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Business Taxes Law Guide—Revision 2024

BTLG Table of Contents > Energy Resources Surcharge Law > Chapter 6 > entire chapter

Energy Resources Surcharge Law

Revenue and Taxation Code

Division 2. Other Taxes
Part 19. Energy Resources Surcharge Law

Chapter 6. Collection of Surcharge

Article 1. Suit for Surcharge

Article 2. Notice to Withhold

Article 2.5. Priority and Lien of Surcharge

Article 3. Warrant for Collection

Article 4. Miscellaneous


Article 1. Suit for Surcharge

40141. Court action. At any time within 10 years after any surcharge or any amount of surcharge required to be collected becomes due and payable, and at any time after any amount determined under Articles 3 (commencing with Section 40071), 4 (commencing with Section 40081), and 5 (commencing with Section 40091) of Chapter 4 of this part becomes due and payable, the board may bring an action in the courts of this state, of any other state, or of the United States in the name of the people of California to collect the amount delinquent together with penalties.

40142. Rules of procedure. The Attorney General shall prosecute the action, and the provisions of the Code of Civil Procedure relating to service of summons, pleadings, proof, trials, and appeals are applicable to the proceedings.

40143. Attachment. In the action a writ of attachment may issue, and no bond or affidavit previous to the issuing of the attachment is required.

40144. Certificate of delinquency. In the action a certificate by the board showing the delinquency shall be prima facie evidence of the determination of the surcharge or the amount of surcharge, of the delinquency of the amounts set forth, and of the compliance by the board with all the provisions of this part in relation to the computation and determination of the amounts.

40145. Service of process. In any action brought under this part process may be served according to the Code of Civil Procedure and the Civil Code of this state.

Article 2. Notice to Withhold

40151. Notice to holders of credits and personal property and to debtors. If any person is delinquent in the payment of the amount required to be paid by him or in the event a determination has been made against him which remains unpaid, the board may, not later than five years after the payment became delinquent, give notice thereof personally or by first-class mail to all persons, including any officer or department of the state or any political subdivision or agency of the state, having in their possession or under their control any credits or other personal property belonging to the delinquent, or person against whom a determination has been made which remains unpaid, or owing any debts to the delinquent or such person. In the case of any state officer, department or agency, the notice shall be given to such officer, department or agency prior to the time it presents the claim of the delinquent to the State Controller.

History—Stats. 1978, Ch. 827, effective January 1, 1979, substituted "first-class" for "registered".

40152. Duty to hold credits, other personal property, and debts. After receiving the notice the person so notified shall neither transfer nor make any other disposition of the credits, other personal property, or debts in their possession or under their control at the time they receive the notice until the board consents to a transfer or disposition or until 60 days elapse after the receipt of the notice, whichever period expires the earlier.

40153. Duty to advise board; notice to bank. All persons so notified shall forthwith after receipt of the notice advise the board of all such credits, other personal property, or debts in their possession, under their control, or owing by them. If such notice seeks to prevent the transfer or other disposition of a deposit in a bank or other credits or personal property in the possession or under the control of a bank, the notice to be effective shall state the amount, interest and penalty due from the person and shall be delivered or mailed to the branch or office of such bank at which such deposit is carried or at which such credits or personal property is held. Notwithstanding any other provision, with respect to a deposit in a bank or other credits or personal property in the possession or under the control of a bank, the notice shall only be effective with respect to an amount not in excess of two times the amount, interest and penalty due from the person.

40154. Liability for transfer. If, during the effective period of the notice to withhold, any person so notified makes any transfer or disposition of the property or debts required to be withheld hereunder, to the extent of the value of the property or the amount of the debts thus transferred or paid he shall be liable to the state for any indebtedness due under this part from the person with respect to whose obligation the notice was given if solely by reason of such transfer or disposition the state is unable to recover the indebtedness of the person with respect to whose obligation the notice was given.

40155. Notice of levy. (a) The department may, by notice of levy, served personally, by first-class mail, or by electronic transmission or other electronic technology, require all persons having in their possession, or under their control, any payments, credits other than payments, or other personal property belonging to a consumer or other person liable for any amount under this part to withhold from these credits or other personal property the amount of any surcharge, interest, or penalties due from the consumer or other person, or the amount of any liability incurred by them under this part, and to transmit the amount withheld to the department at the time it may designate. The notice of levy shall have the same effect as a levy pursuant to a writ of execution except for the continuing effect of the levy, as provided in subdivision (b).

(b) The person served shall continue to withhold pursuant to the notice of levy until the amount specified in the notice, including accrued interest, has been paid in full, until the notice is withdrawn, or until one year from the date the notice is received, whichever occurs first.

(c) The amount required to be withheld is the lesser of the following:

(1) The amount due stated on the notice.

(2) The sum of both of the following:

(A) The amount of the payments, credits other than payments, or personal property described above and under the person's possession or control when the notice of levy is served on the person.

(B) The amount of each payment that becomes due following service of the notice of levy on the person and prior to the expiration of the levy.

(d) For the purposes of this section, the term "payments" does not include earnings as that term is defined in subdivision (a) of Section 706.011 of the Code of Civil Procedure or funds in a deposit account as defined in paragraph (29) of subdivision (a) of Section 9102 of the Commercial Code. The term "payments" does include any of the following:

(1) Payments due for services of independent contractors, dividends, rents, royalties, residuals, patent rights, or mineral or other natural rights.

(2) Payments or credits due or becoming due periodically as a result of an enforceable obligation to the consumer or other person liable for the surcharge.

(3) Any other payments or credits due or becoming due the consumer or other person liable as the result of written or oral contracts for services or sales whether denominated as wages, salary, commission, bonus, or otherwise.

(e) In the case of a financial institution, to be effective, the notice shall state the amount due from the consumer and shall be delivered, mailed, or served by first-class mail, or by electronic transmission or other electronic technology, to the branch or office of the financial institution where the credits or other property is held, unless another branch or office is designated by the financial institution to receive the notice.

History—Added by Stats. 1982, Ch. 1589, in effect January 1, 1983. Stats. 1993, Ch. 1113, in effect January 1, 1994, added "(a)", added comma after "The board may", deleted a comma after "notice of levy", substituted "these" for "such" after "withhold from", substituted "the" for "such" after "due from", and substituted "the time" for "such times" after "board at", in the first paragraph; added "(b)"; and added subdivision (c). Stats. 1998, Ch. 609 (SB 2232), in effect January 1, 1999, substituted "payments, credits other than payments," for "credits" after "their control, any" and added "The notice of … in subdivision (b)." as the last sentence to subdivision (a); relettered subdivision (b) as (e); relettered subdivision (c) as (b); and added subdivisions (c) and (d). Stats. 1999, Ch. 991 (SB 45), in effect January 1, 2000, but operative July 1, 2001, deleted "as" after "at the time" in subdivision (a) and substituted "paragraph (29) of subdivision (a) of Section 9102" for "Section 9105" after "as defined in" in subdivision (d). Stats. 2022, Ch. 474 (SB 1496), in effect January 1, 2023, substituted "department" for "board" throughout the section; added "," after "levy", deleted "or," after "personally", and added ", or by electronic transmission or other electronic technology" after "mail" in first sentence of subdivision (a); substituted ", mailed, or served by electronic transmission or other electronic technology" for "or mailed" after "delivered" in subdivision (e).

40156. Employer withheld earnings. (a) Notwithstanding Article 7 (commencing with Section 706.151) of Chapter 5 of Title 9 of Part 2 of the Code of Civil Procedure, if the board determines upon receiving information from a user or other person liable for any amount under this part that the person's employer withheld earnings for taxes pursuant to Section 40155 and failed to remit the withheld earnings to the board, the employer shall be liable for the amount not remitted. The board's determination shall be based on payroll documents or other substantiating evidence furnished by the person liable for the tax.

(b) Upon its determination, the board shall mail notice to the employer at its last known address that upon failure to remit the withheld earnings to the board within 15 days of the date of its notice to the employer, the employer shall be liable for that amount which was withheld and not remitted.

(c) If the employer fails to remit the amount withheld to the board upon notice, that amount for which the employer is liable shall be determined, collected, and paid as though it were a tax deficiency. The amount may be assessed at any time prior to seven years from the first day that the unremitted amount, in the aggregate, was first withheld. Interest shall accrue on that amount from the first day that the unremitted amount, in the aggregate, was first withheld.

(d) When the determination against the employer is final and due and payable, the person's account shall be immediately credited with an amount equal to that determined amount as though it were a payment received by the board on the first date that the unremitted amount, in the aggregate, was first withheld by the employer.

(e) Collection against the person liable for the tax is stayed for both the following amount and period:

(1) An amount equal to the amount determined by the board under subdivision (a).

(2) The earlier of the time the credit is applied to the person's account pursuant to subdivision (d) or the determination against the employer is withdrawn or revised and the person is notified by the board thereof.

(f) If under this section an amount that was withheld and not remitted to the board is final and due and payable by the employer and credited to the person's account, this remedy shall be the exclusive remedy for the person to recover that amount from the employer.

(g) This section shall apply to determinations made by the board on or after the effective date of the act adding this section.

History— Added by Stats. 2000, Ch. 1052 (AB 2898), in effect January 1, 2001.

Article 2.5. Priority and Lien of Surcharge*

* Article 2.5 was added by Stats. 1982, Ch. 1589, in effect January 1, 1983.

40157. Priority of claims. The amounts required to be paid by any person under this part together with interest and penalties shall be satisfied first in any of the following cases:

(a) Whenever the person is insolvent.

(b) Whenever the person makes a voluntary assignment of his or her assets.

(c) Whenever the estate of the person in the hands of executors, administrators, or heirs is insufficient to pay all the debts due from the deceased.

(d) Whenever the estate and effects of an absconding, concealed, or absent person required to pay any amount under this part are levied upon by process of law.

This section does not give the state a preference over any lien or security interest which was recorded or perfected prior to the time when the state records or files its lien as provided in Section 7171 of the Government Code.

The preference given to the state by this section shall be subordinate to the preferences given to claims for personal services by Sections 1204 and 1206 of the Code of Civil Procedure.

40158. Lien dates. (a) If any person fails to pay any amount imposed under this part at the time that it becomes due and payable, the amount thereof, including penalties and interest, together with any costs in addition thereto, shall thereupon be a perfected and enforceable state tax lien. Such a lien is subject to Chapter 14 (commencing with Section 7150) of Division 7 of Title 1 of the Government Code.

(b) For the purpose of this section, amounts are "due and payable" on the following dates:

(1) For amounts disclosed on a return received by the board before the date the return is delinquent, the date the return would have been delinquent.

(2) For amounts disclosed on a return filed on or after the date the return is delinquent, the date the return is received by the board.

(3) For all other amounts, the date the assessment is final.

Article 3. Warrant for Collection

40161. Warrants. At any time within five years after any person is delinquent in the payment of any amount required to be paid under this part the board or its authorized representative may issue a warrant for the collection of any amount required to be paid to the state under this part. The warrant shall be directed to any sheriff or marshal and shall have the same effect as a writ of execution. The warrant shall be levied and sale made pursuant to it in the same manner and with the same effect as a levy and a sale pursuant to a writ of execution.

History—Stats. 1996, Ch. 872, in effect January 1, 1997, substituted "or marshal" for ",marshal or constable" after "to any sheriff" in the second sentence.

40162. Fees, commissions, and expenses. The board shall pay the sheriff or marshal, upon the completion of his or her services pursuant to a warrant, the same fees, commissions, and expenses for his or her services as are provided by law for similar services pursuant to a writ of execution. The board, and not the court, shall approve the fees for publication in a newspaper.

History—Stats. 1996, Ch. 872, in effect January 1, 1997, substituted "or marshal" for ", marshal or constable" after "pay the sheriff", and added "or her" after "completion of his" and after "expenses for his", in the first sentence.

40163. Collection of fees, commissions, and expenses. The fees, commissions, and expenses are the obligation of the person required to pay any amount under this part and may be collected from him by virtue of the warrant or in any other manner provided in this part for the collection of the surcharge.

Article 4. Miscellaneous

40166. Furnishing of partnership agreement. The board shall not be subject to subdivisions (c) and (d) of Section 16307 of the Corporations Code unless, at the time of application for or issuance of a permit, license, or registration number under this part, the applicant furnishes to the board a written partnership agreement that provides that all business assets shall be held in the name of the partnership.

History—Added by Stats. 1996, Ch. 1003, in effect January 1, 1997.

40167. Installment payment agreement. (a) The board may, in its discretion, enter into a written installment payment agreement with a person for the payment of any surcharges due, together with interest thereon and any applicable penalties, in installments over an agreed period. With mutual consent, the board and the person liable for the surcharge may alter or modify the agreement.

(b) Upon failure of a person to fully comply with the terms of an installment payment agreement with the board, the board may terminate the agreement by mailing a notice of termination to the person. The notice shall include an explanation of the basis for the termination and inform the person of his or her right to request an administrative review of the termination. Fifteen days after the mailing of the notice, the installment payment agreement shall be void, and the total amount of the surcharge, interest, and penalties due shall be immediately payable.

(c) The board shall establish procedures for an administrative review for persons requesting that review whose installment payment agreements are terminated under subdivision (b). The collection of surcharge, interest, and penalties that are the subject of the terminated installment payment agreement may not be stayed during this administrative review process.

(d) Except in the case of fraud, if an installment payment agreement is entered into within 45 days from the date on which the board's notice of determination or redetermination becomes final and the person complies with the terms of the installment payment agreement, the board shall relieve the penalty imposed pursuant to Section 40096.

History—Added by Stats. 1999, Ch. 929 (AB 1638), in effect January 1, 2000. Stats. 2000, Ch. 1052 (AB 2898), in effect January 1, 2001, added subdivision (d).

40167.5. Installment payment agreement; annual statement. The board shall, beginning no later than January 1, 2001, provide each taxpayer who has an installment payment agreement in effect under Section 40167 an annual statement setting forth the initial balance at the beginning of the year, the payments made during the year, and the remaining balance as of the end of the year.

History—Added by Stats. 2000, Ch. 1052 (AB 2898), in effect January 1, 2001.

40168. Collection cost recovery fee. (a) A collection cost recovery fee shall be imposed on any person that fails to pay an amount of surcharge, interest, penalty, or other amount due and payable under this part. The collection cost recovery fee shall be in an amount less than or equal to the California Department of Tax and Fee Administration’s costs for collection, as reasonably determined by the California Department of Tax and Fee Administration. The collection cost recovery fee shall be imposed only if the California Department of Tax and Fee Administration has mailed its demand notice, to that person for payment, that advises that continued failure to pay the amount due may result in collection action, including the imposition of a collection cost recovery fee.

(b) Interest shall not accrue with respect to the collection cost recovery fee provided by this section.

(c) The collection cost recovery fee imposed pursuant to this section shall be collected in the same manner as the collection of any other surcharge imposed by this part.

(d) (1) If the California Department of Tax and Fee Administration finds that a person's failure to pay any amount under this part is due to reasonable cause and circumstances beyond the person's control, and occurred notwithstanding the exercise of ordinary care and the absence of willful neglect, the person shall be relieved of the collection cost recovery fee provided by this section.

(2) Any person seeking to be relieved of the collection cost recovery fee shall file with the California Department of Tax and Fee Administration a statement under penalty of perjury setting forth the facts upon which the person bases the claim for relief.

(e) Subdivision (a) shall be operative with respect to a demand notice for payment which is mailed on or after January 1, 2011.

(f) Collection cost recovery fee revenues shall be deposited in the same manner as revenues derived from any other surcharge imposed by this part.

History—Added by Stats. 2010, Ch. 721 (SB 858), in effect October 19, 2010, operative January 1, 2011. Stats. 2021, Ch. 432 (SB 824), in effect January 1, 2022, added "less than or" after "shall be in an amount" in subdivision (a); and substituted "California Department of Tax and Fee Administration" for "board" throughout.

40169. Electronic earnings withholding orders. (a) Notwithstanding Sections 706.071, 706.073, 706.080, 706.101, and 706.105 of the Code of Civil Procedure, the California Department of Tax and Fee Administration may serve earnings withholding orders for taxes and any other notice or document required to be served or provided in connection with an earnings withholding order for taxes according to Article 4 (commencing with Section 706.070) of Chapter 5 of Division 2 of Title 9 of Part 2 of the Code of Civil Procedure to government and private employers by electronic transmission or other electronic technology.

(b) Upon consent of the employer, the California Department of Tax and Fee Administration may provide service by electronic transmission or other electronic technology under this section.

(c) Notwithstanding Sections 706.071, 706.073, 706.080, 706.101, 706.125, and 706.126 of the Code of Civil Procedure, the California Department of Tax and Fee Administration may receive the employer’s return, as described in Section 706.126 of the Code of Civil Procedure, by electronic transmission or other electronic technology.

(d) This section shall apply in the same manner and with the same force and effect and to the full extent as if this section had been incorporated in full into Article 4 (commencing with Section 706.070) of Chapter 5 of Division 2 of Title 9 of Part 2 of the Code of Civil Procedure.

(e) This section shall apply to notices served or provided on or after the effective date of the act adding this section.

History—Added by Stats. 2023, Ch. 511 (SB 889), in effect January 1, 2024.