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Home My WebLink AboutORD FOR INTRODUCTION 09-06-83DATE: August 9, 1983 ~nRDINANCES FOR INTRODUCTION 9-6-83 Inter-Corn FROH: SUBJECT: William Huston, City Manager James G. Rourke, City Attorney James P. Lough, Deputy City Attorney New State Auctioneer Regulations This memorandum is in reference to the effects of the recently-enacted laws governing auctioneers. These statutes, which took effect from July 1, 1983, are known as the "Auctioneer and Auction Licensing Act" (1982 Statutes, Chapter 1499). These Sections (Business and Professions Code Section 5700 et seq.) set up a State Commission which govern all auctioneers in the State of California. Under Business and Professions Code Section 5714(c), the Act states, in part: "The auctioneer commission is invested with all duties, powers, purposes, responsibilities and ju- risdiction regarding auctions and auctioneering in California." Prior to the enactment of this Section, regulation of auctioneering, including the licensing of auctioneers, was left to the discretion of municipalities. (Hart v. Beverly Hills (1938) 11 Cal.2d 343.) Such regulation was held valid under the police power and the taxing power of the legislative body enacting the regulations. However, with the formation of the Auctioneer Commission, the State has at least partially pre-empted the field of auctioneer regulation. The powers and duties of the Board of Governors of the Auctioneer Commission specifically vests all regulatory power within the State with the Commission. Under Section 5714(c), certain limitations are placed on cities as follows: "No other agency, or political subdivision of the State, shall impose on a licensee or seller at auction any registration or license requirement or any license or employment fee or charge on ac- count of such auction activities. No provision of this subdivision or chapter shall prohibit any city from imposing a business license fee on an auctioneer, including any city . where the auctioneer conducts any sale." Page Two August 9, 1983 This Section, while prohibiting regulatio~ of auctioneers, does allow a city to impose a normal business license fee on an auctioneer. This would allow the City of Tustin to retain some sort of business license fee for auctioneers as it does with other lawful businesses transacted within the City. (Govern- ment Code Section 37101.) In other words, while the State has retained all regulatory power over auctioneers, cities may still use this as a revenue raising power through a business license fee structure. (Agnew v. City of Los Angeles (1958) 51 Cal.2d 1.) However, in imposing its revenue raising powers, the City may not use those revenue raising powers to also regulate a business. In Verner, Hilb¥ & Dunn v. City of Monte Sereno (1966) 245 Cal.App.2d 29, a city ordinance was struck down because it attempted to regulate a profession in conflic~ with general laws of the State. In the Verner case, the city imposed a business license fee on civil engineers and land surveyors. Included in the city's application~process were questions re- lating to the moral turpitude of those persons who wished to practice civii engineering or land surveying within the city. The court struck down the enti~e ordinance as an unlawful in- trusion into the general laws of the State. In its opinion, the court held that: "Although it is true that state pre-emption does not preclude a city from taxing state-licensed businesses which are carried on within its boundaries and enforcing such taxes by requiring business licenses for revenue and by criminal penalties, revenue provisions of this nature cannot be upheld if they are an inseparable part of the regulatory scheme excluded by state law." (245 Cal.App. at 33.) The business license provisions in the City of Tustin do not include moral turpitude questions or any other types of similar regulations. (Chapter 5, Business License Tax, Section 2500 et seq.) The City's business license applications only include questions which deal with the business' identity and its income production. These provisions do not intrude upon the State's regulatory scheme. However, the revenue-raising sections of the Tustin City Code appear to intrude into areas of State regulation. (Tustin City Code Section 2523(d).) Under the tax schedules for enumerated businesses (Section 2523(d)), business license fees are imposed in the following manner: Page Three August 9, 1983 "Auction sales, house or yard. . $200.00 + $500.00 for each employed auctioneer. Auctioneer not registered as an employee by a licensed auctioned sale, house or yard .... $25.00 per day or $200.00 per year." The charge per employed auctioneer imposes fees in an area restricted to state control. Under Business and Professions Code Section 5714(c), a city may not impose any employment fee or charge on an auction or auctioneer. This fee imposes a charge on a per employee basis contrary to state law. As such, the fee imposition is pre-empted by state control. Also, the regulatory scheme set up by the City of Tustin differentiates between licensed and unlicensed auctioneers. Under Business and Professions Code Section 5733(b), the only unlicensed auctioneers are those selling at "an auction of goods conducted by an individual who personally owns such goods and who did not acquire such goods for resale." The distinction in the Tustin City Code between licensed and unlicensed auctioneers could result in an equal protection challenge. However, if the Code is amended to reflect the distinction found in the State law, such a challenge would probably fail since there is a rational basis for the distinction. The distinction would be based on the difference in burdens placed upon the City by the different kinds of auctions. An auction held by a professional would generally take place more frequently and on a larger scale. It would tax the City's resources in a significantly greater manner than a private sale. Private sales would generally be limited to smaller yard sales or garage sale situations and occur infrequently. In conclusion, the City Ordinance, in general, does not conflict with the State Auctioneer's Law. Cities may impose business license fees on auctioneers pursuant to their revenue raising powers. However, the current fee structure taxing auctioneers on a per employee basis intrudes into the state regulatory domain. This provision should be amended, and the per employee provision dropped. Finally, the provision relating to unlicensed auctioneers should be amended to reflect the distinctions found in the state law. The only auctioneers exempt from state regulation, for our purposes, are individuals selling their own property which they did not buy for resale. Page Four August' 9, 1983 The Tustin City Code should be amended to reflect this distinc- tion. The only other exemptions found in state law deal with auctions by public entities and court-ordered sales, neither of which are regulated by the City. JPL:pj cc: DL RN MW ~ 1 2 4 5 6 7 8 10 11, 12 15 16 18 20 21 22 23 24 25 26 27 28 ORDINANCE NO. 894 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA, AMENDING THE TUSTIN CITY CODE RELAT/VE TO BUSINESS LICENSE TAXES FOR AUCTIONEERS AND AUCTIONS The City Council of the City of Tustin, California, does ORDAIN as follows: Section 1: That Section 2523(d)(6) of the Tustin City Code be and the same hereby is amended as follows: A. The subpart deali'ng with auction sales, house or yard, is hereby amended to read as follows: "Auction sales, house or yard .... $200.00" B. The subpart dealing with auctioneers not regis- tered as an employee by a licensed auction sale, house or yard, be amended to read as follows: !'An auction of goods conducted by an indi- vidual who personally owns such goods and who did not acquire such goods for resale, house or yard. $25.00 per day or $200.00 per year." PASSED AND ADOPTED at a regular meeting of the City Council of the City of Tustin, California, held on the day of , 1983. MAYOR ATTEST: CITY CLERK