APPEAL from a judgment of the Superior Court of Los Angeles County. Richard E. Rico, Judge. (Los Angeles County Super. Ct. No. BC418113)
The opinion of the court was delivered by: Rothschild, Acting P. J.
CERTIFIED FOR PUBLICATION
Jessica Bower appeals from the judgment entered after the trial court sustained without leave to amend the demurrer of AT&T Mobility, LLC, AT&T Inc. and AT&T Corporation (collectively, AT&T) in this action based on Bower's alleged payment of $15.50 as part of her purchase of a cellular telephone. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
1. Bower's Original Complaint
On July 17, 2009, Bower filed a class action complaint against AT&T on behalf of herself individually and other AT&T customers alleging causes of action for violation of Civil Code section 1750 et seq., the Consumer Legal Remedies Act (CLRA); unlawful, unfair and fraudulent business practices under Business and Professions Code section 17200 (section 17200); and false or misleading advertising under Business and Professions Code section 17500 (section 17500). Bower based her causes of action on allegations that, on January 27, 2009, she had purchased a cellular telephone from AT&T, retailing at $399, at a discounted rate of $199, on the condition that she enter a wireless service agreement with AT&T for a two-year period. Although Bower purchased the telephone at the discounted rate, she was required to pay the California sales tax of 7.75 percent on the undiscounted price of the telephone. Paying tax on the undiscounted price of the telephone, as compared to the tax that would have corresponded to the discounted price of the telephone, cost Bower an additional $15.50.
According to Bower, based on information obtained from AT&T's website and its responses to her post-purchase communications, in purchasing the cellular telephone and entering the wireless service agreement, Bower relied on "misrepresentations" and "misleading statements" by AT&T that she "had no choice but to pay sales tax based on the undiscounted price" of the telephone. Nevertheless, although AT&T is required to remit sales tax to the state on the undiscounted price of the cellular telephone, its decision to pass that cost on to consumers is discretionary. AT&T's conduct "has deprived, and continues to deprive, consumers of the ability and opportunity to negotiate the amount of sales tax they will be charged by [AT&T] and/or to purchase a cell phone from one of [AT&T's] competitors." Bower sought an injunction, restitution, declaratory relief, interest, punitive damages, attorney fees and costs.
2. Bower's First Amended Complaint and the Demurrer Sustained with Leave to Amend
Bower filed a first amended complaint on August 25, 2009, alleging the same three causes of action.*fn1 In her first amended complaint Bower detailed that California Code of Regulations, title 18, section 1585, subdivision (b)(3), (Regulation 1585, subdivision (b)(3)) requires retailers to "report and pay a sales tax on the full, 'unbundled' price of a discounted or 'free' cell phone when part of a bundled transaction [including a wireless service agreement]. Regulation 1585 makes it clear the retailer, not the consumer, 'is required to report and pay' the sales tax, although retailers 'may' collect tax reimbursement from the consumer." Bower further stated that, "[d]espite the permissive language of Regulation 1585 and AT&T's explicit, specific promises to consumers [through its website] that AT&T will collect only 'mandatory' taxes and will not disguise cost recovery fees by labeling them as taxes, AT&T falsely informs consumers the government requires consumers to pay the full sales tax on bundled cell phone transactions, and that AT&T is required by law to pass this charge on to the consumer." Bower alleged that, "[w]hen [she] inquired why she was paying more in sales tax than appeared correct, she was told by AT&T salespersons it was a mandatory tax on the unbundled price of the cell phone. She was never informed it was AT&T's decision to charge her the cost recovery fee." Bower alleged that she "relied on the misrepresentations and misleading statements made by [AT&T] that the government taxes consumers, not retailers, on the undiscounted price of cell phones in bundled transactions" and that AT&T's conduct deprived consumers of the ability to negotiate or purchase a cellular telephone from an AT&T competitor. She sought the same relief as she had in her original complaint.
AT&T filed a demurrer to the first amended complaint, making four arguments: (1) Bower's claims are barred by article XIII, section 32 of the California Constitution, precluding actions to prevent or enjoin the collection of any tax, because they are a disguised attempt for reimbursement of sales tax through the courts rather than through the State Board of Equalization; (2) AT&T is entitled to safe harbor immunity because it properly calculated and collected the sales tax reimbursement from Bower; (3) Bower did not and cannot allege that she actually relied on a genuine misrepresentation made by AT&T; and (4) Bower lacks standing to assert her causes of action under sections 17200 and 17500 because she cannot allege an injury in fact.
In opposition, Bower argued that her case is not a sales tax dispute and thus that the prohibitions against lawsuits to prevent or enjoin taxation do not apply. She emphasized that her case involves an affirmative misrepresentation that AT&T was required to pass on to her the sales tax on the full, undiscounted price of the cellular telephone, when such decision was purely discretionary. She also argued that she sufficiently had alleged reliance on the misrepresentations and damage therefrom.
The trial court sustained AT&T's demurrer, relying on AT&T's contention that "the claim on behalf of [Bower] and a putative class fails as a matter of law as it is an improper effort to obtain a tax refund on the purchase of a cell phone bundled with a service agreement . ...