City & County of San Francisco v. Carpenter Funds Administrative Office of Northern California, Inc.

Defendant Carpenter Funds Administrative Office of Northern California (CFA) appeals from a judgment against it for $176,822.18 plus interest in an action that was brought by the Tax Collector of the City and County of San Francisco (City) to recover unpaid payroll expense taxes for the years 1970-1979 inclusive.

In 1970, the San Francisco Payroll Expense Tax Ordinance (Ordinance), San Francisco Municipal Code, part III, article 12-A, section 901 et seq. became effective. Section 903 of the Ordinance provides, inter alia, that “A tax for general revenue purposes is hereby imposed upon every person who, in connection with his business, engages, hires, employs or contracts with one or more individuals as Commission Merchant or Employee, to perform work or render services in whole or in part within the City and County of San Francisco.” In general, the Ordinance imposes a tax that is based on a fixed percentage of the salaries paid to employees. (Ord., § 903.)

In 1977, the City tax collector commenced this action against CFA to collect unpaid back payroll expense taxes under the Ordinance. In 1981, the matter was tried in the San Francisco Superior Court. Two witnesses…