Were police sales of vehicles acquired through asset-forfeiture laws exempt from California sales tax?

Plain-English summary

A police department seized vehicles connected with drug activity and obtained title under California's asset-forfeiture laws. It then sold vehicles through an auctioneer and used the proceeds to buy smaller, less conspicuous vehicles.

The memorandum distinguished vesting from a later sale. Moving title to the law-enforcement agency under the forfeiture statutes was nontaxable because no sale occurred and the agency paid no consideration. The statutes were mechanisms for conveying clear title.

Once the agency sold the forfeited vehicles, however, the sales were taxable to the same extent as other transactions. Purchases of replacement vehicles with the proceeds likewise remained subject to the ordinary rules and procedures.

Source-identifier and shared-opinion note

CDTFA's index and official URL identify this source as Annotation 295.0570.800, “Sales of Assets Acquired Through Asset Forfeiture Laws.” The PDF itself is stamped 295.0260. CDTFA separately publishes the same April 14, 1993 memorandum for Annotation 295.0427, “Purchase of Property from Proceeds from Forfeited Property Sales,” in a different official PDF stamped 295.0427. Both official URLs are retained because CDTFA independently indexes the letter for the sale and purchase sides of the analysis.

Citations and references

• California Health and Safety Code sections 11473.2 and 11473.3(c) (as cited)
• Jan. 25, 1993 Compliance memorandum to Gordon Adelman asking about BT-111 forms for police vehicles bought with asset-forfeiture proceeds — memorandum, forms, and supporting records not reproduced in the official PDF
• Declarations or judgments of forfeiture filed with DMV to convey clear vehicle title to a law-enforcement agency — statutory procedure described; declarations, judgments, DMV filings, titles, and registration records not reproduced in the official PDF
• Police seizure of drug-related vehicles, auctioneer sales, and purchases of smaller, less conspicuous vehicles using the proceeds — facts supplied; seizure, forfeiture, auction, sale, purchase, invoice, payment, title, and tax records not reproduced in the official PDF
• Official Annotation 295.0570.800's forfeited-property acquisition, tangible-property sale, ordinary-transaction tax treatment, and April 14, 1993 date — annotation omits the source's internal 295.0260 stamp, separately indexed 295.0427 copy, Jan. 25 memorandum, BT-111 forms, title vesting, declarations or judgments, DMV procedure, auctioneer and replacement purchase, statutory analysis, missing records, and later outcome and supplies no additional transaction record
• Possible BT-111 issuance, vehicle registration, forfeiture, auction, replacement purchase, return filing, audit, assessment, refund claim, appeal, or other later agency action — not supplied in the official PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/295-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/295-0570-800.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Compliance

From:

Thomas Cooke
Tax Counsel

295.0260

Date:

April 14, 1993

Subject:

Gordon Adelman has requested that I respond to your memorandum to him dated January 25, 1993 concerning the above subject. In your memorandum, you state that the --- Police Department has asked for BT-111's to register vehicles purchased with funds obtained through asset forfeiture laws. The police department seizes certain vehicles involved in drug dealing. The vehicles are sold through an auctioneer. The auctioneer purchases smaller and less conspicuous vehicles with the proceeds of the earlier vehicle sales. You ask if Health and Safety Code sections 11473.2 or 11473.3(c) provide a sales tax exemption for the police department in this situation? Health and Safety Code section 11473.2 states that seized vehicles may be placed in the name o f the law enforcement agency for use in its law enforcement program. The statute provides that a copy of a declaration, or judgment of forfeiture, filed with DMV shall constitute authority to convey clear title to the law enforcement agency. Health and Safety Code section 11473.3 (c ) provides a similar procedure to vest title to seized property in general in the law enforcement agency. The forfeiture of vehicles and the vesting of title to those vehicles in a law enforcement agency is nontaxable because there was no sale and therefore there was no consideration paid for the transfer. Health and Safety Code sections 11473.2 and 11473.3(c) are merely enabling statutes permitting DMV to transfer title to the agency. If the law enforcement agency sells the forfeited vehicles, tax applies to the sales to the same extent as in any other transaction. The agency's purchase of less conspicuous vehicles with the proceeds from the sale of the forfeited vehicles will be subject to tax to the same extent (and subject to the same procedures) that the agency purchases vehicles in general TC: wk cc: Mr. R. A. Slater