Did deleting a boat buyer's failure-to-file penalty also eliminate the accrued use-tax interest?

Plain-English summary

The boat buyer's redetermination deleted the failure-to-file penalty and set the taxable sales price at $140,000. The buyer paid $8,400 of tax on May 19, 1992, then received a $4,024.98 bill for accrued interest and believed the earlier recommendation required payment of tax only. The petition, recommendation, order, boat and purchase records, return, calculations, payment, bill, and account history are not reproduced.

Counsel found no basis to relieve the interest. Section 6593 addressed late payment caused by a disaster, while the buyer's delay arose from an apparent misunderstanding that the Coast Guard and California would forward vessel paperwork and send a tax bill. Regulation 1610 required a return by the earlier stated deadline; filing and paying by December 31, 1988 would have avoided interest.

Settlement under section 7093.5 was also unavailable because the tax dispute had already been resolved by redetermination. The remaining procedural option was to pay the interest and file a refund claim, which counsel said would be recommended for denial. The occasional-sale exemption did not apply because section 6367 excluded private-party vessel sales. No filed claim, Board decision, interest payment, appeal, or later outcome is supplied.

The live annotation describes the Coast Guard paperwork position as an apparent misunderstanding. The supporting letter instead quotes the purchaser's assertion that an agreement existed and supplies no record verifying it. The annotation omits the payment and bill amounts, filing deadline, settlement and occasional-sale questions, and recommendation-only refund posture.

Common questions

Did deleting the penalty automatically delete interest?

No. Penalty relief did not establish the separate disaster basis required for interest relief.

Was the private-party boat sale exempt as an occasional sale?

No. The cited statute expressly excluded vessels from that exemption.

Citations and references

• California Revenue and Taxation Code section 6593 — described for disaster-based interest relief; complete text, definition, conditions, procedures, amendments, later history, and current law not supplied
• California Sales and Use Tax Regulation 1610 — partially quoted for the vessel return deadline; complete text, definitions, forms, exceptions, amendments, later history, and current law not supplied
• Assembly Bill 3225 and California Revenue and Taxation Code section 7093.5 — described for administrative settlement; bill, enacted text, definitions, procedures, amendments, later history, and current law not supplied
• California Revenue and Taxation Code section 6367 — partially quoted for the vessel exclusion from occasional-sale treatment; complete text, definitions, conditions, exceptions, amendments, later history, and current law not supplied
• Redetermination record and March 30 and April 11, 1994 correspondence — no underlying records, asserted agreement, vessel documentation, return, calculations, payment and bill records, refund claim, Board decision, appeal, or later outcome supplied
• Official Annotation 320.0125's redetermination, no-relief conclusion, misunderstanding characterization, and date — the supporting letter quotes an asserted agreement without verifying or labeling it and the annotation omits the other issues, figures, provenance, records, recommendation posture, later outcome, and reliance status and supplies no additional transaction 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/320-0125.pdf

Original ruling text

320.0125

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

April 11, 1994

This is in response to your letter of March 30, 1994.
We understand that you recently went through the sales and use tax redetermination process that concerned the issue of use tax on a boat that you purchased in December 1987. At the conclusion of the appeals process, the recommendation was "Delete the failure to file penalty and redetermine the tax on a sales price of $140,000." It was your understanding that based upon this recommendation you would be required to pay tax only. You paid the tax of $8400 on May 19, 1992. You subsequently received a bill from us in the amount of $4,024.98, for the interest that had accrued to your date of payment. You raise three questions: (1) Is there a basis for relief from the interest amount? No, there is not. Revenue and Taxation Code section 6593 provides for relief of certain interest obligations where failure to make a timely payment was due to a "disaster." You state that "The reason why a return was not filed was an agreement was in place between the U. S. Coast Guard, which has responsibility for the documentation of vessels, and the state of California, to forward all paperwork on vessels undergoing documentation to the state for determination of sales tax due and subsequently forwarding a tax bill to the purchaser/seller." Under our regulation 1610, you were required to file a return "... on or before the last day of the calendar month next succeeding the month in which a return form is mailed to the purchaser, or the last day of the twelfth month following the month during which the vessel... was purchased, whichever period expires the earlier." (Emphasis added.) If you had filed a return and made payment by December 31, 1988, no interest would have been due. (2) Is there a basis for settlement with respect to the interest amount? No, there is not. AB 3225 added to the Revenue and Taxation Code, section 7093.5, with respect to settlement of certain "civil tax matter disputes." The object of that section was to produce a settlement of a matter in dispute during the administrative process. This section does not apply where the dispute has been resolved by

redetermination of the tax. Your remedy at this juncture would be to pay the interest and file a claim for refund. We would recommend to the Board that any such claim for refund of interest be denied. (3) You ask whether the transaction in question would be exempt as an "occasional sale." No, it would not be. Generally, tax does not apply to casual or isolated sales of tangible personal property by private parties. Thus, if you sell a bicycle to your next-door neighbor, tax does not apply. The occasional sale exemption does not apply, however, to private party sales of vehicles, vessels and aircraft. Revenue and Taxation Code section 6367 provides that the occasional sale exemption "does not apply to the gross receipts from the sale of, or to the storage, use or other consumption in this state of, ... a vessel...”

Very truly yours,

Gary J. Jugum
Assistant Chief Counsel

GJJ:sr
cc:
Honorable Brad Sherman
Honorable Matthew K. Fong
Honorable Ernest J. Dronenburg, Jr.
Honorable Gray Davis
bc:

Mr. Burton W. Oliver - MIC:73
Mr. Glenn A. Bystrom - MIC:43
Mr. E. L. Sorensen, Jr. - MIC:83