City Prevails in Challenge to Sales Tax Diversion Scheme

Here is a news release provided by the :

Since 2008 the City of Livermore has been challenging the diversion of sales tax by a large out-of-state retailer from Livermore to the City of Fillmore.

The out- of-state retailer has a 100,000 square-foot facility in town. Through an agreement with MTS Consulting, this out-of-state retailer set up a makeshift storefront office in Fillmore, primarily to direct sales taxes away from the cities of Livermore, Palo Alto, Lathrop and Industry.

Under the “consultant agreement,” Fillmore keeps 15 percent of the local sales taxes, and returns the other 85 percent to MTS and the out-of-state retailer, leaving the cities housing the retailer’s facilities holding the bag with no money to deal with the impacts of the warehouses.

The matter has been debated through several layers of government in the state, and even got the attention of the state legislature when it enacted Senate Bill 27 in 2009 which makes it unlawful to enter into sales tax agreements in California such as the one in Fillmore.

The State Court of Appeal in Los Angeles issued a ruling late last week that the City of Fillmore failed to file a timely appeal from the Board of Equalization 2009 award of the sales taxes back to Livermore and Industry, terminating Fillmore’s efforts to have the BOE reverse its decision.

The effect is welcome news for city officials.

Livermore City Attorney John Pomidor stated, “We couldn’t be happier the Court of Appeal decided Fillmore’s appeal was over. We have worked very hard for nearly three years to challenge the sales tax scheme and are pleased that the courts agree with us.” Sales tax revenues from the out-of-state retailer have been held in trust by the Board of Equalization since the first quarter of 2008, when Livermore initially filed its challenge to stop the loss of sales taxes."

“Sales tax dollars generated locally are supposed to be used for local services” Mayor Marshall Kamena said. "It puts a tremendous strain on services for our residents when we have to maintain streets, roads and provide services for a local business and receive nothing in return for those services.”

During this time of fiscal uncertainty, city officials say they are going to continue their efforts to get the sales tax dollars released from the Board of Equalization, and put the dollars to their intended use of providing services for Livermore residents.