Ezel / Tax Rulings / CA

Who received a retailer's California tax-security deposit at closeout when a third party originally supplied the money?

Short answer The permittee received it. Staff said the deposit had to be returned to the retailer unless the retailer assigned the deposit to the third party.
State
CA
Ruling
Annotation 170.0080
Tax type
Sales and Use Tax
Issued
1950-09-28
Issued by
California State Board of Equalization
Requested by
Board staff
Topics
security deposit third party funds assignment surplus
Source
View Original PDF

Apply this to your situation

This page answers the general question as of 1950. Ask about yours and see what current California tax law says, with citations.

Currency note: this ruling is from 1950
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This September 28, 1950 internal correspondence applies former section 6701 to a retailer's security deposit. It is historical staff advice, not current deposit, ownership, assignment, or refund guidance. The depositor of record, permit terms, assignment validity, competing claims, statutory amendments, and current law control.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

Board staff treated money deposited as security for a retailer's account as the retailer's deposit even when a third party supplied the funds.

The correspondence said former section 6701 required surplus from a sale of the security to be returned to the person who deposited it. Staff applied the same approach at account closeout: return the deposit to the permittee.

A different result required the permittee to assign the deposit to the third-party funder.

Common questions

Did supplying the money make the third party the repayment recipient?

No.

Who received the deposit at closeout?

The permittee.

How could the third party receive it?

The permittee could furnish an assignment of the deposit.

Citations and references

  • Former California Revenue and Taxation Code section 6701 — return of security or sale surplus discussed

Source

Original ruling text

STATE BOARD OF EQUALIZATION
OFFICE CORRESPONDENCE
170.0080
Sacramento
September 28, 1950

Mr. REDACTED TEXT

E. H. Stetson

REDACTED TEXT
Account No. REDACTED TEXT

Your memo of June 1, addressed to Mr. REDACTED TEXT, attention Miss REDACTED TEXT, was referred to me for reply.

It seems that where a third party actually furnishes the money to be used as security for the account of a particular retailer that, as far as we are concerned, the retailer has put up the money. Section 6701 specifically requires that the security shall be returned to the person who deposited this security, in the case of a sale of the security and return of the surplus. We think it is equally true that where the security is returned upon close out that it must be returned to the party who actually deposited it with us, even though a third party may have furnished the money. It is, accordingly, our opinion that the deposit must be returned to the permittee, unless he furnishes an assignment of the deposit to the third party.

EHS:ph

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