Dakessian Law successfully represented the taxpayer in a case involving the taxability of hookah under the Cigarette and Tobacco Products Tax Law. At issue was whether the 50% test in former Rev. & Tax. Code Sec. 30121 applied to hookah or whether hookah was taxable regardless of tobacco content.

In January 2021, Dakessian Law prevailed in its original hearing before the Office of Tax Appeals, in a unanimous, 14-page written opinion, which granted Dakessian Law’s client nearly $3 million in refunds in April 2021. In May of 2021, the CDTFA filed a petition for rehearing on grounds that the original opinion was “contrary to law,” which Dakessian Law opposed because the CDTFA failed to satisfy the “contrary to law” standard, which for decades has meant that no substantial evidence supports the original decision–not just an assertion that the original opinion contained legal errors or that the case should have been decided differently, which was the entire basis of the CDTFA’s petition.

Despite the decades of legal precedent supporting the taxpayer on this issue, in September of 2021, a new panel of OTA judges consisting of two entirely new judges who did not hear the original opinion, along with the author of the original opinion, granted the rehearing in a split decision (with the author of the original opinion dissenting). Dakessian Law promptly sued the OTA in Orange County Superior Court for its unlawful grant of a rehearing, and also naming the CDTFA as a real party in interest.

After nearly a year of litigation in the courts, the parties reached an agreement that a third OTA panel consisting of three new judges would decide whether the rehearing had been properly granted. After full briefing and oral argument in January 2023, that panel unanimously decided that the rehearing should not have been granted, reinstated the original opinion, and ordered the CDTFA to issue the refunds in full, bringing the case to a close.