Tax Refunds to Travelers Halted by Judge

A Sacramento Superior Court judge issued a temporary order Thursday preventing the State Board of Equalization from issuing refunds to travelers for state taxes they paid on overseas purchases.

The order by Judge James Ford came one day after the board voted 4 to 1 to stop enforcing a state tax on overseas purchases and authorized its staff to return $110,000 in taxes that had already been paid by 800 California residents who traveled abroad in 1989.

The order was issued at the request of William Bennett, the only board member who opposed the decision to cancel the new program to collect the tax.

The board’s majority, noting numerous complaints from taxpayers and elected officials, said the program had been poorly implemented because the tax had been imposed without any warning to taxpayers.

But Bennett, a lawyer, said once the tax notices were sent there was no legal way the state could stop collecting it, nor could the board order refunds.

“This decision and action were based upon the grounds that the tax was ‘unpopular, arbitrary, a new tax’ as well as other criticisms,” Bennett wrote the court. “Monies which belong to the State of California may not be returned under the notion of ‘unpopularity’ or whatever.”

By returning the taxes already paid, Bennett said the board, in effect, would be providing the taxpayers with an illegal “gift of state money.”

Bennett, who is running for re-election to the board, acknowledged that his action to stop the refunds would probably be unpopular with most taxpayers. “There’s no way we as members of the board can be popular,” he said. “We’re not supposed to be.”

The new program implemented the state’s 55-year-old use tax. The tax applies to purchases residents make out of state for use in California. The state had been unable to collect the tax on overseas purchases until last year, after the U.S. Customs Service agreed to make its records available to the board.