California Court of Appeal Upholds Enforcement of City’s Subpoenas for Records Necessary to Audit Compliance with Local Transient Occupancy Tax

In Kumar v. Superior Court of Sonoma County, (— Cal.Rptr.3d —, 2007 WL 779511, Cal.App. 1 Dist., Mar. 16, 2007), a California Court of Appeal considered Petitioners’ claim that a transient occupancy tax (“TOT”) imposed by the City of Cloverdale (“City”) was unconstitutional and therefore unenforceable. The court found the TOT constitutional, and denied Petitioners’ request for relief from records subpoenas issued in conjunction with a compliance audit.


In 1969, City passed Ordinance No. 257, enacting a tax on occupancy in hotels, inns, motels, and other lodgings for a period of less than 30 consecutive calendar days. The ordinance requires hotel operators to collect the tax — equivalent to 10 percent of the rent charged for a room — from occupants, and provide returns to City’s tax administrator showing total rents charged and received, and the amount of TOT collected. The ordinance also requires operators to retain for three years all records necessary to determine the TOT owed by an operator.

In February 2006, Petitioners — Alex Kumar and the records custodians for Best Vineyard Valley Inn and Cloverdale Oaks Inn — refused City’s request to disclose records in connection with a TOT compliance audit. City authorized its mayor to issue legislative subpoenas requiring Petitioners to produce books and records related to TOT collection. The subpoenas were served, but Petitioners refused to comply. City filed an application in superior court seeking an order enforcing the subpoenas, and Petitioners responded with several constitutional challenges to the TOT. The trial court rejected Petitioners’ constitutional arguments, and issued an order requiring Petitioners to comply with City’s audit requests.

Petitioners filed a notice of appeal. In the interest of “judicial economy and expediency,” the Court of Appeal construed the appeal as a petition for an extraordinary writ, and set it on an expedited schedule.


Petitioners asserted three arguments to support their claim that the TOT ordinance was unenforceable: (1) the ordinance was void for vagueness under the due process clause of the U.S. Constitution; (2) the TOT violated the Constitution’s equal protection clause; and (3) the ordinance was void “by way of preemption of state law” because City’s definition of “transient” in the TOT conflicted with state tax law. The Court of Appeal rejected all three arguments.

Petitioners asserted the definition of the term “hotel” was vague because it included the terms “dwelling” and “lodging” — terms that Petitioners said implied permanent residency. The court characterized Petitioners’ argument as “untenable” under the language of the ordinance itself. The TOT defines “hotel” as “any structure . . . occupied or intended or designed for occupancy by transients for dwelling, lodging, or sleeping purposes”; and defines “transients” as “any person who exercises occupancy or is entitled to occupancy . . . for a period of less than thirty consecutive calendar days” unless certain exceptions apply. The ordinance clearly did not attempt to impose a tax on the basis of either the type or location of the property, but instead imposed it on “persons defined as transient,” with such persons identified as anyone occupying a hotel for less than 30 days. The court held that the ordinance gave “fair notice” of the practice to be avoided and provided “reasonably adequate standards to guide enforcement,” and thus was not unconstitutionally vague.

Petitioners next claimed the TOT improperly classified for taxation “persons who cannot afford month-to-month housing and can only afford residing at a motel on a day-to-day basis.” The ordinance clearly does not impose a tax based on the type of arrangement under which a person occupies a property, however, the court said. In addition, City had a legitimate purpose in imposing the tax on “charges made for lodgings of the short period or stop-over type” as opposed to lodgings that are more characteristic of residence. Thus, the court held the TOT did not violate equal protection because it was based on a classification that had reasonable relation to a legitimate governmental goal.

Finally, Petitioners’ claimed the TOT ordinance conflicted with and was therefore preempted by California Revenue and Taxation Code §7280(a), which states that a city or county may “levy a tax on the privilege of occupying a room . . . in a hotel, inn, tourist home or house, motel, or other lodging, unless the occupancy is for a period of more than 30 days.” Because the TOT clearly limits its applicability to occupancies of less than 30 days, it does not conflict with §7280, nor does it duplicate, contradict, or otherwise “enter an area fully occupied by state law,” the court stated. The court therefore characterized Petitioners’ preemption argument as “baseless.” It denied Petitioners’ petition for relief, and awarded City its costs.

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