What proof kept a yacht broker from being treated as the retailer after signing a conditional sales contract as seller?

Plain-English summary

A yacht broker had signed conditional sales contracts as “seller.” The letter said that signature alone did not make the broker the retailer if the broker retained a letter, telegram, or other writing proving that the buyer's offer had first been communicated to and accepted by the vessel owner.

That writing showed the broker's authority was limited to finding and relaying an offer rather than accepting it for the owner. The source connected the documentation rule to Business and Professions Code section 8946's written-authorization requirement.

Without retained written proof of owner acceptance, the listing agreement would be construed as giving the broker authority to enter the sale contract. If the broker had that authority, collected the price, and delivered or arranged delivery, the source treated the broker as a factor making a consignment sale.

The letter also directed removal of transactions assessed solely because the broker obtained a blank bill of sale or power of attorney after the buyer and owner had already entered a written sale agreement. A reaudit was required, after which the petition was to return to the Board.

Common questions

Did signing as “seller” automatically make the broker the retailer?

No. Contemporaneous written proof that the owner had already accepted the offer could establish a true brokerage.

What happened if the broker kept no such proof?

The listing agreement could be construed as granting authority to make the sale, and the broker's collection and delivery acts could make it a factor and retailer.

Did a later blank bill of sale or power of attorney establish retailer status?

Not when the buyer and owner had already formed their written sale agreement; those transactions were ordered removed on reaudit.

Citations and references

• California Business and Professions Code section 8946 (as cited)
• California Civil Code section 2026 (as cited)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/185-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/185-0200.pdf

Original ruling text

185.0200

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

November 19, 1965
Gentlemen:
We have completed our review of the above-named taxpayer’s petition for Redetermination of sales and use taxes. After making a further study of the legal issues involved, it has been determined that a yacht broker will not be regarded as the retailer on the basis that he signed a conditional sales contract as “seller” provided he has retained a letter, telegram, or other writing sufficient to evidence that the buyer’s offer was communicated to and accepted by the owner of the yacht or ship prior to execution of the conditional sales contract. This requirement is consistent with provisions of Section 8946 of the Business and Professions Code which requires a yacht broker to obtain written authorization from his principal before engaging in any transaction for which a license is required. Where no such writing has been retained, the broker’s listing agreement will be construed to have granted him authority to enter into a contract of sale. Where the broker has authority to enter into a contract of sale as a sales agent, collects the price, and delivers or arranges delivery of the vessel, we remain of the opinion that he is a factor performing the acts necessary to vest ownership in the buyer and is making a consignment sale. Section 2026 of the Civil Code defines a factor to include: “…an agent who, in the pursuit of an independent calling, is employed by another to sell property for him, and is vested by the latter with the possession or control of the property, or authorized to receive payment therefore from the purchaser.” We have directed the field staff to make a further reaudit of you client, making adjustments in accordance with what has been set forth above. Additionally, our review has disclosed that a number of brokerage sale transactions were included in the measure of tax solely on the basis that a blank bill of sale or power of attorney was obtained after a written agreement was entered into between buyer and owner for the sale of the vessel. We have directed that these transactions also be removed from the measure of tax by reaudit. At the time the reaudit is completed, your client will be advised of the amounts of these adjustments. When the reaudit is completed, this matter will be resubmitted to the Board for Redetermination. Very truly yours,

W. E. Burkett
Associate Tax Counsel
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