Laws, Regulations and Annotations
Business Taxes Law Guide – Revision 2023
Sales And Use Tax Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 1. Sales and Use Taxes
Chapter 6. Collection of Tax
Article 7. Payment on Termination of Business and Successor's Liability
6812. Liability of purchaser; release. (a) If the purchaser of a business or stock of goods fails to withhold from the purchase price as required, he or she becomes personally liable for the payment of the amount required to be withheld by him or her to the extent of the purchase price, valued in money.
(b) (1) Within 60 days after the latest of the dates specified in paragraph (2), the board shall either issue the certificate or mail notice, to the purchaser at his or her address as it appears on the records of the board, of the amount that must be paid as a condition of issuing the certificate.
(2) For purposes of paragraph (1), the latest of the following dates shall apply:
(A) The date the board receives a written request from the purchaser for a certificate.
(B) The date of the sale of the business or stock of goods.
(C) The date the former owner's records are made available for audit.
(c) Failure of the board to mail the notice referred to in subdivision (b) will release the purchaser from any further obligation to withhold from the purchase price as above provided. The last date upon which the obligation of the successor may be enforced shall be not later than three years after the date the board is notified of the purchase of the business or stock of goods.
History—Stats. 1943, p. 2458, operative July 1, 1943, added last sentence. Stats. 1945, p. 1001, operative July 1, 1945, substituted "60" for "30." Stats. 1947, p. 2029, operative July 1, 1947, added provisions extending to 90 days under certain conditions time for issuance to purchaser of business of certificate or statement of amount due. Stats. 1963, p. 1492, in effect September 20, 1963, substituted "person" for "retailer" in the last sentence. Stats. 1977, Ch. 921, operative January 1, 1978, added provision for 90 days from date of sale. Stats. 1986, Ch. 333, effective January 1, 1987, reduced the Board's allowable response time from 90 to 60 days after receiving the purchaser's request or from the date of sale. Stats. 1991, Ch. 236, in effect July 29, 1991, added "from the"after "to withhold" in subdivisions (a) and (c), substituted "last date upon" for "time within" after "provided. The", and substituted "be not later than … purchase of the" for "start to run at the time the person sells out his or her", and deleted "or at the time that the determination against the person becomes final whichever event occurs the later" after "stock of goods" in subdivision (c).
Tax assessed after sale of business.—The purchaser of a business is liable, up to the amount of the purchase price, for sales tax assessed against the retailer after the sale of the business is consummated, measured by taxable sales made before the sale of the business. Such tax is "due and unpaid" even though not then assessed. People v. Buckles (1943) 57 Cal.App.2d 76.
Purchaser of Fixtures and equipment.—A purchaser of fixtures and equipment is not liable for sales tax due from the seller, on account of failing to withhold sufficient of the purchase price to cover such liability when the evidence showed that the purchaser did not purchase the business of the former owner or become his successor in the business. People v. Gabriel (1943) 57 Cal.App.2d 788.
Related corporations.—A wholly owned subsidiary of a creditor corporation was a "purchaser" of a debtor corporation where the debtor corporation transferred all of its operating assets to the subsidiary, and the subsidiary in turn issued to the creditor corporation a promissory note, equivalent to the value of the assets, which the creditor corporation credited to the debtor corporation, in reduction of its indebtedness. Knudsen Dairy Products Co. v. State Board of Equalization (1970) 12 Cal.App.3d 47.
Effect of Order of Bankruptcy Court.—Where the board fails to appeal the order of a bankruptcy court which finds the claim of the board not a valid debt of the bankrupt seller, the board is barred from subsequently attempting to collect the amount of the tax from the buyer under the successor liability theory. Century Geophysical Corp. v. California Board of Equalization (1977) 564 F.2d 342.
Compliance with Bulk Sales Law did not avoid successor liability.—A purchaser of a business deposited the purchase price into escrow to comply with Commercial Code § 6101 et seq., but did not obtain a tax clearance from the Board. The Board was entitled to collect the purchase price from the purchaser as a successor. The public interest in collection of taxes outweighs a private interest in the transfer of business assets. Successor liability is a remedy distinct from the Bulk Sales Law. Schnyder v. State Board of Equalization (2002) 101 Cal.App.4th 538.