City of Livermore v. Pacific Gas & Electric Co.

Opinion

SCOTT, Acting P. J. The issue presented here is the constitutionality of the City of Livermore’s business license tax as applied to respondent [1003]Pacific Gas and Electric Company (P.G. & E.). This appeal follows the granting of summary judgment on behalf of P.G. & E. declaring section 12.23.9 of the Livermore City Code as unconstitutional in contravention of article XIII, section 19 of the California Constitution.

Article XIII, section 19 of the California Constitution provides in pertinent part: “No ... tax or license charge may be imposed on [companies transmitting or selling gas or electricity] which differs from that imposed on mercantile, manufacturing, and other business corporations.” The Livermore City Ordinance which P.G. & E. contends runs afoul of this constitutional amendment is a part of the business license scheme of the city. Livermore imposes one of three types of taxes on all businesses located in the city: a gross receipts tax, a flat rate tax, and a gross expense tax. The flat rate tax applies to businesses without a fixed location, such as carnivals, and the gross expense tax is imposed on businesses having administrative headquarters inside Livermore which have minimal gross receipts but substantial expenses. The gross receipts tax under which provisions P.G. & E. is taxed is imposed on a variety of fixed location businesses divided into subclasses which include: 1) money-lending institutions which are taxed at $2.40 per $1,000 gross receipts; 2) persons engaged in residential and commercial rentals who are taxed at $1.20 per $1,000 gross receipts; 3) water companies which are taxed at 1 percent of their annual gross receipts (which is approximately $1.00 per $1,000 gross receipts); 4) most other businesses including wholesale and retail sellers, manufacturers, and utility services (including P.G. & E.) which are taxed at 80 cents per $1,000 gross receipts; and 5) grocery stores and motor vehicle dealers which are taxed at 50 cents per $1,000 gross receipts.

The essence of P.G. & E.’s contention is that the 80-cent rate it pays is greater than the 50-cent rate paid by grocers and automobile dealers, and thus violates the provisions of article XIII, section 19 of the California Constitution because it “differs from that imposed on mercantile, manufacturing, and other business corporations.”

Since its adoption in the 1974 general election, section 19 has not been interpreted in any reported decision. However, its predecessor former section 141 of article XIII was interpreted in City of Oceanside v.