Rossmoor Taxpayers Get Answer to Sales Tax Confusion

May 6, 2021 Updated: May 6, 2021

Residents of an unincorporated Orange County, California, town said they were recently overcharged taxes for sharing the same zip code as a neighboring, higher-taxed city.

The issue dates back to last November, when Los Alamitos voters narrowly passed Measure Y, which allowed the city to raise its sales tax by 1.5 percent. The tax hike was proposed due to concerns that Los Alamitos would run out of money due to the economic impact of the global pandemic, coupled with other budgetary worries.

The measure was introduced to generate additional revenue to mitigate cuts of essential services and public safety. Voters passed the measure by less than 140 votes, enabling the city to increase its sales tax to 9.25 percent; Los Alamitos now ties Santa Ana in having the highest tax rate in Orange County.

In unincorporated Rossmoor, which shares the same zip code as Los Alamitos, the tax hike doesn’t apply, yet residents were starting to notice they were being charged at the higher rate, and many began filing complaints with the Rossmoor Community Services District.

The statewide minimum sales tax is 7.25 percent. Without special enabling legislation, the maximum rate is 10.25 percent. Rossmoor’s tax base is 7.75 percent.

The district reached out to Orange County Supervisor Katrina Foley, who represents the area, for clarification.

In an April 26 memo addressing the issue to Joe Mendoza, general manager of the Rossmoor Community Services District, Foley said, “We have issued and received guidance from county counsel. The short answer is Rossmoor residents are not subject to Los Alamitos Tax.”

Foley concluded that while Rossmoor shares the same zip code with the City of Los Alamitos, it keeps its same base 7.75 percent tax rate, and that Los Alamitos’ differing sales tax should only be imposed in the city’s jurisdictional boundaries, not in unincorporated areas.

“Our commitment to the community is to solve problems. Rossmoor residents shouldn’t have to pay for taxes they haven’t voted to increase,” Foley told The Epoch Times via email. “I’m glad our office could get to the bottom of it.”

Struggling to Stay Afloat

In a report presented to the Los Alamitos City Council in July 2020, city staff addressed its fiscal changes.

“Due to significant strains placed upon the city’s finances by outside forces, the city is currently facing a significant structural budget deficit,” the report stated. “These challenges have resulted in projected structural shortfalls growing from $1.6M in 2021-22 to over $3.4M in 2027-28, and approximately $3.7M by 2030.

“Recognizing that the city would need to take extraordinary measures in order to mitigate these projected deficits and loss of existing reserves, the city council took the proactive step of developing a plan to focus on building future fiscal sustainability for the City of Los Alamitos.”

City officials considered alternative sources of funding, including raising property taxes, but ultimately took the staff recommendation and chose to support raising the sales tax. The staff report estimated that a one-cent local sales tax would generate more than $3 million annually.

Follow the Money

Foley’s memo provided the district with information for residents on determining geographic tax rates for Californians.

The Rossmoor Homeowners Association recommends that residents who want to avoid being overtaxed use as their Rossmoor billing and shipping address showing that Rossmoor is their legal address.

Rossmoor residents should always confirm that they’re being charged the 7.75 percent rate. If they find they’ve been charged a different rate, they should notify the seller and request a refund or correction.

If all else fails, residents can contact the California Department of Tax and Fee Administration for assistance in resolving any problems with overcharging.