California Supreme Court sides with oil refiner in local tax dispute

Carson's administrative procedures for seeking a refund of the city's oil industry business license tax undermines the purpose of a state law that imposes uniform procedures, the court said. Marathon Petroleum's Los Angeles Refinery in Carson, California. (Source: Marathon Petroleum Corp.) CARSON, Calif. (CN) — The California Supreme Court agreed with Tesoro Refining & Marketing on Monday that the city of Carson can’t impose its own administrative requirements for seeking a tax refund on top of California’s Government Claims Act. In a unanimous opinion , the state’s top court overturned the rulings by a trial judge and an appellate court panel that sided with Carson’s argument that Tesoro, a subsidiary of Marathon Petroleum, can’t sue over a denied tax refund without first going through the city’s mandatory procedures for the business tax in question. The refiner sought a refund from the city clerk, under the Government Claims Act, of the oil industry business license tax it had paid under protest. This tax was imposed under a 2017 voter-approved ordinance that also stipulates that if a taxpayer wants a refund, they must request it from the city’s finance director and must appeal a denial of the refund to the city manager. The state Supreme Court, however, agreed with Tesoro that this administrative procedure was preempted by California law. “In enacting the [Government Claims Act], the Legislature sought to address the ‘conflicting’ requirements among public entities throughout the state for presenting claims for damages or other monetary demands,” Chief Justice Patricia Guerrero wrote. “Requiring a taxpayer to exhaust local administrative review procedures in addition to the GCA’s procedures would frustrate the Legislature’s primary purpose in enacting ‘uniform procedures’ for the presentation of such claims,” she added. Representatives of Carson didn’t immediately respond to a request for comment. A Marathon spokesperson said the company doesn’t comment on litigation. Marathon’s Los Angeles facility in Carson is the largest refinery on the West Coast with a crude oil capacity of 365,000 barrels per calendar day. The refinery processes heavy crude from California’s San Joaquin Valley and the LA Basin, as well as crudes from the Alaska North Slope, South America, West Africa and other international sources. In 2017, Carson voters approved the so-called Oil Industry Business License Tax ordinance, which imposes a 0.25% tax on the gross receipts of oil refining and petroleum storage operations within the city. After an audit, Carson concluded Tesoro had underpaid its business license tax for December 2017 through June 2018 and issued a notice of tax deficiency. Tesoro chose to pay the assessed deficiency under protest and filed a claim with the city clerk for a refund of the deficiency payment. The refiner argued the city’s deficiency notice was time-barred and Carson had used an unlawful methodology to determine the proportion of Tesoro’s operations that occurred in the city to calculate the license tax. Our weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.