              TO BE PUBLISHED IN THE OFFICIAL REPORTS



                  OFFICE OF THE ATTORNEY GENERAL


                        State of California



                         DANIEL E. LUNGREN


                          Attorney General



              ______________________________________

            OPINION            :


                               :         No. 90-928


               of              :


                               :         JUNE 12, 1991


       DANIEL E. LUNGREN       :


        Attorney General       :


                               :


      RODNEY O. LILYQUIST      :


    Deputy Attorney General    :


                               :


__________________________________________________________________

          THE STATE BOARD OF EQUALIZATION has requested an opinion


on the following question:



          Is the San Diego City "transient transportation tax" a


sales or use tax or is it a substantially different tax for


purposes of administering local sales and use tax ordinances? 


                            CONCLUSION



          The San Diego City "transient transportation tax" is a


use tax for purposes of administering local sales and use tax


ordinances.



                             ANALYSIS



           Revenue and Taxation Code section 7203.51 provides:



          "The State Board of Equalization shall not
 

     administer and shall terminate its contract to administer


     any sales or use tax ordinance of a city, county,


     redevelopment agency, or city and county, if such city,


     county, redevelopment agency, or city and county imposes


     a sales or use tax in addition to the sales and use taxes


     imposed under an ordinance conforming to the provisions


     of Sections 7202 and 7203. 


     1


          All section references are to the Revenue and Taxation
 

Code unless otherwise specified.


                                 1.                          90-928

          "The   board   shall   give  such   city,   county,
    

     redevelopment agency, or city and county written notice


     of termination, stating the reasons therefor .... If the


     cause for termination is not cured within the time


     specified in the notice, the board shall not administer


     the ordinance until the cause for termination is removed


     ....



          "Nothing in this section shall be construed as


     prohibiting the levy or collection by a city, county,


     redevelopment agency, or city and county of any other


     substantially   different   tax  authorized   by    the
      

     Constitution of California or by statute or by the


     charter of any chartered city." (Emphasis added.)



          The City of San Diego imposes a use tax upon persons


leasing automobiles from car rental agencies located within the


city. (§ 7202, subd. (a)(8)(A) ["... a use tax of 1 percent or


less ... upon the storage, use, or other consumption of tangible


personal property ... in the city"], see also §§ 6006.3, 6009,


6010, 6010.1, 6201; Cal. Code of Regs., tit. 18, § 1660.) This 1


percent use tax is imposed upon total rental charges, collected by


the rental agency at the same time as other rental charges, and
 

becomes the obligation of the rental agency if not collected from


the customer or transmitted to the Board.     (See §§ 6011, 6201­

6204.)



          San Diego also imposes a "transient transportation tax"


upon persons renting automobiles for a period of 30 or fewer days


from car rental agencies located within the city. The tax rate is


3 percent of the total rental charges, and the tax is collected by


the rental agency at the same time as the other rental charges. The


tax becomes the obligation of the rental agency if not collected


from the customer or transmitted to the city. It is deposited in


the city's general fund for general governmental services.



          The question presented for analysis is whether the
 

"transient transportation tax" adopted by the City of San Diego is


an additional "sales or use tax" or a "substantially different tax"


as those terms are used in section 7203.5.      If the former, the


State Board of Equalization ("Board") must notify the city that the


contract to administer the city's sales and use tax ordinances will


be terminated unless the transient transportation tax ordinance is


rescinded. We conclude that the city's transient transportation


tax constitutes a use tax.



          The Sales and Use Tax Law (§§ 6001-7176) imposes a state


sales tax (§ 6051) on retail sellers and a state use tax (§ 6201)


on persons storing, using, or consuming tangible personal property


within the state. (See generally Rivera v. City of Fresno (1971)


6 Cal.3d 132, 137; Century Plaza Hotel Co. v. City of Los Angeles



                                2.                            90-928

(1971) 7 Cal.App.3d 616, 623.) These taxes are administered by the
 

Board. (§ 7051.) 


          The Bradley-Burns Uniform Local Sales and Use Tax Law (§§


7200-7212) provides a mechanism for the imposition of sales and use


taxes by cities and counties in addition to the state taxes.


(§§ 7202-7203.)    All local sales and use tax ordinances are


administered by the Board. (See §§ 7203.5-7204.3, 7209-7211.) As


explained in Geiger v. Board of Supervisors (1957) 48 Cal.2d 832,


837:



          "The act contemplates an integrated, uniform system


     of city and county sales and use taxation. The counties


     are given authority to impose sales and use taxes as a


     means of raising additional revenue, and the cities are


     furnished with a plan of state administration which will


     relieve them from operating collection systems of their


     own. The taxpayers will receive the benefit of a scheme


     which will free them from the burden of complying with


     differing regulations of state and local taxes, avoid the


     necessity of making payments and reports to several


     governmental bodies, and permit all auditing to be done


     by a single agency."



          Returning to the provisions of section 7203.5, we find


that it limits the amount of local sales and use taxes that may be


imposed, but has no effect upon the authority of a city or county


to impose a "substantially different tax."         The legislative


purposes of section 7203.5 are to prevent "situations which


complicated tax collection, reporting, auditing and accounting" for


local businesses and "varying and conflicting sales tax rates


[that] have an adverse effect on the general business climate in


California." (Stats. 1968, ch. 1265, § 2; see Rivera v. City of


Fresno, supra, 6 Cal.3d 132, 136-138; Century Plaza Hotel Co. v.


City of Los Angeles, supra, 7 Cal.App.3d 616, 624-625, fn. 6.)2



     2
         The full text of the declared purposes is as follows:



          "The Legislature finds that the overlapping tax


     structures of the federal, state and local governments


     are seriously hampering the functioning of the State of


     California. Due to the high rate of the federal income


     tax, the state is precluded from making the personal


     income tax and bank and corporation taxes its chief


     sources of revenue, as high state taxes, when combined


     with the high federal tax, would make the income and


     franchise taxes prohibitive in this state. Moreover, the
 

     state in the past has allowed local government to make


     the property tax its chief source of revenue and for the


     state again to rely on this source of revenue would cause


     great consternation among property owners.


                                   3.                          90-928

     "Therefore, the state must rely on sales and use


taxes as its chief source of revenue.



      "In addition, the Legislature is well aware that


prior to the enactment of the Bradley-Burns Uniform Local


Sales and Use Tax Law in 1955 the differences in the


amount of sales tax levied among the various communities


of the state created a very difficult situation not only


for retailers but also created fiscal problems for the


cities and counties. The retailer was faced with many


situations which complicated tax collection, reporting,


auditing and accounting. Because of the differences in


taxes   between   areas,   the   retailer  was   affected
  

competitively. Many areas advertised `no city sales tax,
 

if you buy in this area.' This factor distorted what


would otherwise have been logical economic advantages or


disadvantages.    It is apparent that enactment of the


Bradley-Burns Law has brought about reduced costs to the


retailer and has corrected illogical competitive
 

situations.



     "Moreover, the Legislature finds that recent
 

amendments to the state's Sales and Use Tax Law, which


are incorporated into the ordinances of local government


operating under the Bradley-Burns Law, have complicated


the administration of sales and use taxes in such areas


as prepayments and the taxing of certain occasional sales


and leases. The increasing complexity of these taxes has


made it more and more apparent that a return to the


conflicting systems in existence prior to the adoption of


the Bradley-Burns Law would be disastrous in California


today.



     "In the big metropolitan areas where most taxable


sales occur, local officials have shown the most interest


in returning to the older system of independent sales and


use tax administration. And it is in these areas that


most of the poor and the minority groups are
 

concentrated, and it is these persons who are least able


to pay increased consumer taxes. In addition, the recent
 

trend of business to locate outside of metropolitan areas


can only be accelerated by a system which grants them a


competitive advantage by locating in the suburbs. And


the fact should not be overlooked that varying and


conflicting sales tax rates will have an adverse effect


on the general business climate in California.



     "Therefore, the Legislature declares that the state,


by enactment of the Sales and Use Tax Law and the


Bradley-Burns Uniform Local Sales and Use Tax Law, has


                           4.                            90-928

          With this general background in mind, we examine the


"transient transportation tax" ordinance adopted by the San Diego


City Council.    First, the label placed upon the tax is not


controlling as to its basic character. In Flynn v. San Francisco


(1941) 18 Cal.2d 210, 214-215, the Supreme Court observed:



          "The character of a tax must be determined by its


     incidents, and from the natural and legal effect of the


     language employed in the act.       [Citations.]    The


     nomenclature is of minor importance, for the court will


     look beyond the mere title or the bare legislative


     assertion ... to see and determine the real object,


     purpose and result of the enactment. [Citations.]"



          The San Diego transient transportation tax and the city's


use tax have the same taxpayers (customers of the rental agencies),


taxable events (rentals of the automobiles), measure of the taxes


(total rental charges), collection mechanisms (rental agencies


collect and transmit the taxes), and ultimate city expenditure of


the funds (for general governmental purposes of the city).



          It has been suggested, however, that certain differences


between these city taxes compel the conclusion that the transient


transportation tax is not an additional use tax. First, the city's
 

transient transportation tax is limited to automobile leases of 30


or fewer days, while its use tax ordinance is not so limited. The


transient transportation tax is imposed even though some of the


rental use may occur outside the boundaries of the city, whereas


the city's use tax only applies to rental use within the city's


jurisdictional limits. (See § 7202, subd. (a)(8)(A).) Third, the


transient transportation tax is imposed regardless of whether the


rental agency has paid sales tax reimbursement on the vehicle; the


city's use tax ordinance exempts vehicles for which sales tax


reimbursement has been paid. (See § 6010, subd. (e)(10).)3



          We disagree with the proposed suggestion. These minor


differences do not transform the city's transient transportation


tax into something other than a use tax. It remains a tax upon the
 

use of tangible personal property. The differences do not change


the "real object, purpose and result of the enactment." (Flynn v.


San Francisco, supra, 18 Cal.2d 210, 218.)






     preempted this area of taxation."


    3


          We are informed by the Board that car rental agencies do
 

not have an economic incentive to pay sales tax reimbursement at


the time they purchase their vehicles. Accordingly, a state and


local use tax is imposed upon their rental receipts in the ordinary


course of business.


                                5.                            90-928

          We find support for this conclusion in the cases that


have examined the provisions of section 7203.5. In Century Plaza


Hotel Co. v. City of Los Angeles, supra, 7 Cal.App.3d 616, the
 

court ruled that a tax of 5 percent upon the purchase price of


alcoholic beverages sold by a retailer for consumption on the


premises where sold was not authorized under the terms of


section 7203.5. The court concludes:



          "... the taxes imposed by [the Sales and Use Tax
 

     Law] are levied by the state not, as here, by a chartered


     city. [The Bradley-Burns Uniform Local Sales and Use Tax
 

     Law] allows a maximum 1 percent rate for sales and use


     taxes, whereas the ordinance adopted by the city imposes


     a 5 percent tax, thus failing to qualify ...." (Id., at


     p. 623.)
 


Cases interpreting the phrase "substantially different tax" are


equally supportive of the conclusion reached herein. (See A.B.C.


Distributing Co. v. City and County of San Francisco (1975) 15


Cal.3d 566, 575 [payroll expense tax]; Rivera v. City of Fresno,


supra, 6 Cal.3d 132, 138-140 [utility user tax].)



          In summary, we find that the transient transportation tax


in question is imposed upon the same use of tangible personal


property as is currently subject to taxation under the Sales and


Use Tax Law and the city's own sales and use tax ordinances. The


city is limited to a 1 percent tax upon car rental charges (§ 7202,


subd. (a)(8)(A)); it is not authorized to add an additional 3


percent. Section 7203.5 was designed to prevent such "increased


consumer taxes." (Stats. 1968, ch. 1265, § 2.)



          Consequently, the Board has the statutory duty to give


the City of San Diego "written notice of termination" of its


contract to administer the city's sales and use tax ordinances, and


"[i]f the cause for termination is not cured within the time


specified in the notice, the Board shall not administer the


ordinance until the cause for termination is removed and a new


contract for the administration of the ordinance executed."


(§ 7203.5.)



          In answer to the question presented, therefore, we


conclude that the San Diego City "transient transportation tax" is


a use tax for purposes of administering local sales and use tax


ordinances.




                              ***** 





                                6.                            90-928


