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Taxpayers’ Rights to Receive Full Refunds of an Illegally Collected Tax: McWilliams v. City of Long Beach

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Download Amici Curiae Brief: McWilliams vs. City of Long Beach

Update: On April 26, 2013, the California Supreme Court unanimously sided with our brief, ruling that the taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. payers are entitled to class refunds.

We filed a friend-of-the-court brief today with the California Supreme Court, to protect taxpayers’ rights to receive full refunds of an illegally collected tax.

The case involves the Long Beach, CA local telephone tax, which was allegedly unconstitutionally collected for the period 2003 to 2008. California law establishes a procedure for taxpayers to file a group refund claim, known as a class claim, an efficient process that reduces costs. Long Beach, however, claims it is not bound by the state law, and instead requires taxpayers to file separate refund claims. The trial court in this case ruled in favor of Long Beach, and the California Supreme Court has agreed to hear the appeal.

If Long Beach wins, the practical effect will be that the City will keep most of its illegally collected revenue because it is unlikely all past taxpayers will individually pursue refund claims.

We support this option of filing class refund claims because it fosters government accountability and subjects state and local revenue agencies to a fair and transparent refund processes. California chose to give consumers one process, providing a fair and open standard. Large suits make courts accessible for groups of consumers with small individual claims. By challenging Long Beach’s attempt to avoid recognizing this claim, we hope to send a message that governments should not refuse to provide full refunds of illegally collected taxes.

The case, McWilliams v. City of Long Beach, No. S202037, is pending before the California Supreme Court. Our brief is a joint submission by the Tax Foundation, Consumer Action, and the National Association of Shareholder and Consumer Attorneys (NASCAT).

View the brief here.