When could California excuse interest on a sales-and-use-tax liability?

Plain-English summary

An absent request from James J. Delaney asked when the Board could and could not excuse interest on tax liabilities. The request, examples, liabilities, taxpayers, and proposed applications are not reproduced. The response gave general guidance rather than deciding a particular account.

The memorandum began with the general rule that interest was not excusable. It identified two statutory routes for relief.

Section 6593 allowed relief when a qualifying disaster caused the late return or payment despite ordinary care and no willful neglect. Regulation 1703(b)(6) then defined disaster for periods beginning in 1982 to include fire, flood, storm, tidal wave, earthquake, or a similar public calamity, whether natural or not. Relief extended only to interest imposed through the provisions identified in section 6593 and related cross-references; the memorandum said it did not cover deficiency-determination interest under section 6482 or interest tied to specified misuse of a resale certificate under section 6072.

Section 6596 addressed reasonable reliance on written Board advice. The taxpayer had to make a fully factual written request, receive written advice, reasonably rely without collecting tax reimbursement or use tax, remain within the advice's effective period, and submit copies, a sworn statement, and other requested information. Only the person who requested the advice could rely on it. The quoted statute described relief from sections 6051 and 6201 taxes and added penalty or interest.

The live annotation publishes only the general rule and the disaster and written-advice routes. It omits the detailed conditions, cross-references and exclusions, historical definition change, absent request and enclosure, printed defects, and lack of an applied or final outcome.

Common questions

Was ordinary financial hardship enough to excuse interest?

The memorandum identified no general hardship exception; relief had to fit a statutory route.

Could someone rely on written advice issued to another taxpayer?

No. The quoted section 6596 requirements limited reliance to the person who made the written request.

Citations and references

• California Revenue and Taxation Code section 6593 — described for disaster relief from interest under enumerated provisions; the source first prints “Section 5593,” and the complete statute, procedures, amendments, later history, and current law are not supplied
• California Sales and Use Tax Regulation 1703(b)(6) — described for the historical disaster definition; enclosed copy, complete text, examples, procedures, amendments, later history, and current law not supplied
• California Revenue and Taxation Code sections 6459, 6480.4, 6480.8, 6513, and 6591 — enumerated interest provisions described in the memorandum; complete texts, procedures, amendments, later history, and current law not supplied
• California Revenue and Taxation Code sections 6291-6294 and 6537 — cited cross-references that could afford relief in some circumstances; complete texts, qualifying circumstances, amendments, later history, and current law not supplied
• California Revenue and Taxation Code sections 6482 and 6072 — identified as interest outside section 6593 relief; complete texts, elements, procedures, amendments, later history, and current law not supplied
• California Revenue and Taxation Code section 6596 — quoted for written-advice reliance relief and its conditions; complete statute, procedures, amendments, later history, and current law not supplied
• California Revenue and Taxation Code sections 6051 and 6201 — identified within quoted section 6596; complete texts, relationship to section 6596, amendments, later history, and current law not supplied
• Undated request and February 11, 1988 response — no request, examples, applied liabilities, taxpayer records, agency reply, relief request, Board finding, payment, claim, appeal, or later outcome supplied
• Official Annotation 320.0057's general rule, two relief routes, citations, and date — omits the detailed statutory conditions and exclusions, historical definition change, provenance, missing records, printed defects, later outcome, and reliance status and supplies no additional application 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/320-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/320-0057.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. James J. Delaney

From:

E. L. Sorensen, Jr.

Subject:

Sales and Use Tax Law – Excusability of Interest

320.0057

Date:

February 11, 1988

This is in response to your request that we provide you with information regarding when interest on tax liabilities may and may not he excused by the Board. Generally speaking, interest is not excusable. The exceptions to the general rule are found in Revenue and Taxation Code Sections 6593 and 6596. SECTION 6593 Section 5593 provides, in essence, that if the Board finds a person's failure to make a timely return or payment was due to a disaster and occurred notwithstanding the exercise of ordinary care and the absence of willful neglect, the person may be relieved of interest imposed under Sections 6459, 6480.4, 6480.8, 6513, and 6591. Regulation 1703(b)(6) (copy enclosed) defines "disaster" for periods beginning January 1, 1982 to mean fire, flood, storm, tidal wave, earthquake or similar public calamity, whether or not resulting from natural causes. (Prior to January 1, 1982, "disaster" was limited to the foregoing phenomena occurring only from natural causes). Following is a brief description of the sections enumerated in Section 6593: Section 6459 - provides that the board for good cause may extend for up to one month the time for making a return or payment. In such cases, interest is due from the date on which the tax was due without the extension until the date of actual payment. Sections 6480.4 and 6480.8 - pertain to interest due for failure to prepay sales tax (§ 6480.4) or failure to remit certain credits (§ 6480.8) from vehicle fuel distributions.

Section 6513 – requires interest be paid with respect to estimated determinations made by the board for periods in which the taxpayer failed to file returns. Section 6591 – this is the general interest provision of the law which requires imposition of interest for failure to timely pay tax or amounts of tax required to be collected and paid to the state. Please Note that certain other Revenue and Taxation Code provisions not specifically mentioned in Section 6593 refer to the enumerated sections outlined above and, therefore, could also afford the taxpayer relief under certain circumstances. Those sections are: Sections 62916294 (taxes and interest due as a result of the purchase of certain vehicles, vessels, and aircraft); Section 6537 (interest due on jeopardy determinations). Finally, please note that no relief under Section 6593 is available in the case of interest imposed on deficiency determinations (§ 6482) or in cases where a person knowingly issues a resale certificate for personal gain or to evade the payment of taxes while not actually engaged in business as a seller (§ 6072). SECTION 6596 This section provides: "Excusable delay - reliance on advice. (a) If the board finds that a person's failure to make n timely return or payment is due to the person's reasonable reliance on written advice from the board, the person may he relieved of the taxes imposed by Sections 6051 and 6201 and any penalty or interest added thereto. "(b) For the purpose of this section, a person's failure to make a timely return or payment shall be considered to be due to reasonable reliance on written advice from the board, only if the board finds that all of the following conditions are satisfied: "(1) The person requested in writing that the board advise him or her whether a particular activity or transaction is subject to tax under this part. The specific facts and circumstances of the activity or transaction shall be fully described in the request. "(2) The board responded in writing to the person regarding the written request for advice, stating whether or not the described activity or transaction is subject to tax, or stating the conditions under which the activity or transaction is subject to tax. "(3) In reasonable reliance on the board's written advice, the person did not charge or collect from his or her customers amounts designated as sales tax reimbursement or use tax for the described activity or transaction. "(4) The liability for taxes applied to a particular activity or transaction which occurred before either of the following:

"(A) Before the board rescinded or modified the advice so given, by sending written notice to the person of the rescinded or modified advice. "(B) Before a change in statutory or constitutional law, a change in the board's regulations, or a final decision of a court, which renders the board's earlier written advice no longer valid. "(c) Any person seeking relief under this section shall file with the board: "(1) A copy of the person's written request to the board and a copy of the board's written advice. "(2) A statement under penalty of perjury setting forth the facts on which the claim for relief is based. "(3) Any other information which the board may require. "(d) Only the person making the written request shall be entitled to rely on the board's written advice to that person." As can be seen, if the board fines that a person's failure to make a timely return or payment comes within the purview of Section 6596, it may excuse the interest. Hopefully, this information is what you require. If additional data or explanation is needed, please contact me.

ELS: jb
bc:

Mr. Gary J. Jugum
Mr. Donald J. Hennessy