Did California need separate dual determinations before collecting a partnership aircraft-use-tax liability from its documented general partners?

Plain-English summary

California legal staff concluded that the Board did not need separate dual determinations before collecting one partnership's aircraft-use-tax liability from its two documented general partners.

The memorandum said a partner who signs a seller's-permit application binds the partnership and the other partners. It also said a notice clearly identifying the partnership by its name or listed partners and account number creates liability against both the partnership and its partners, even when system limits prevent every partner from appearing on the notice.

FAA records showed that the two individuals were general partners when the first aircraft was purchased, so changing the account name and pursuing them was not improper. For a different aircraft owned by another limited partnership, however, staff said the lien could reach that entity and its sole general partner only if a timely determination had been issued; the other named people or entity should be released unless the Board could prove they co-purchased the aircraft.

Common questions

Did each general partner have to receive a separate dual determination?

No, under the memorandum's analysis, if the partnership and account were clearly identified and the Board could document who the general partners were when the taxable purchase occurred.

Did the conclusion automatically extend to a different partnership's aircraft?

No. Staff required a timely determination and evidence tying each person or entity to that purchase.

What document did the memorandum cite for seller-permit applications?

Revenue and Taxation Code section 6066, which the source said requires a partnership application to be signed by a partner.

Citations and references

• California Revenue and Taxation Code section 6066 — partnership seller's-permit application discussed
• FAA bills of sale and aircraft registrations — evidence used to identify the partnerships and general partners

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/170-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/170-0007-085.pdf

Original ruling text

State of California

Board of Equalization
Legal Division-MIC: 82

Memorandum
170.0007.085
To :

Mr. Dennis Smith
Supervisor, Centralized Collection Section MIC:55

From :

Thomas J. Cooke
Tax Counsel

Subject:

Date:

August 19, 1996

Telephone: (916) 445-6496

CalNet 485-6496

C--- F--- P--- Ltd.
J--- S--- and R--- M--Account No. SP -- XX-XXXXXX

Your memorandum dated August 8, 1996 addressed to the Legal Division and concerning the above taxpayers has been forwarded to me for response. In your memorandum, you state that C--- F--- P---, Ltd. purchased aircraft –XXX-- in October, 1984 and registered it with the Federal Aviation Administration in the name of this partnership. The FAA bill of sale and the FAA registration list J--- S--- and R--- M--- as the partners of this partnership. A Notice of Determination was issued to C--- F--- P--- Ltd. on June 23, 1986 for use tax on the aircraft. On March 9, 1987, the name on the Board account was changed from C--- F--- P---, Ltd. to J--- S--- and R--- M---. The name was changed because the partnership had not paid the liability, and it was believed that the partnership entity was one and the same as the two individuals. Dual determinations have never been issued to the partners as individuals, but, over the years, liens have been filed in their names as individuals, and other collection action has been taken against them. You ask if the Board’s Notice of Determination in the name of C--- F--- P---, Ltd. created a legal liability against the partners as individuals, i.e., was it legal to change the name and proceed with collection action against the individuals without issuing dual determinations? When a partnership applies for a seller’s permit, the application should state the name of the partnership, if any, and list all of the partners in the partnership. Revenue and Taxation Code section 6066 states that an application for a seller’s permit on behalf of a partnership shall be signed by a partner. It is our opinion that a partner who signs an application for a seller’s permit on behalf of a partnership will bind the partnership and the other partners for the partnership’s tax liability as if the other partners had individually signed the application. Any Notice of Determination issued for a partnership liability should ideally list the name of the partnership, if any, and the name of each individual partner. As a practical matter, this is frequently not possible because of the limitations of the system that prepares the Notice of Determination. It is our opinion that if the partnership is clearly identified by name designation (or the listing of one or more partners) and the partnership account number in the Notice of Determination, it will create a liability against the partnership and the individual partners whether or not all of the partners are listed in the Notice of Determination. No dual determinations are necessary for any unlisted partners.

Mr. Dennis Smith

-2-

August 19, 1996
170.0007.085

Frequently, a Notice of Determination must be issued for tax due on a vehicle, vessel or aircraft when the purchaser has not previously applied for a permit. It is our opinion that if the Board discovers that a vehicle, vessel or aircraft has been purchased in the name of a general or limited partnership, the Board may issue a Notice of Determination in the name designation of the general or limited partnership and the general partners will be liable for partnership tax on the basis of this Notice of Determination if the Board has sufficient documentary evidence to show that the individuals were, in fact, at that time, general partners of the entity which purchased the vehicle, vessel or aircraft. In that case, no dual determinations need be issued to the individuals. The documentation in the file clearly indicates that J--- S--- and R--- M--- were general partners of C--- F--- P---, Ltd. at the time that the aircraft was purchased. The Board did not act improperly when it changed the account name from C--- F--- P---, Ltd. to J--- S--- and R--- M--and proceeded with collection action against these individuals without issuing dual determinations to them. You also state in your memorandum that a lien was filed on aircraft -XXXXX which is owned by C--- C--- Leasing Ltd. You ask if the Board can legally encumber this aircraft or should be Board’s lien be released? The Aircraft Bill of Sale for aircraft -XXXXX shows the purchaser as C--- C--- Leasing, Ltd., a California limited partnership, with R--- M. M--- as its sole general partner. J--- V. S---’s name was listed only as part of the mailing address. The taxpayer was listed on the lien which the Board filed for this purchase as: “The partnership consisting of J--- V. S--- and R--- M--- Individually and as Copartners Doing Business as C--- C--- Leasing Ltd. and/or C--- F--- P---.” We have been unable to locate a Notice of Determination issued for the purchase of this aircraft. Assuming that a timely Notice of Determination was issued to C--- C--- Leasing Ltd., the Board may file a lien against that entity and its general partner R--- M---. J--- V. S--- and C--F--- P--- should be released from the lien unless the Board can show that they co-purchased this aircraft. TJC/cmm cc: Mr. Ronald L. Dick (MIC:82) Mr. Rick A. Slater (MIC:55)