appellate law

by

Challenging a CDTFA Determination: What a Recent $750,000 Reversal Teaches About Fighting Back

The California Department of Tax and Fee Administration issues tens of thousands of determinations every year. Sales tax assessments, cannabis excise tax assessments, jeopardy determinations, Field Billing Orders, Notices of Determination, and state tax liens arrive in the mail with imposing numbers attached and very short response windows. The temptation is to pay, to settle, or to assume the agency has the facts right. The Fox Firm’s recent appellate work shows why that assumption is often wrong.

We recently secured a complete reversal of a CDTFA cannabis excise tax assessment exceeding $750,000. The Department had stacked tax, a 50% failure-to-pay penalty, a 25% unlicensed-person penalty, a 10% failure-to-file penalty, and interest against three individuals who had no ownership or operational connection to the cultivation site at issue. After we developed the record on appeal, the Department recommended adjusting the liability to $0.00 and refunding every amount our clients had paid. The case offers a useful window into how CDTFA determinations are made, where they break down, and how an effective appeal can produce a full reversal rather than a negotiated reduction.

How CDTFA Determinations Get Made

CDTFA does not conduct its own field investigations in cannabis enforcement matters. The agency receives a referral from a law enforcement task force, reviews the seizure paperwork and the search warrant return, and builds an assessment from the documents in front of it. The auditor calculates a retail value from the plant count, applies the excise tax rate, stacks the statutory penalties, and issues the determination. The persons named on the determination are the persons named in the referral.

This process has a structural weakness. The agency rarely verifies whether the persons named in the law enforcement paperwork actually owned, occupied, or operated the location where the cannabis was found. Family members get swept in. Landlords of separate residences get swept in. Anyone whose name appears in the investigative file through association can find themselves on a six-figure or seven-figure tax bill. The agency is not required to develop independent evidence on the threshold question of liability, and in our experience, it usually does not.

What the Statute Actually Requires

Revenue and Taxation Code section 34015.1 is narrow. It imposes excise tax liability on an unlicensed person who possesses, keeps, stores, or retains cannabis for purposes of sale, or who sells or offers to sell cannabis. The statute targets the actor. It does not reach relatives of the actor. It does not reach the landlord of an unrelated residence. It does not reach anyone whose connection to the cultivation site consists of paying utilities, collecting rent, or holding keys at a family home. When CDTFA expands liability beyond the statutory boundary, the determination is vulnerable to challenge.

How We Won

Our appeal proceeded in three movements. First, we identified the threshold defect in the determination: the Department had assessed tax against persons who did not match the statutory description of a liable party. Second, we developed the documentary record to prove the point. The grant deed established that the cultivation properties were held in the name of a non-party. The lease agreements established that the actual occupants were unrelated third parties. The property owner’s federal income tax return showed that he was reporting the rental income from the properties on his own return. Third, we presented that record to the Department in a form that allowed only one conclusion.

The Department’s Supervising Tax Auditor reviewed our submission and recommended adjusting the liability to $0.00. The agency conceded that the property was owned by the non-party we had identified, that the lease agreements supported third-party tenancy, and that the property owner’s federal return supported his reporting of the rental income. The full refund followed.

What This Means for People Facing CDTFA Determinations

Three points are worth taking from this matter. First, CDTFA determinations are challengeable. The agency’s initial number is a proposal, not a judgment, and the appeals process is designed to allow correction. Second, the threshold question of liability is often the strongest ground for challenge. Many CDTFA determinations rest on attribution rather than on independent evidence of the conduct the statute targets. When the attribution is wrong, the determination falls. Third, the documentary record matters more than argument. The Department responded to grant deeds, lease agreements, and tax returns because those documents answered the statutory question directly. An appeal that develops the right evidence in the right form can produce a complete reversal rather than a negotiated reduction.

Time is also a factor. CDTFA determinations carry short response windows, and the right to challenge can be lost through delay. Anyone who has received a Field Billing Order, a Notice of Determination, a jeopardy determination, or a state tax lien should treat the response deadline as the first priority and seek counsel before that deadline runs.

Contact The Fox Firm

The Fox Firm represents individuals and businesses challenging CDTFA determinations throughout California. We handle cannabis excise tax assessments, sales and use tax matters, jeopardy determinations, penalty appeals, and related administrative proceedings before the agency and before the Office of Tax Appeals. If you have received a determination from CDTFA and believe the agency has the facts or the law wrong, contact us for a consultation. The first conversation costs you nothing, and the difference between an early call and a late one can be the difference between a full reversal and a payment plan.

The Fox Firm represents clients throughout California. Learn more at melissafoxlaw.com. The outcome of any legal matter depends on its particular facts and circumstances. Past results do not guarantee or predict similar outcomes in future matters.

by

A Constitutional Win for a Grieving Single Parent on a Question of First Impression

The Fox Firm recently won a reversal in the California Court of Appeal in a case raising a constitutional question that, as far as the parties or the appellate court could find, no published California opinion had ever decided.

I will not name the parties. The basic shape of the case is this. A young father lost his wife to sudden illness when their child was less than a year old. His estranged in-laws filed a petition for grandparent visitation under Family Code section 3102. The father opposed the petition. Two separate child welfare investigations had already concluded that the father was caring properly for his son. The first child welfare case had been dismissed at the agency’s request. The second had returned an “unfounded” finding.

The family court declared the father unfit anyway and granted grandparent visitation over his objection.

The constitutional problem was straightforward. The United States Supreme Court held in Troxel v. Granville (2000) that fit parents are presumed to act in their children’s best interests. Courts cannot override a fit parent’s decisions about who spends time with the parent’s child without giving the parent’s judgment meaningful deference. California Courts of Appeal have applied Troxel to section 3102 for two decades.

The novel question in our case was whether a family court could find a parent “unfit” under Troxel in a section 3102 visitation proceeding — and, if so, what role the determinations of the child welfare system should play. Neither the family court nor opposing counsel could identify a published California opinion answering either question. The Court of Appeal confirmed in its opinion that the appellate court was likewise unaware of any prior published opinion finding a parent “unfit” under Troxel in a section 3102 proceeding.

The Court of Appeal reversed and held three things.

Family courts must presume parental fitness in section 3102 proceedings. A grandparent seeking visitation over a fit parent’s objection must overcome the presumption by clear and convincing evidence.

When the child welfare system has investigated allegations against a parent and found the allegations unfounded or adequately resolved, a family court cannot lightly reach a contrary fitness finding based on the same facts. California’s dependency system has the procedural protections designed for fitness adjudications; the family court system does not.

A family court has no authority to substitute its own judgment for a fit parent’s. The Constitution requires deference to the parent’s view, not a free-floating best-interests inquiry by the court.

The Court of Appeal reversed and remanded for a new hearing under the correct standard.

The decision matters for parents in California facing grandparent visitation petitions. The decision matters for anyone in California who has had a trial court override their constitutional rights and needs to know an appellate court can correct the error. The decision also matters for attorneys who try cases below and need an appellate specialist who can take a trial loss and turn it into a reversal.

My firm handles civil appeals like this one — and other appeals across California from adverse trial court rulings on constitutional, statutory, and procedural grounds. If you have an adverse ruling and need to consider an appeal, or if you are an attorney with a client facing one, I would welcome the conversation.

I am reachable at melissa@melissafoxlaw.com or 949-683-8855.

— Melissa

The Fox Firm represents clients throughout California. Learn more at melissafoxlaw.com

by

The Blog is Back!

My career has always been advocacy. As a lawyer, I represent businesses starting up in California’s complicated regulatory environment, victims of fraud trying to recover what was taken from them, and people and businesses fighting back against government overreach. I appear in the California Courts of Appeal, before state regulatory agencies, and before city councils and county boards of supervisors throughout the state. I continue to build relationships with state and local officials and the key policymakers whose decisions shape what happens to my clients.

My current legal work is a continuation of the advocacy I have done for a long time. I founded The Fox Firm in 1999 and have practiced California law ever since. From 2016-2020 I served as an elected member of the Irvine City Council, where I led work on affordable housing, public safety, fiscal accountability, and environmental policy. I also served on the Orange County Fire Authority and the Great Park Board, and Chaired the Irvine Community Land Trust. I testified before the California Legislature on housing and the environment. The work I do now has changed in form but not in purpose.

Posts here will range. Some will be about cases and clients I’m working with — the kinds of advocacy I do, the questions that come up, the law as it actually operates. Some will be about California government — what is happening in Sacramento, in the agencies, in the cities and counties, and what it means for the people who have to live with the decisions. Some will be about whatever else seems worth saying at the moment.

To anyone returning here from my Irvine years — I am glad to reconnect. The archive of writing from my Irvine City Council years remains on this blog.

For anyone new here, welcome!

— Melissa

The Fox Firm represents clients throughout California. Melissa is reachable at melissa@melissafoxlaw.com.