Did exchanging a seller-permit business for a home avoid tax on the business's tangible personal property?

Plain-English summary

A business owner asked whether sales tax would apply if he traded his business for a home of approximately the same value.

The Board explained that gross receipts included cash, credits, and property received as consideration. Receiving real estate instead of cash therefore did not remove the exchange from tax.

The occasional-sale exclusion did not cover tangible personal property held or used in a business activity requiring a seller's permit. Tax applied to the portion of the exchange price attributable to that property, except stock in trade that the purchaser acquired for resale in the regular course of business.

Citations and references

• California Revenue and Taxation Code sections 6006.5 and 6012 (as cited)
• Sales and Use Tax Ruling 81, third paragraph (as cited)
• Kreeger letter dated only as “July” asking about a proposed exchange of a business for a home of approximately equal value — day, account number, letter, and attachments, if any, not supplied
• Proposed business-for-home exchange, seller's-permit activity, tangible personal property held or used in the business, and stock in trade potentially acquired for resale — agreement, property schedule, valuations, permit record, allocation, resale documentation, and closing records not reproduced in the official PDF
• July 17, 1953 assistant-counsel response copied to Woodland Compliance and referring the requester to the Lakeport office — no follow-up advice, completed exchange, return, audit, assessment, refund claim, appeal, agency adoption, or later outcome supplied
• Official Annotation 295.1100's seller-permit business, approximately equal-value home, taxable consumed-property, resale exclusion, real-estate consideration, and July 17, 1953 date — annotation omits Kreeger's identity, incomplete July request date and blank account, sections 6006.5 and 6012, Ruling 81 and missing enclosure, proposed posture, office referral, copied compliance office, underlying records, later outcome, and reliance status and supplies no additional proceeding record

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/295-1100.pdf

Original ruling text

295.1100

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

July 17, 1953

Mr. Albert F. Kreeger
P. O. Box 226
Clearlake Highlands, California
Your letter of July
Account No.
Dear Mr.
You inquire whether the sales tax would apply if you were to trade your business for a home of approximately the same value. Section 6012 of the California Sales and Use Tax Law provides, in part, that taxable gross receipts include all receipts, cash, credits, and property of any kind when received as consideration for tangible personal property sold at retail. In other words, the sales tax applies to the selling price of tangible personal property whether or not the consideration received constitutes cash or other consideration, including real estate received in exchange. Furthermore, section 6006.5 of the Law does not include within the definition of an exempt occasional sale by a retailer the sale of tangible personal property held or used by a seller in the course of an activity for which a seller's permit is required. Therefore, if you were to trade your business for a home, the tax would apply to that portion of the gross receipts representing the selling price of personal property held or used in your business other than stock in trade sold for resale in the regular course of the purchaser's business. See also the third paragraph of Ruling 81 (copy enclosed). If you desire further information concerning the application of the tax to the sale of your business, we would suggest that you contact a representative of our Lakeport office, 100 Main Street, P. O. Box 447, telephone 2385.

Yours very truly,

W. W. Mangels
Assistant Counsel
WWM: ja
cc: Woodland - Compliance