May Department Stores Co. v. City of Los Angeles

Defendant and appellant City of Los Angeles (the City) appeals the judgment entered after a court trial in favor of plaintiff and respondent May Department Stores Company (May Co.).

Because the City’s Ruling No. 19 fails to apportion fairly finance charge income attributable to May Co.’s out-of-city deferred payment retail credit sales based upon the amount of activity generating that income taking place within the city, the trial court properly found the rule arbitrary. Further, the apportionment formula of Ruling No. 14, utilized by the trial court in lieu of Ruling No. 19, was designed to apportion gross receipts arising out of retail sales and is not applicable to finance charges. Therefore, the judgment is affirmed in part and reversed in part.

Factual and Procedural Background

May Co.’s complaint sought recovery of $17,042.80 plus interest from the City as a refund of 1980 and 1981 business taxes attributable to finance charges earned on deferred payment retail credit sales made at May Co.’s out-of-city stores and apportioned under Ruling No. 19.

The complaint also prayed for a declaration that the method used by the City to tax finance charges earned on goods…