Pollak, Vida & Barer

In Tesoro Refining & Marketing Company, LLC v. City of Carson, published August 10, 2026, the California Supreme Court reversed the holding of the lower appellate court affirming dismissal on demurrer. A city ordinance imposed a tax on persons engaged in operating oil refineries or facilities that store petroleum products a business license tax. The ordinance establishes a procedure for taxpayers to request a refund. The taxpayer must file a request with the city’s finance director. If unsatisfied with the result, the taxpayer may appeal the decision to the city manager. The taxpayer may challenge the appeal’s result by petitioning the superior court for administrative mandamus. The city determined that the plaintiff had underpaid its tax and issued a notice of deficiency. The plaintiff paid the deficiency under protest, and filed a claim with the city clerk for a refund. It used the city’s approved form for filing claims under the Government Claims Act. The city denied the claim. The plaintiff filed the lawsuit, seeking a refund of its additional payment to the city. The city demurred on the ground that the plaintiff had failed to exhaust its administrative remedies under the ordinance. The plaintiff maintained that the Government Claims Act occupies the field of presentation procedures for damages claims against local public entities, and therefore preempts the ordinance’s administrative refund procedures. The trial court sustained the city’s demurrer. It ruled that presenting a claim is not a substitue for exhausting an administrative remedy. The lower appellate court affirmed, ruling that the Act did not fully occupy the field of prescribing the procedures a taxpayer must follow before suing for refund of a local tax.

The California Supreme Court disagreed. The Government Claims Act occupies the field of presentation requirements for claims for money or damages against local public entities. Previous California Supreme Court case law holds that the Act preempts a local government entity’s claims procedures, including those governing claims for a tax refund. Government Code sections 905 (which specifically enumerages several types of claims to which the claim presentation requirements do not apply) and 935 (which states that claims excepted by section 905 and not governed by other statutes or regulations expressly relating thereto shall be governed by local public entities’ prescribed procedures) evince the the Legislature’s intent to occupy the field of claims presentation requirements. The Legislative history confirms that the Legislature viewed the presentation requirements for damages claims against local public entities as requiring uniform treatment throughout the state. The City’s administrative review procedures seek to impose additional requirements for the presentation of a claim for money or damages besides those prescribed in the Act. A claim, as used in the Act, encompasses the assertion of an underlying substantive right which is independent from (and unaffected by) whatever presentation requirements the public entity seeks to impose. The claims subject to the Act are those for “money or damages.” This encompasses any prelawsuit demand asserting a right to monetary compensation for an alleged act or omission. The refund request required by the ordinance falls within this definition. Although the administrative remedy doctrine generally requires a party to seek relief through available administrative review procedures before resorting to courts, this doctrine says nothing about the validity of a local government’s administrative review procedures, or whether those procedures might be preempted by conflicting state law. Further, the administrative procedure serves essentially the same purpose as the Act’s claim-presentation requirement. The city fails to offer any legitimate rationale why taxpayers must both exhaust the administrative remedy and present a claim under the Act. The court limited its preemption holding to local, mandatory procedures governing how taxpayers may seek a postpayment tax refund like those set forth in the ordinance.