Weekes v. City of Oakland

In Weekes v. City of Oakland (1978) 21 Cal.3d 386, the California Supreme Court considered the City of Oakland's adoption of an "'employee license fee'" ordinance, which imposed a 1 percent fee on the "'privilege of engaging in or following any business, trade, occupation or profession as an employee.'" (Id. at p. 390.) The fee was measured by the employee's "'gross receipts'" for services performed within the city, regardless of where the employee resided. (Id. at pp. 390, 391-392.) The court agreed with the city that fee was not an income tax, but an "occupation tax" expressly authorized by the final paragraph of section 17041.5. (Weekes v. City of Oakland, supra, 21 Cal.3d at p. 391.) The court observed "numerous differences" between the fee at issue and a typical income tax. (Id. at p. 392.) "For example, the provision which defines 'gross income' for state income tax purposes ( 17071 . . . ), includes not only 'compensation for services' and 'gross income derived from business' but 'interest,' 'rents,' 'royalties,' 'annuities,' 'income from discharge of indebtedness,' 'income from an interest in an estate or trust,' and other items and sources of revenue which the Oakland tax does not purport to reach. Moreover, the traditional assessment commonly recognized as an income tax is ordinarily a tax upon net income-that is, gross income reduced by other taxes, business expenses, and costs incurred in the production of the income. The Oakland ordinance, in contrast, expressly includes, as compensation subject to the levy, sums deducted 'before "take home" pay is received' . . . ." (Id. at pp. 392-393.)