Which assets in an outdoor-advertising business sale were taxable, and did the personal-property portion qualify as an occasional sale?

Plain-English summary

A corporation bought the assets and business of an outdoor-advertising division. The seller operated billboard structures, sold cutouts and embellishments, held multiple seller's permits, and periodically sold paint, used furniture and fixtures, vehicles, stores, and other property.

Tax counsel excluded the portion of the price allocated to advertising structures that were real property when sold. That included heavily embedded structures on owned or leased land and advertising attached to buildings. A building sign that was readily removable as a unit was different: it was personal property when the seller leased the building and had a present removal right.

The tangible-personal-property portion was taxable and did not qualify as an occasional sale. The division's substantial and varied prior sales made the final disposition one of a series of sales, and the analysis also considered sales by the larger company rather than treating the division as a separate taxpayer.

The letter also directed the seller to report through the division's general office and identified the corresponding local-tax jurisdiction.

Common questions

Were billboard structures on leased land automatically personal property?

No. The letter treated the heavily embedded structures as real property whether the underlying land was leased or owned.

When could a sign attached to a building be taxable personal property?

When it was readily removable as a unit and a lessee-owner had a present right to remove it.

Why was the personal-property sale not occasional?

The seller and its division had made substantial, diverse prior sales sufficient to make the final sale part of a series.

Citations and references

• California Revenue and Taxation Code section 6006.5(a) (as cited)
• California Sales and Use Tax Ruling 11 (removable fixtures, as cited; copy enclosed)
• People v. Cal-Manor Distributors, Inc. (Superior Court case described as unsound and virtually overruled, as cited without a reporter citation)
• Bigsby v. Johnson, 18 Cal. App. 2d 860 (as cited)
• Northwestern Pacific Railroad Co. v. State Board of Equalization, 21 Cal. 2d 524 (as cited)
• Sutter Packing Company and Pacific Pipeline Construction Company cases (as cited without full citations)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/150-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/150-0420.pdf

Original ruling text

150.0420

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

May 23, 1960

M--- B--- Corporation
XXX East XXth Street
--- --- XX, --- --Attention:

-XXXXXX

Mr. R--- A. D--Secretary

Gentlemen:
This will acknowledge your letter of April 25, requesting an opinion as to the application of the California Sales and Use Tax Law to a purchase by M--- B--- Company from W. R. G--- & Co. of certain property situated in California. This property consists of the assets and business of the F--- and K--- division of G---. This division’s business is principally providing advertising space on outdoor advertising structures. It did, however, sell cut-outs or embellishments to advertisers. The division held sellers’ permits at eight locations, and also from time to time sold such items as paint, used furniture and fixtures, autos and trucks, stores, etc. We answer your specific questions as follows: (1) The sale is properly reported on the return filed by the general office of the F--- and K--- division of G--- which is located in --- ---, to which permit
--- - XXXXXX is issued. The applicable local tax is the tax imposed by the sales and use tax ordinance of the City and County of --- --- and will be distributed to that jurisdiction. (2) That portion of the sales proceeds allocable to advertising structures in place and constituting real property at the time of sale is not subject to either State or local tax. This property will be deemed to include structures, whether erected on leased property or on property owned by G---. We understand these structures consist of heavy vertical members embedded five to fifteen feet in concrete or other foundation material. It also includes signs and other advertising on buildings. We believe, however, that any sign affixed to a building in such a manner that the sign is readily removable as a unit so as to constitute “fixtures” under Ruling 11, copy enclosed, should be treated as personal property for purposes of the sales tax if, at the time of sale, the owner is a lessee of the building and has the present right of removing the sign.

M--- B--- Corporation

-2-

May 23, 1960
150.0420

(3)
We do not concur with your contention that the sale of that portion of the assets constituting tangible personal property may be regarded as an exempt occasional sale. In our opinion, the fact that the divisions made substantial sales of cut-outs and embellishments, paint, used furniture and fixtures, autos and trucks, stores, etc., prevents the final sale from being regarded as other than one in a series of sales. Thus, the final sale is within the exception provided for in Section 6006.5(a) of the Sales and Use Tax Law defining “occasional sale”. We do not believe that the cases cited in your letter are contrary to this conclusion. People v. Cal-Manor Distributors, Inc., a Superior Court case, is not, in our opinion, sound authority or in point and has been virtually overruled by subsequent decisions of higher courts. Among these decisions are the Sutter Packing Company and Pacific Pipeline Construction Company cases cited in your letter. You state, “In the present case, the sale by G--- to M--- is sufficiently different from prior sales of used equipment, etc., by G--- so as not properly to be linked to such prior sales”. The prior sales, as set forth above, are rather diversified in themselves. You do not specifically state in your letter the nature of the personal property involved in the case in question, but it would appear to us that where sales of a variety of items were made, the final sale of items used in the advertising business in which the items previously sold had also been used could well be regarded as a sale constituting one of a series of sales along with the sales previously made. We find nothing in the cases inconsistent with this view. In Bigsby v. Johnson, 18 Cal. App. 2d 860, the California Supreme Court, after quoting the language of the statute imposing the tax upon receipts from sales “of all tangible personal property”, said: He [plaintiff] can claim no exemption merely by virtue of the fact that the sale of used printing equipment was not the kind of retail sale ordinarily made by him”. In the later case of Northwestern Pacific Railroad Co. v. State Board of Equalization, 21 Cal. 2d 524, after stating that the Bigsby case was not distinguishable, and quoting the above-quoted statement from the Bigsby case, the Supreme Court then said: “It [plaintiff] contends, however, that the sales of rolling stock here involved were unrelated to its other sales and represented casual and isolated sales wholly incidental to its railway business as distinguished from its retail sales business. The trial court erred in accepting this contention. While for reasons considered desirable plaintiff corporation may departmentalize its business, it cannot by such process set up for tax purposes a distinction between the types or kinds of sales made by it where the effect would be to cause some of its sales to escape the tax aimed at all such sales. Specific sales of a retailer cannot be segregated from the bulk of its sales and treated separately as isolated or occasional sales.” We find no disapproval of this reasoning in either the Sutter Packing or Pacific Pipeline cases cited in your letter. To the contrary, the Supreme Court in Pacific Pipeling said:

M--- B--- Corporation

-3-

May 23, 1960
150.0420

“Although they involved sales prior to the enactment of section 6006.5 the following cases are directly in point, for they involved essentially the same question that section 6006.5(a) presents, namely, was the sale one of a series of sales sufficient in number, scope and character to constitute an activity requiring the seller to hold a seller’s permit. In fact, the words of the statute ‘number, scope and character’ were apparently taken from this court’s opinion in Northwestern Pacific R. R. Co. v. State Board of Equalization, 21 Cal. 2d 524, 529.” Furthermore, inasmuch as F--- and K--- Company is only a division of W. R. G--- & Co., we believe that it is pertinent to consider not only the prior sales made by the F--- and K--- division, but any sales made by W. R. G--- & Co. of tangible personal property wherever located. It is our view, accordingly, that the tax applies with respect to the receipts from the sale of the business properly attributed to the tangible personal property located in California at the time of the sale. Very truly yours,

E. H. Stetson
Tax Counsel

EHS:tl
Enc.
cc:

W. R. G--- & Co.
X --- Square
--- --- X, --- --Attn: Mr. K. A. L--Treasurer

cc:

--- ----- --- - Administrator