Court of Appeal tax procedure ruling
saves San Francisco $12 million

By Julia Cheever, Bay City News Service

October 19, 2006

SAN FRANCISCO (BCN) - A spokesman for San Francisco City Attorney Dennis Herrera said today an appeals court ruling on a tax refund for Macy's Department Stores Inc. is expected to save the city at least $12 million.

Spokesman Matt Dorsey said, "We are very gratified by the appellate court ruling.

"It's a very good result for the city," Dorsey said.

The decision was issued Thursday by a three-judge panel of the Court of Appeal in San Francisco.

The court set aside a Superior Court judge's order that the city was required to repay Macy's all of the business taxes it had collected from the company between 1995 and 1999 under a tax procedure that was later found to be unconstitutional.

The trial judge, Richard Kramer, ordered the city to pay more than $13 million in refunds and interest.

But the appeals court said the city needed to repay only the extra amount Macy's was overtaxed during that period.

Dorsey said city lawyers estimate that amount to be only "a few hundred thousand dollars.''

The appeals court said, "We conclude Macy's tax refund must be limited to an amount sufficient to cure the discriminatory effect of the tax.''

An accountant who testified on behalf of the city in Superior Court estimated the extra tax paid by Macy's amounted to 1.2 percent of the total, the appeals court said.

A lawyer for Macy's was not immediately available to comment on whether the company is considering an appeal to the California Supreme Court.

Under the former taxation method, the city required companies to pay business taxes on either their total payroll expenses or their sales revenues, whichever was higher.

After businesses challenged the tax procedure, the Board of Supervisors repealed it and reached a settlement of nearly $80 million with several hundred companies in 2001. Macy's did not agree to the settlement and continued the case.

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