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When Is A 10 Charge Imposed by the Government Not A Tax?

You'll be happy to know that the 10¢ charge that Los Angelinos are required to pay to grocery stores for using a paper bag isn't a tax, even though the charge was imposed by the Los Angles County Board of Supervisors.  That's right, even though you get to pay more, it's really not a tax.

Really.

Let's think about this one for a minute.  Ok.  I'm done. How about you?  Convinced yet?  If not, then think about the argument that the County used to convince the state court (wonder why this case wasn't tried in federal court?):   the County argued that it wasn't a tax because the money wasn't paid to the County. 

Actually, the ordinance allows the grocery stores to keep the 10¢ charge to offset the "cost of compliance."  What?  How much could it possibly cost to comply with this ordinance?  There's some bagger at the end of the check out counter saying, "Hey there, customer, you have to pay 10¢ to use that paper bag."

Right.  That statement alone must cost the grocery store a whopping 10¢. 

Don't get me wrong here, I'm all for the purpose of the ordinance - eliminate the use of plastic bags, cut down on the use of paper bags and encourage grocery shoppers to bring reusable canvas bags.  You knew, didn't you, that deep down, us Angelinos are all just grown-up hippies, tree huggers, earth-shoe wearing liberals who want to save the environment? 

Well, some of us actually rail at taxes. This case, Schmeer v. County of Los Angeles, had plenty of environmental star power at the helm (Surfrider Foundation and the Environment California Research and Policy Center), but this tax case went down in flames anyway.

Judge Chalfant, an excellent judge, saw it the other way and looked past the wording of the ordinance and ruled that because the 10¢ charge didn't go to the County it wasn't a tax, reasoning that in order to be a tax, the money has to go to the County.  Where the 10¢ charge stayed with the grocery store, neither Judge Chalfant nor Justice Croskey, writing for the Court of Appeal, thought we all expect taxes to go to the government, and when the money doesn't, it's not a tax.

Sounds reasonable, until you read the wording of the definition of a tax.  Nowhere in that definition do you see the reasoning that the money has to go to the government:

"As used in this section, ‘tax' means any levy, charge, or exaction of any kind imposed by the State [County], except the following [five exceptions, none of which require that the money be paid to the State [County]]"

I don't know about you, but that 10¢ charge sounds an awful lot like a tax to me, even if the money doesn't end up in the State's hands (which some of it will anyway, because the grocery store has to pay tax on its income, but that's a different story, they say). 

Maybe one of the parties will get the California Supreme Court's attention, and perhaps they will see it differently. 

Posted by J. Craig Williams on Thursday, February 21, 2013


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