at pp. 936-937].)

The discrimination between residents owning fishing boats documented in California and residents owning fishing boats documented in other states may not be justified on either the ground that the tax will promote local industry or the ground that it tends to eliminate double taxation. The place of registration with the federal government does not relate to the operation of the fishing boats. By placing the greater tax on the foreign documented boat, the tax, if anything, would tend to drive industry away from California. As to double taxation, the boat documented in another state and used in California faces a greater risk of double taxation than the boat documented in this state and used here.

The principal justification proffered by the county for the discrimination is that it is expensive to prove that a boat registered in another state is used in this state and is owned by a resident. Although, as pointed out above, administrative convenience may furnish a basis for discrimination as to taxes in a proper case, we are satisfied that in the instant case the difference in rates is so great that it may not be upheld. (Cf. Mullaney v. Anderson, 342 U.S. 415 , 417-419 [ 96 L.Ed. 458 , 461-462, 72 S.Ct. 428 ]; Toomer v. Witsell, 334 U.S. 385 , 398-399 [ 92 L.Ed. 1460 , 1472-1473, 68 S.Ct. 1157 ].) The state has demanded that plaintilffs pay 24 times the tax paid by other residents of California who either documented their boats at the time of purchase in California or who were subsequently permitted by the Commissioner of Customs to change the home port designation to a California port. To accept the discrimination made by the tax statute would require that we conclude that approximately 95 percent of the money taken in is consumed in administering the tax on plaintiffs and other residents whose boats are not documented in California.

In fixing the assessment the burden on the assessor is the same whether or not the boat is documented in California or another state. He must first value the boat whether the assessment rate is 24 percent or 1 percent. As the county points out, the burden on the assessor in determining whether the property is subject to tax is reduced when the boat is docu

We conclude that the legislative intent is properly carried out by holding invalid subdivision (a) of section 227, which requires that the port of documentation be within this state, and by upholding the balance of the section. Accordingly, plaintiffs are entitled to a refund.

The judgment is reversed with directions to enter judgment for plaintiffs in accordance with the views expressed above.