California’s highest court ruled unanimously Monday that cities cannot layer their own bureaucratic hoops on top of state law when businesses seek tax refunds—a decision that strips local governments of a tool they’ve used to make refund claims harder to pursue.
The Supreme Court sided with Tesoro Refining & Marketing, a Marathon Petroleum subsidiary, against the city of Carson in a dispute over an oil industry business license tax. Carson had required companies to exhaust city-specific administrative appeals before filing suit, even though state law already establishes uniform procedures for such claims.
Carson’s Extra Requirements Blocked Refund Claim
Tesoro paid Carson’s oil industry business license tax under protest after voters approved the levy in 2017. When the refiner sought its money back through the state’s Government Claims Act—the standard process—Carson said no. The city’s ordinance required taxpayers to first appeal to the finance director, then to the city manager, before going to court.
Both a trial judge and an appellate panel initially backed Carson’s position. But the Supreme Court found those extra requirements violated state law designed to create uniform procedures across California.
State Law Trumps Local Bureaucracy
The court said Carson’s administrative maze undermined the purpose of California’s Government Claims Act, which the legislature enacted to standardize how people and businesses make claims against local governments. By forcing companies through city-specific channels, Carson was effectively rewriting state law.
The unanimous decision means Tesoro can proceed with its lawsuit over the denied refund without navigating Carson’s internal appeals process first. It also signals to other California cities that they cannot create parallel administrative systems that contradict state procedures.
What Happens Next
The case now returns to lower courts for Tesoro to pursue its refund claim on the merits. Other businesses that paid the Carson oil tax under protest may follow with their own lawsuits, now that the procedural barrier has fallen.
For taxpayers statewide, the ruling clarifies that when state law establishes a claims process, cities must follow it—not invent their own. Local governments looking to protect tax revenue will need to defend their levies on substance, not procedural technicalities.
Key Points
- California’s top court ruled unanimously that cities cannot add local administrative requirements on top of state refund procedures
- Carson required oil companies to appeal tax denials internally before suing, contradicting the state’s Government Claims Act
- The decision lets Tesoro pursue its refund lawsuit and signals other cities cannot create parallel bureaucratic systems
https://www.courthousenews.com/california-supreme-court-sides-with-oil-refiner-in-local-tax-dispute/ – August 10, 2026
