City of L.A. v. L.A. Indep. Gas Co.

SHAW, J. This is a suit to recover license taxes imposed by an ordinance of the city of Los Angeles. The clause relating to defendant is as follows:—

“For every person, firm or corporation conducting, managing, or carrying on the business of manufacturing, selling, distributing, or furnishing gas for light, heat, or power, $100 per month.”

The defendant claims that this clause of the ordinance is unconstitutional and void. The particular reason advanced in support of this claim is that the same sum is imposed upon every person, firm, or corporation, regardless of the extent, amount, or value of the business done, or the income thereof. It is alleged in the answer that there are but two companies engaged in the business in the city, that the value of defendant’s property devoted to the business in the city does not exceed one hundred thousand dollars, that it distributes only fifty thousand cubic feet of gas each day, has only ten miles of street mains, and receives an income of only fifteen hundred dollars a month; whereas, the other company owns a plant in the city worth three million five hundred thousand dollars, including three hundred miles of street mains, distributes five million cubic feet of gas daily, and has a monthly income therefrom of one hundred and twenty-five thousand dollars. It is contended that this shows an unjust and unlawful discrimination against the defendant. The court below sustained a demurrer to this part of the answer and, upon the trial, refused to allow proof of the facts therein stated. The appeal is from the judgment.

The Los Angeles charter authorizes the city to impose a license tax upon occupations, business, and trades, to raise revenue for the city, qualifying the power by the following restriction: “Provided, that no discrimination shall be made between persons engaged in the same business, otherwise than by proportioning the tax upon any business to the amount of [767]business done.” (Stats. 1889, p. 457.) This provision does not require occupation taxes to be graded, in all cases, according to the amount of the business done. It forbids discrimination between persons engaged in the same business,—that is, the charging of a higher rate to one than to the other,—in any case, except when it is done by grading the tax to the amount of the business. It does not forbid the imposition of a uniform license tax upon all persons who engage in a particular calling.

The constitution (art. XIII, sec. 1) declares that all property “shall be taxed in proportion to its value, to be ascertained as provided by law,” and that the word “property” includes “moneys, credits, bonds, stocks, dues, franchises, and all other matters and things, real, personal, and mixed, capable of private ownership. ” If a license tax upon the privilege or right to carry on a particular trade within the city was a tax upon property, as here defined, it would be necessary, in order to lay a valid tax of that character, to provide some mode of ascertaining the value of the right of each person to carry on his particular business, and to tax it at the same rate and in the same manner as other property is taxed. In that case, it would also be necessary for the assessor to include all of this class of property in his general assessment, and the city council could not impose such a tax upon one occupation without also imposing it upon all occupations at the same rate, or percentage of value. The constitution is not to be so construed. The distinction between a license tax of this character and a tax upon property is well understood, and it is settled that “Occupation taxes are not property taxes and therefore are not subject to the restrictions imposed upon property taxation by statutes and constitutions.” (21 Am. & Eng. Ency. of Law, p. 775.) This statement in the text is fully supported by a large number of cases cited in the footnote. In People v. Naglee, 1 Cal. 252, [52 Am. Dec. 312], in an elaborate discussion of a clause of the constitution of 1849, similar to that above quoted, the court said that it referred only to a direct tax upon property, and not to a license fee charged to persons following a particular trade or calling, The proposition that these constitutional provisions do not refer to license taxes was also stated and approved in People . McCreery, 34 Cal. 448; High v. Shoemaker, 22 Cal. 369;