
    The PEOPLE, Plaintiff and Respondent, v. Troy Earl SEALS, Defendant and Appellant.
    B271109
    Court of Appeal, Second District, Division 8, California.
    Filed August 30, 2017
    Certified for Partial Publication.
    Katherine E. Hardie, Beverly Hills, under appointment by the Court of Appeal, for Defendant and Appellant.
    Xavier Becerra, Attorney General, Gerald A. Engler, Chief Assistant Attorney General, Lance E. Winters, Senior Assistant Attorney General, Stephanie C. Brenan and Abtin Amir, Deputy Attorneys General, for Plaintiff and Respondent.
    
      
      Pursuant to California Rules of Court, rules 8.1100 and 8.1110, Section I of this opinion is certified for publication.
    
   SORTINO, J.

In 2014, Troy Seals stole a cellphone from a store. A confrontation with the storeowner ensued, during which Seals pulled out a knife as he attempted to flee. The People charged Seals with second degree robbery ( Pen. Code, § 211 ) and second degree commercial burglary ( Pen. Code, § 459 ). At trial, the evidence established the storeowner typically sold the phone Seals stole for $899, plus sales tax, which increased the price to almost $1,000. The jury found Seals guilty on both counts. The trial court found true several prior conviction allegations.

On appeal, Seals contends substantial evidence does not support his burglary conviction because the evidence established the price of the phone was less than $950, and the jury could not consider sales tax as part of the phone's value. He also contends substantial evidence does not support his robbery conviction. Seals further asserts the trial court erred in denying his Romero motion, and that his 25-years-to-life sentence for robbery violates the Eighth Amendment's prohibition against cruel and unusual punishment. We modify the judgment to correct the presentence custody credits awarded and otherwise affirm.

FACTUAL AND PROCEDURAL BACKGROUND

In July 2014, Seals walked into Hot Spot Wireless, a cellphone store. Seals asked Adilmar Hernandez, a store clerk, about a pair of headphones and whether he could "get a better price" on them. Hernandez went to the back of the store to ask the storeowner, German Flores, if he could negotiate the price of the headphones. While discussing the matter with Flores, Hernandez heard the shop's front door beep, indicating someone had entered or exited the store. On a television feed of the store's security camera, Hernandez saw Seals leaving with a bag. When Hernandez and Flores returned to the sales floor they noticed a phone was missing from the display case.

Flores chased after Seals. When Flores was eight feet away from Seals, he confronted Seals, saying: "[G]ive me the fucking phone." Seals denied having the phone and kept walking, at a faster pace. Flores continued to follow Seals, demanding that he return the phone. Eventually, as Flores closed the gap between the two men to six feet, Seals pulled out a nine-inch knife. Seals held the knife by his side and said: "Get away from me. I don't have your phone."

When Flores saw the knife he was hesitant and "a little bit scared"; after he saw the knife he stopped going after the phone. Flores thought Seals might use the knife. He began to look for something to use to protect himself. Still, he continued following Seals, demanding that he return the phone. Flores testified at trial that he was determined to get the phone back because he had no insurance to cover the loss. In an effort to get closer to Seals, Flores threw a rock at him; Seals responded by throwing rocks at Flores. Eventually, police arrived and arrested Seals. Flores retrieved the phone, which was on the ground near where the men had thrown rocks. The knife was found nearby.

A jury found Seals guilty of second degree robbery and second degree commercial burglary. The trial court thereafter found true the prior conviction allegations as to five of Seals's prior criminal prosecutions. The court sentenced Seals to a total state prison term of 35 years to life.

DISCUSSION

I. The Jury Properly Included Sales Tax in Determining Whether Seals Entered the Property with Intent to Steal an Item with a Value Greater than $950.

In 2014, the People charged Seals with one count of commercial burglary in violation of section 459. By the time of trial in 2016, the electorate had enacted Proposition 47, which added section 459.5 to the Penal Code, creating a separate offense of "shoplifting." Under section 459.5, "shoplifting is defined as entering a commercial establishment with intent to commit larceny while that establishment is open during regular business hours, where the value of the property that is taken or intended to be taken does not exceed nine hundred fifty dollars ($950). Any other entry into a commercial establishment with intent to commit larceny is burglary." Shoplifting under this provision is a misdemeanor. Further, under section 459.5, subdivision (b), any act of shoplifting must be charged as such and no person charged with the crime may also be charged with burglary or theft of the same property.

Thus, to establish a violation of section 459 in this case, the People were required to prove the property Seals stole had a value exceeding $950. At trial, Flores testified that at the time of the crime, he usually sold the phone for $899, which, with tax, was "nine-fifty. Almost 1,000." There was no evidence that, excluding sales tax, Flores ever sold the phone for more than $950. To convict Seals of burglary, the jury had to include sales tax in its determination of the value of the phone.

In the lower court and on appeal, Seals has argued it was improper for the jury to include sales tax as part of the value of the phone. Although Seals frames this issue as one of sufficiency of the evidence, the threshold question does not involve disputed facts. Instead, whether sales tax could be included in the calculation of value is a legal question, which we review de novo. ( People v. Perkins (2016) 244 Cal.App.4th 129, 136 ; People v. Cuellar (2008) 165 Cal.App.4th 833, 836.)

A. Establishing Value in Theft Crimes in California

Under section 484, subdivision (a), which defines theft, "[i]n determining the value of the property obtained, for the purposes of this section, the reasonable and fair market value shall be the test." "[C]ourts have long required section 484's 'reasonable and fair market value' test to be used for theft crimes that contained a value threshold...." ( People v. Romanowski (2017) 2 Cal.5th 903, 914 [Proposition 47 did not change this valuation approach].)

As explained in People v. Pena (1977) 68 Cal.App.3d 100 ( Pena ), "When you have a willing buyer and a willing seller, neither of whom is forced to act, the price they agree upon is the highest price obtainable for the article in the open market. Put another way, 'fair market value' means the highest price obtainable in the market place...." ( Id . at p. 104.) Further, in a retail context, absent proof "that the price charged by a retail store from which merchandise is stolen does not accurately reflect the value of the merchandise in the retail market, that price is sufficient to establish the value of the merchandise within the meaning of sections 484 and 487." ( People v. Tijerina (1969) 1 Cal.3d 41, 45.)

California courts have established these general principles for determining the value of property in a theft crime, yet no court has expressly considered whether sales tax may be included in the valuation.

B. Sales Tax and Fair Market Value

To evaluate this issue, we first consider the nature of the sales tax in California.

"The sales tax is imposed on retailers '[f]or the privilege of selling tangible personal property at retail.' [Citation.]" ( Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1104 ( Loeffler ).) It is a longstanding principle that in this state, "[t]he retailer is the taxpayer, not the consumer. 'The tax relationship is between the retailer only and the state; and is a direct obligation of the former.' [Citation.]" ( Ibid, fn. omitted.) Retailers pay sales tax on their gross receipts, not on a per item basis. ( Ibid; Rev. & Tax. Code, § 6051 ; Roth Drug, Inc. v. Johnson (1936) 13 Cal.App.2d 720, 737 [the sales tax law contemplates imposing a fixed rate of tax on gross receipts and not on each particular sale of merchandise].)

"[A]lthough the sales tax falls on retailers and must be paid by them to the state, retailers are permitted but not required to obtain reimbursement for their tax liability from the consumer at the time of sale. [Citations.] Whether a reimbursement amount will be added is purely a matter of contract between the retailer and consumer. [Citations.] It is presumed that the parties agreed to the addition of sales tax reimbursement to the sales price if the sales agreement so states, if the sales tax reimbursement is shown on the sales check, or if the retailer posts a notice or notifies consumers by specified methods that reimbursement for sales tax will be added to the sales price of all items or certain items. [Citations.]" ( Loeffler, supra, 58 Cal.4th at pp. 1108-1109 ; Livingston Rock & Gravel Co. v. De Salvo (1955) 136 Cal.App.2d 156, 160-164.) The People primarily rely on one civil case to support the argument that sales tax may be included in a fair market value determination. In Xerox Corp. v. County of Orange (1977) 66 Cal.App.3d 746 ( Xerox ), the parties disputed whether sales tax could be considered in the valuation of property subject to a personal property tax. County assessors included sales tax in the calculation of the fair market value of office copying machines and related equipment the plaintiff, Xerox, leased to its customers. ( Id. at pp. 750-751.) To determine the tax owed on the copiers and equipment, county assessors used the list price for new equipment and added sales tax, and, in some cases, freight charges, to arrive at the "full cash value" of the property. ( Id. at pp. 751-752.) Xerox argued the inclusion of sales tax and freight charges was improper; the court disagreed.

The Xerox court began its analysis by noting the legal standard of full cash value for assessment under the California Tax Code is "fair market value." In turn, "[f]air market value contemplates a hypothetical transaction between an informed seller, being under no compulsion to sell, and an informed buyer, being under no compulsion to buy." ( Xerox , supra , 66 Cal.App.3d at pp. 752-753.) Xerox contended sales tax was not part of the purchase price the parties would agree upon in a market value approach. ( Id. at p. 756.) The appellate court rejected this argument based on the nature of the sales tax. The court explained:

"The California courts, while consistently holding that the legal incidence of the tax is upon the vendor, have always recognized that the ultimate burden of the sales tax, as in the case of all taxes paid in the course of production, will be shifted to the consumer. It is a part of the cost of marketing the property that is passed on to the consumer. 'It must be conceded that the purchase price ultimately is necessarily the source from which payment of the tax must be made. The consumer still has the right to purchase or not at the asked price which includes the tax. Any quibbling between the parties, in an attempt to differentiate between the purchase price and the tax by reason of the separate statement of the amount intended as tax reimbursement, will not alter the fact that within the purview of the legislative enactment the aggregate of the list price and the amount of tax reimbursement constitutes the actual purchase price of the commodity .' (Italics added.) [Citation.] [¶] Therefore, under the market value concept, where price is the basis of value, the sales tax is an element of value. The ultimate price the informed seller and buyer agree upon includes the amount of tax reimbursement. The retailer, absent exigent circumstances, would not sell for less, and the buyer purchases only if the value of the product to him justifies the total price." ( Xerox , supra , 66 Cal.App.3d at pp. 757-758.)

Xerox also asserted sales tax should not be included since it would result in different valuations of the same property depending on the county. The court rejected this argument: "Fair market value traditionally depends upon the location of the market. Certainly the costs incurred by the seller, whether for materials, labor or tax, vary depending on the locale in which the business is conducted, and those costs are reflected in the market price. We are concerned for tax purposes not with some esoteric value of the property, but with its value in exchange wherever the market is located." ( Xerox, supra, 66 Cal.App.3d at p. 760.)

Xerox additionally contended sales tax should not be included in fair market value because the tax amount collected from a hypothetical buyer must be paid over to the state, thus the seller has no interest in the tax. The court rejected this argument as ignoring the market value concept of valuation: "The price at which at which a willing and informed seller will sell, in the absence of some exigent circumstances, will always include his costs of production, materials, overhead, advertising and other costs of doing business. The sales tax is merely another cost of doing business, measured by the gross receipts of that business." ( Xerox, supra, 66 Cal.App.3d at p. 763 ; County of San Diego v. Assessment Appeals Bd. No. 2 (1983) 140 Cal.App.3d 52 [accord].)

C. The Jury Properly Considered Sales Tax When Determining the Fair Market Value of the Phone on the Section 459 Charge

Although Xerox arose in a different context from this case we find the court's reasoning relevant and persuasive. In criminal cases, as in Xerox and other civil cases in this state, "fair market value" has been interpreted as what an item "would be sold for in the open market if neither buyer nor seller was under any urgent necessity to either buy or sell" the item. ( Pena, supra, 68 Cal.App.3d at p. 103 ; City of Perris v. Stamper (2016) 1 Cal.5th 576, 598-599 [same definition in condemnation case]; Code Civ. Proc., § 1263.320, subd. (a) ; Glendale Fed. Sav. & Loan Assn. v. Marina View Heights Dev. Co. (1977) 66 Cal.App.3d 101, 141-142 [accepted definition of market value in California]; Pacific States Sav. & L. Co. v. Hise (1945) 25 Cal.2d 822, 837-840 [definition appropriate in valuation of corporate assets]; People v. Cook (1965) 233 Cal.App.2d 435, 438.)

Given the nature of the sales tax in California, sales tax reimbursement may properly be viewed as part of the price a willing buyer and seller, neither of whom is forced to act, agree upon. A seller is not required to seek sales tax reimbursement from the buyer. As a result, as the Xerox court noted, the sales tax is similar to other factors retailers take into consideration to increase the price of an item, such as overhead and advertising. When the retailer chooses not to absorb the sales tax and instead seeks sales tax reimbursement from the buyer, that is "purely a matter of contract between the retailer and consumer." ( Loeffler , supra , 58 Cal.4th at p. 1108.)

In adding sales tax reimbursement to the price of an item, the retailer is not merely collecting a tax on behalf of the state. Instead, the retailer is passing on a cost-for which only it is responsible-to the buyer. Further, when a retailer adds an amount for sales tax reimbursement to the total price of an item, that ultimate price is the highest price to which the willing and informed buyer and seller agree. We agree with the Xerox court that the fair market value test allows for inclusion of sales tax reimbursement in the valuation when price is the basis of value. Although this is a criminal case, we see no basis to adopt a different interpretation of the fair market value test, or how retail goods should be valued under that test, when value is an element in a theft crime.

Seals relies on several cases from other states to support his argument that the sales tax should not be included in value.

We do not find these cases persuasive. For example, in State v. Alexander (1987) 12 Kan.App.2d 1 ( Alexander ), the appellate court reasoned that "[u]pon the retail sale of merchandise, Kansas law obligates a merchant to collect and forward a sales tax to the state. [Citation.] In no sense may a theft be characterized as a sale. [Citation.] Because the sweaters had not been sold, [the store from which the defendant stole the items] did not owe, and the state was not entitled to collect, a sales tax on them.... [¶] ... Because no sales tax had been imposed, none was stolen." ( Id. at pp. 4-5.)

Similarly, in State v. Kluge (Iowa Ct. App. 2003) 672 N.W.2d 506 ( Kluge ), the appellate court concluded sales tax is "not truly a component of the 'value' of a good or service, but rather a separate amount collected by a retailer for the benefit of a governmental taxing authority. It is a fee collected because of a transaction." ( Id. at p. 509.) The court further noted that "[w]ith the determination of a sales tax does not increase the value of property, we conclude our statutory scheme ... does not allow for the addition of sales tax on an item not yet purchased." ( Ibid ; accord Russell v. State (2006) 367 Ark. 557 [242 S.W.3d 265].)

Alexander , Kluge, and several courts in other states have also adopted the reasoning of two New York trial courts which concluded sales tax should not be included in the value of property to determine the degree of a criminal offense: People v. Barbuto (N.Y. Sup. Ct. 1980) 434 N.Y.S.2d 120 ( Barbuto ) and People v. Medjdoubi (N.Y. Sup. Ct. 1997) 661 N.Y.S.2d 502. Both courts concluded the sales tax may increase the cost to the buyer but does not increase the value of stolen property. (See generally Annot., Consideration of Sales Tax in Determining Value of Stolen Property of Amount of Theft (1998) 63 A.L.R.5th 417 [collecting cases]; Foreman v. U.S. (D.C. Ct. App. 2010) 988 A.2d 505 [following Russell and Medjdoubi ].) The Barbuto court reasoned the price and sales tax are distinct; the storekeeper "establishes value by the freely negotiated price," but separately "collects a tax for the benefit of the State and locality." ( Barbuto, supra, at pp. 121-122.)

However, unlike the sales tax law and administration described in several of the cases from other jurisdictions, California law does not obligate a merchant to collect a sales tax from the customer. (See e.g., Barbuto , supra, 434 N.Y.S.2d at p. 122 [in New York, "a vendor is required to collect the tax from each customer when collecting the price charged for each item of personal property which he then holds as trustee for and on account of the State"].) This is a significant distinguishing factor. In California, whether the retailer seeks a sales tax reimbursement from the customer is a matter of contract between the buyer and seller. Under this sales tax framework, the addition of sales tax reimbursement to the cost of an item is an indication of that item's fair market value: the total and highest price to which the willing buyer and seller agree.

Some states have concluded sales tax should not be included in the value of stolen property because there was no sale to trigger the imposition of the sales tax. (See e.g., Alexander, supra, 12 Kan.App.2d at p. 817; Kluge , supra , 672 N.W.2d at p. 509 ; see also State Farm Mut. Auto. Ins. Co. v. Berthelot (La. 1999) 732 So.2d 1230, 1235 [insurance reimbursement did not include sales tax on sale price of vehicle; no taxable event occurred]; cf. Tunnell v. State (1983) 99 N.M. 446 [sales tax cannot be included in determining value of shoplifted item unless the total advertised retail or actual market price of the item included the applicable tax].)

Seals adopts this reasoning, arguing a stolen item would not be included in a store's gross receipts, thus the merchant would not be liable for any associated tax. In our view, the lack of a "sale" is irrelevant. Determining the fair market value of an item involves a hypothetical transaction between an informed buyer and seller-not the details of any actual particular sale. (See Xerox, supra, 66 Cal.App.3d at pp. 758-760.) So long as there is evidence that, in that hypothetical transaction, the ultimate price the willing and informed seller and buyer agree upon would include sales tax reimbursement, that ultimate price is the fair market value. That the item stolen was not purchased, so that sales tax did not actually come into play, does not change the fair market value determination.

We note our conclusion that sales tax reimbursement may be included in determining the fair market value of stolen retail property is consistent with decisions of several federal courts that have also considered the question. For example, in U.S. v. Draves (7th Cir. 1997) 103 F.3d 1328 ( Draves ), the court rejected the argument that sales tax should be excluded from the calculation of a threshold jurisdictional value under 15 United States Code section 1644, which punishes the knowing use of a fraudulently obtained credit card to acquire anything with an aggregate value of $1000 or more. ( Draves , supra , at pp. 1331-1332.) The Draves court explained: "The fair market value of property is commonly defined as the price a willing buyer would pay a willing seller for the property, when neither is under compulsion to buy or sell. [Citations.] In states that levy sales tax, buyers necessarily consider this mandatory amount in determining what they are willing to pay for an item." ( Id. at p. 1332 ; see also U.S. v. Burns (9th Cir. 1990) 894 F.2d 334, 336 ["in ordinary retail trade the amount that a willing buyer is prepared to pay includes the tax and shipping costs, regardless of who ultimately receives that fraction of the purchase price"]; People v. Bazo (N.Y. Sup. Ct. 1988) 529 N.Y.S.2d 432.)

Here, the jury could properly consider the sales tax reimbursement in determining the reasonable and fair market value of the phone Seals stole. While there was no testimony about the exact amount attributable to sales tax reimbursement, Flores testified that he usually sold the phone for an amount that, including tax, was over $950 and close to $1,000. The evidence presented at trial supported the jury's conclusion that the value of the phone exceeded $950.

II.-V.

DISPOSITION

The judgment is modified to reflect an award of 89 days of presentence conduct credit. The trial court is directed to prepare a corrected abstract of judgment reflecting the correct award of presentence conduct credit and to forward it to the Department of Corrections and Rehabilitation. In all other respects, the judgment is affirmed.

We concur:

FLIER, Acting P.J.

GRIMES, J. 
      
      Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
     
      
      All further undesignated section references are to the Penal Code unless otherwise stated.
     
      
      People v. Superior Court (Romero) (1996) 13 Cal.4th 497, 53 Cal.Rptr.2d 789, 917 P.2d 628.
     
      
      On the robbery count, the trial court imposed a sentence of 25 years to life. The court imposed a sentence of six years on the burglary count-three years, doubled pursuant to the Three Strikes law-and stayed pursuant to section 654. The court further imposed a total 10-year determinate sentence based on two five-year priors (§ 667, subd. (a)(1)).
     
      
      See footnote *, ante.
     
      
      In his reply brief on appeal, Seals argues there was insufficient evidence of the value of the phone because, in addition to testifying that he sold the phone, with sales tax, for almost $1,000, Flores also testified he bargained on the price of the phone, the "average market value" for the phone at the time was "like 499, 500," and "most people" sold them at that time for "600, 599." However, on appeal, we do not resolve evidentiary conflicts, but instead " 'review the evidence in the light most favorable to the prosecution and presume in support of the judgment the existence of every fact the jury could reasonably have deduced from the evidence.' " (People v. Manibusan (2013) 58 Cal.4th 40, 87, 165 Cal.Rptr.3d 1, 314 P.3d 1.) If sales tax was properly considered in the valuation of the phone, there was sufficient evidence to support the conviction.
     
      
      See footnote *, ante.
     