## Facts

- A consumer filed a putative class action against several retailers, including Sav-On Drugs, alleging the retailer overcollected sales tax reimbursement in transactions involving trading stamps.
- Under California’s sales tax scheme, the sales tax is imposed on retailers’ gross receipts, and retailers generally collect tax reimbursement from customers.
- Trading stamps used in taxable sales could be treated as a cash discount deductible from gross receipts for purposes of computing the retailer’s sales tax liability, creating a risk that a retailer might collect reimbursement from customers on the full price while remitting tax on a reduced taxable base.
- In discovery, the plaintiff served interrogatories seeking aggregate information corresponding to Sav-On’s sales tax reporting, including: (1) total sales tax reported and paid and total gross receipts for specified periods; (2) total trading stamps issued for those periods; and (3) the total gross receipts on which Sav-On collected sales tax reimbursement from customers for those periods.
- The trial court ordered Sav-On to answer the interrogatories; Sav-On sought writ relief, asserting statutory tax-return confidentiality barred the compelled disclosures.

## Issues

1. Whether California’s sales tax return confidentiality statutes and regulations create a privilege or immunity that prevents compelling a retailer to disclose tax-return-related information in civil discovery.
2. Whether interrogatories seeking aggregate tax-related figures from the taxpayer are permissible when relevant to claims of excessive sales tax reimbursement collection.
3. Whether an interrogatory that effectively compels disclosure of information closely tracking protected tax return content must be barred to preserve the confidentiality scheme.

## Decision

- The California Supreme Court granted writ relief in part and denied it in part.
- The court allowed discovery as to interrogatories requesting general, aggregate figures (including total tax paid, total gross receipts, and total trading stamps issued) because the requests were relevant and did not require production of the tax returns themselves.
- The court prohibited enforcement of the order compelling an answer to the interrogatory seeking the total gross receipts upon which Sav-On collected sales tax reimbursement, concluding this request too directly sought return-like information protected by the confidentiality framework.
- Sav-On was required to answer the permissible interrogatories and was relieved only from answering the prohibited one.

## Legal Principles

- Tax return confidentiality provisions primarily restrict disclosure by tax authorities and do not create a blanket privilege allowing a taxpayer to refuse all tax-related discovery in private litigation.
- Civil discovery permits obtaining relevant, nonprivileged information; claimed “tax return privilege” protections are construed narrowly and must be grounded in statute.
- Courts may permit discovery of general financial and tax-related aggregates obtainable from a party’s records without compelling disclosure of return-level details or information that effectively replicates protected return content.
- When a discovery request is aimed at data that is tightly tied to protected return information and threatens the confidentiality policy, courts may limit or bar that discovery even if related to the subject matter of the action.

## Conclusion

The court held that California’s tax confidentiality scheme does not categorically shield a taxpayer from disclosing relevant tax-related facts in civil discovery, but it does justify blocking discovery requests that function as compelled disclosure of protected return content; accordingly, Sav-On had to answer general aggregate interrogatories but not the one targeting gross receipts on which it collected sales tax reimbursement.


Sav-On Drugs, Inc. v. Superior Court, 15 Cal. 3d 1, 538 P.2d 739 (Cal. 1975)