On August 10, 2026, the California Supreme Court decided Tesoro Refining & Marketing Co. LLC v. City of Carson, No. S289952 (Cal. Aug. 10, 2026). A refinery brought the case, but the rule reaches any business paying a city gross receipts tax in Los Angeles or San Francisco, or a license tax nearer home: a city may not force a taxpayer through its own refund process before a Government Claims Act claim and a lawsuit.
The catch is that the statewide rules are strict. When a client in Riverside or Elk Grove brings me a city tax problem, I start with the calendar, because a missed claim date usually ends the case.
What did the Supreme Court decide in Tesoro v. City of Carson?
Carson voters approved an Oil Industry Business License Tax in 2017, charging refinery and petroleum storage operators one quarter of one percent of gross receipts from business conducted in the city (Carson Mun. Code § 63505). Refunds required a request to the finance director within one year of payment, then a further appeal to Carson’s city manager. After an audit covering December 2017 through June 2018, Tesoro paid the deficiency under protest, then presented a claim to the city clerk on Carson’s own form, disputing the timing and the in-city share. Carson won a demurrer because Tesoro had skipped its internal steps.
In a unanimous opinion by Chief Justice Guerrero, the Court reversed. In its view, the Government Claims Act occupies the whole field of how money claims are presented to local agencies, and a refund request is such a claim. Carson’s process was “simply a way to present a claim,” so Municipal Code sections 63515 and 63523 are preempted. Footnote 3 carves out refund procedures set by state statute; footnote 4 limits the holding to mandatory post-payment procedures.
The Court’s minutes through September 11, 2026 show no rehearing or modification order, and under Cal. R. Ct. 8.532(b) the opinion became final 30 days after filing. No official reporter cite has been assigned yet.
How does a Government Claims Act refund claim work for a city tax?
Cal. Gov. Code § 905 requires a claim before suit on money claims against local agencies, but subdivision (a) excepts claims under a statute that prescribes its own refund procedure. McWilliams v. City of Long Beach, 56 Cal. 4th 613 (2013), held that a city ordinance is not a “statute” for that purpose, so city tax refunds stay inside the Act. Ardon v. City of Los Angeles, 52 Cal. 4th 241 (2011), allowed class claims for refunds of Los Angeles’s telephone users tax.
The mechanics fit on one page. Section 910 sets the claim’s contents, and section 915 directs it to the clerk, secretary, auditor or governing body within one year of accrual under section 911.2. The city then has 45 days under section 912.4, extendable only in writing; silence counts as rejection. Section 945.4 bars suit until that point. After a written rejection, section 945.6 allows six months to sue, or two years from accrual if no notice goes out.
Why can’t a late city tax refund claim be rescued?
There is a late-claim procedure, but it does not fit tax refunds. Section 911.4(a) allows an application for leave to file late only for claims subject to the six-month deadline, such as personal injury claims. Refund claims carry the one-year deadline. The court petition in section 946.6 requires a denied section 911.4 application, so it is unavailable too.
The partial safety valve is accrual. Howard Jarvis Taxpayers Ass’n v. City of La Habra, 25 Cal. 4th 809 (2001), treated each collection of an unlawful tax as a new accrual. Read with section 901, each payment generally starts its own one-year clock, so older payments are lost while recent ones can still be claimed.
How do city tax refunds differ from state and property tax refunds?
State taxes follow a pay first, litigate later model. Cal. Const. art. XIII, § 32 bars court orders against “this State or any officer thereof” stopping collection, and permits a refund action after payment as the Legislature provides. Franchise Tax Board and CDTFA refunds follow their own statutes. Section 32 does not mention cities, though a city refund claim follows payment anyway.
Property tax is its own track. Cal. Rev. & Tax. Code § 5097 generally allows a verified claim within four years after payment, and section 5141 requires suit within six months after the board of supervisors or city council rejects it.
Where do city gross receipts overpayments usually come from?
Usually apportionment, not rates. Los Angeles applies its business tax through City Clerk’s Rulings issued under LAMC § 21.15(h). Ruling No. 2 excludes a contractor’s receipts from jobs outside the city, so a contractor with no Los Angeles office owes tax only on Los Angeles jobs. Ruling No. 14 lets a seller with a Los Angeles location deduct capped percentages for selling steps done elsewhere, up to 20 percent for the shipping warehouse. Ruling No. 15 treats 20 percent of out-of-city receipts as taxable for many service and professional firms with a Los Angeles office unless they prove less.
San Francisco has its own allocation rules and its own refund provision, Business and Tax Regulations Code § 6.15-1. The Controller’s claim form allows one year from the later of payment, the return due date, or the Tax Collector’s denial of an amended return or refund request. That optional step can extend the window, consistent with Tesoro.
As a CPA, I want a job-site city field in job costing and a ship-to city on every invoice. The same discipline matters when Riverside or Sacramento measures its license tax by receipts.
What does the calendar look like for a Riverside contractor that overpaid Los Angeles?
Take an illustrative Riverside electrical contractor with no Los Angeles office, booking about $9.5 million a year, $1.5 million from Los Angeles jobs. It reported the full $9.5 million for 2023, 2024 and 2025, paying on February 27, 2024, February 28, 2025 and February 27, 2026. At the current contractor rate ($153 for the first $60,000 plus $1.01 per $1,000 above that), tax on $9.5 million is about $9,687 and tax on $1.5 million about $1,607. That is roughly $8,080 overpaid per year, or $24,240 in total.
The contractor spots the error on October 15, 2026. The windows for the February 2024 and February 2025 payments closed a year after each was made, and section 911.4 cannot reopen them; Los Angeles’s refund policy under LAMC § 21.07 likewise requires a claim within one year of payment. What remains is the February 27, 2026 payment, about $8,080, with a claim due by February 27, 2027. I would file in November 2026 with the City Clerk and the Office of Finance. A rejection mailed January 8, 2027 means suit by July 8, 2027. Silence means deemed rejection after 45 days and a two-year limit running to February 27, 2028.
The trap is the next renewal. A 2026 return filed next February the old way, while talks drag on, creates a new overpayment needing its own claim; the city’s form warns that a refund claim does not stop the lawsuit clock. Fix the return, and put any extension in writing under section 912.4(b).
What if the city audits you and sends an assessment instead?
Footnote 4 matters here: the Court declined to decide whether Tesoro had to appeal the deficiency notice before paying, because Carson had disclaimed that argument below. A Los Angeles assessment under LAMC § 21.16 can be appealed to an Assessment Review Officer within 45 days of service, then to the Board of Review within another 45 days.
Court review of a hearing decision normally comes by writ of administrative mandate under Cal. Civ. Proc. Code § 1094.5, confined to the administrative record, so the evidence must go in at the hearing. If the appeal window is open, I would use it. If it has closed, paying and presenting a claim under the Act, as Tesoro did, is the clearest route.
| Tax | Where the claim goes | Claim deadline | Agency time to act | Deadline to sue |
|---|---|---|---|---|
| City business license, gross receipts or utility users tax | City clerk (Gov. Code § 915) | One year from accrual (§ 911.2) | 45 days unless extended in writing (§ 912.4) | Six months after written rejection, else two years from accrual (§ 945.6) |
| San Francisco business taxes | Controller (S.F. Bus. & Tax Regs. Code § 6.15-1) | One year from the latest of payment, return due date or Tax Collector denial | 45 days | Same as city taxes |
| County property tax | County or city governing board (Rev. & Tax. Code § 5097) | Generally four years from payment | Six months, then silence may be treated as rejection | Six months after rejection (§ 5141) |
Frequently Asked Questions
Does Tesoro mean I can ignore my city’s tax refund form?
Not quite. A city can no longer make its own refund request or internal appeal a condition of a Government Claims Act claim or a lawsuit, but its process may still produce a faster refund. The safer practice is to file the city’s form and present a claim to the city clerk within one year of payment.
How long do I have to claim a refund of a California city business tax?
Generally one year from accrual under Government Code section 911.2, which usually means one year from each payment. After a written rejection you have six months to sue. If the city never sends written notice, the outer limit is two years from accrual.
Can I get relief if I missed the one-year claim deadline?
Usually not for that payment. The late-claim application in Government Code section 911.4 covers only claims with a six-month deadline, such as personal injury, and the court petition under section 946.6 depends on that application. Later payments may still be inside their own one-year windows, so a partial refund is often possible.
Does Tesoro apply to property tax or sales tax refunds?
No. The Court said its decision does not affect refund procedures for property taxes, sales and use taxes, or other local taxes whose refund process a state statute prescribes. Property tax refund claims follow Revenue and Taxation Code sections 5097 and 5141, which set their own deadlines.
Can a refund of a city utility users tax be claimed for a whole class of customers?
Often, yes. Ardon v. City of Los Angeles allowed class claims for refunds of the city’s telephone users tax, and McWilliams v. City of Long Beach held that a city ordinance cannot take that option away. A class claim must still satisfy the Act’s content and timing rules.
How North Star Law Firm Can Help
North Star Law Firm works with businesses in the Inland Empire, the Sacramento area and statewide on city tax refund claims and on responses to city audits and assessments, as part of its tax law practice. That work often overlaps with tax defense before state agencies and with sales tax and payroll tax matters. Phillip Zagotti is a California attorney and a CPA, and he represents taxpayers before the IRS, the Franchise Tax Board, the Office of Tax Appeals and the U.S. Tax Court.
If your business may have overpaid a city tax or has received a city assessment, contact North Star Law Firm or schedule a consultation.