Catalyst-Bellflower LLC v. California Department of Tax and Fee Administration

(Stanley Mosk Courthouse: Dept. 833) August 28, 2026 DEPARTMENT 833 LAW AND MOTION RULINGS

Case No. 26STCP00901 v. Hearing: August 28, 2026 Location: Stanley Mosk Courthouse Department: 833 California Department of, Judge: Joseph Lipner Tax and Fee Administration [Tentative] Order Denying Entry of Judgment

INTRODUCTION Petitioner Catalyst-Bellflower LLC ("Catalyst") moves for judgment pursuant to California Code of Civil Procedure Section 1094 on the grounds that the Petition presents only issues of law that can and should be resolved by the Court in Catalyst's favor. The Respondent is California Department of Tax and Fee Administration ("CDTFA").

The Court invites oral argument about (a) whether CDTFA has complied with the requirement to conduct a "prompt" post-deprivation hearing; and (b) if not, what authority supports the power of the Court to order a hearing within a particular time frame. In all other respects, the Court will DENY the motion for entry of judgment.

BACKGROUND This petition arises from a legal dispute over the CDTFA's scope and authority to impose excise taxes on cannabis accessories. (Lewis Decl., P. 2.) Prior to January I, 2023, distributors were legally responsible for collecting and remitting to the state excise taxes on cannabis and cannabis product. (Lewis Decl., P. 3.) As of January 1, 2023, retail stores are responsible for collecting and remitting such taxes. (Lewis Decl., P. 3.) After January 1, 2023, CDTFA issued regulations to make cannabis accessories taxable. (Lewis Decl., P. 6.) Petitioner's key witness, Elliott Lewis, argues that this directly violated governing statutes. (Ibid.)

The Notice of Jeopardy Determination from December 2025 details underlying taxes that the CDTFA believes Catalyst should have collected on the sale of cannabis accessories. (Augustini Decl., P. 2.) According to CDFTA, Catalyst owes $3.2 million dollars. (Augustini Decl., P. 11.) A Notice of Jeopardy Determination renders the amounts referenced therein immediately due and payable. (18 CCR Sec. 35022.)

The person against whom a jeopardy determination is made may request an administrative hearing. (18 CCR Sec. 35028.) Catalyst requested an administrative hearing but CDTFA stated that the hearing would be deferred pending outcome of current litigation that may impact the outcome of this case. (Augustini Decl., P. 11.) Catalyst argues that the deferment of the administrative hearing constitutes a violation of Catalyst's statutory and due process rights. (Augustini Decl., P. 12.) CDTFA has not provided any documents, evidence, or facts to support the propriety of its Notice of Jeopardy Determination. (Augustini Decl., P. 14.) Since the Notice of Jeopardy Determination, CDTFA has collected $785,000 from Catalyst. (Augustini Decl., P. 13.)

LEGAL STANDARD When a return raises only questions of law, the Court must proceed to hear the argument of a case. (Code Civ. Proc., Sec. 1094.)

DISCUSSION Catalyst argues that the failure to provide the hearing since December 2025 is unreasonable and unjustifiable, particularly where CDTFA has continued to collect money from Catalyst. The cannabis retail excise tax is administered and collected pursuant to the Fee Collection Procedures Law. (Rev. & Tax. Code ("RTC"), Sec.Sec. 34013, subd. (a), 55001 et. seq.) This provision is materially identical to and patterned after its Sales and Use Tax Law counterpart, Revenue and Taxation Code section 6538.5.

RTC sections 55103 and 6538.5 authorize a person subject to a jeopardy determination to apply for an administrative hearing. Notably, RTC section 6538.5 does not stay collection activities while the administrative process is ongoing. And neither statute states that the hearing must be conducted immediately, nor do the statutes require CDTFA to issue a determination within any specified period.

None of the regulations allow the Court to order the CDTFA to conduct a hearing on a particular schedule. While taxpayers have a right to administrative review, there is no ministerial duty owed by the CDTFA to complete that review on the schedule that Petitioner demands. At the same time, "[w]hen summary action is justified, due process is satisfied as long as there is a prompt post-deprivation hearing to review the agency's determination." (Tyler v. County of Alameda (1995) 34 Cal.App.4th 777, 784.)

The Court has reservations about whether CDTFA is complying with the law. It appears CDTFA has no plans to conduct the administrative hearing soon and is instead waiting for the outcome of other litigation before moving forward. While this argument may work for a few more months, at some point, CDTFA is going to run afoul of Tyler 's key statement of law, which says that a post-deprivation hearing must be "prompt." At the hearing, the Court invites further focused argument from the parties about what it means to hold a "prompt" post-deprivation hearing.

The authorities cited by the parties, while relevant, are obviously distinguishable. For example, People v. Litmon (2008) 162 Cal.App.4th 383 has to do with a delay in retrying a petition under the Sexually Violent Predator Act while the individual remained involuntarily confined, not administrative procedure or tax collection. Smith v. County Engineer of San Diego County (1968) 266 Cal.App.2d 645 has nothing to do with due process or a post-deprivation hearing. Civil Code Section 1657 does not apply to administrative procedure.

Bostean v. Los Angeles Unified School Dist. (1998) 63 Cal.App.4th 95 concerned a school district that had failed to afford a petitioner a hearing after imposition of involuntary illness leave. The Court of Appeal concluded that a pre-deprivation hearing notice and hearing was needed because there was no evidence that the petitioner's remaining on his job posed any immediate threat to his health and safety or to any other person. (Id., at pp. 113-115.) Bostean stands for the proposition that the school district illegally withheld pay from the petitioner for seven months, but it does not answer the question of when a post-deprivation hearing must be held.

The Court is not persuaded by briefing from CDTFA. CDFTA's briefing seems to argue that because there is no specific timeline in the regulations or statutes, the Court cannot order an administrative hearing. This argument would seem to contradict basic principles of due process. Could CDTFA fail to hold a post-deprivation administrative hearing for 2 years or 5 years without any opportunity for a petitioner to gain relief? That would seem to be the logical conclusion of CDTFA's argument. On the other hand, Catalyst's briefing does not identify a clear legal basis that authorizes this Court to require a hearing within a particular time period.

Separately, Catalyst argues that the Court should simply enter judgment in its favor on the overall petition. The petition asks for several different types of relief, including to compel the production of documents, to invalidate CDTFA's jeopardy determination, and to enjoin CDTFA from collecting taxes. However, the moving papers present no substantive argument for why the Court should grant any of this relief. On August 26, 2026, Petitioner dismissed its second cause of action, but the parties have not yet briefed the effect of the dismissal on this case.

CONCLUSION The Court invites oral argument about whether CDTFA has complied with the requirement to conduct a "prompt" post-deprivation hearing, and if not, what relief the Court is permitted to order. In all other respects, the Court will DENY the motion for entry of judgment.

IT IS SO ORDERED. Dated: August 28, 2026 ______________________ Joseph Lipner Superior Court Judge |