Should a lessor collect tax when late rent arrives after the lessee says it already paid the tax directly?

Plain-English summary

An unidentified requester posed a prospective problem involving “S” bank leasing tangible personal property for $1,000 per month. In the illustration, the bank collected two monthly rentals totaling $2,000 plus $80 tax and paid the tax to the Board. The lessee did not pay the third month's rent.

The hypothetical lessee nevertheless followed the law by remitting tax on rentals payable for the unpaid month. The question was what the bank should do when it received the delinquent $1,000 rent in a succeeding quarterly period.

If tax measured by that particular rent had actually been paid, the lessee's storage, use or consumption for the period was not subject to another tax collectible by the retailer. Timing the rent in a later quarter did not create a second tax on the same use.

The bank nevertheless remained liable for payment of the tax. It therefore would want to collect tax with the late rent unless it received sufficient notification that the lessee had reported and paid tax on that specific delinquent payment.

The opinion does not define “sufficient notification,” prescribe a form, or explain return adjustment, credit or refund mechanics. The August 3 request, lease, bill, late payment, notice, direct tax filing, bank return and any actual transaction or outcome are absent. Live Annotation 330.3240 matches the rule but adds no evidence or procedure.

Common questions

Did the opinion require tax to be collected twice because rent arrived late?

No. A second collection was not due if tax measured by that specific delinquent rent had actually been paid.

Was the lessee's statement alone automatically enough?

No. The source does not define an evidentiary standard; it requires “sufficient notification” tied to the particular late payment.

Who remained liable if the lessee had not actually paid?

The bank lessor, which is why the opinion said it would want to collect tax absent sufficient notification of actual direct payment.

What amounts did the hypothetical use?

$1,000 monthly rent, two collected months totaling $2,000, $80 tax paid by the bank, and a delinquent third $1,000 rental payment.

Did the opinion explain how to adjust a later quarterly return?

No. It states the no-duplicate-tax and lessor-liability rules but supplies no form, reporting adjustment, credit or refund procedure.

Was this a documented delinquent transaction?

No. The source expressly calls it a prospective problem and includes none of the underlying records or later outcome.

Citations and references

• No numbered statute, regulation, ruling, or case citation appears in the supporting opinion.
• Live Annotation 330.3240 — same actual-payment, sufficient-notification and lessor-liability result
• August 3 request and every lease, payment, notice, tax filing, adjustment, refund and outcome record — absent

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.3240
• Original supporting opinion: 330.3240 PDF

Original ruling text

330.3240

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

August 25, 1965

Gentlemen:
Your letter of August 3 has been referred to this department for consideration and reply. You have posed the following prospective problem. The "S" bank is leasing tangible personal property for a monthly rental of $1,000. Assuming, for the purposes of illustration, that you collect two monthly rentals totaling $2,000 plus $80 tax which you pay the Board of Equalization. The lessee is delinquent on the third monthly payment. Your question is: In the instance in which the delinquent lessee follows the letter of the law and remits the tax on rentals payable, although he does not pay "S" for that month, what is the bank's procedure when it receives the delinquent payment in a succeeding quarterly period? If the tax measured by that payment has, in fact, been paid by the lessee, the storage, use, or other consumption of that property by the lessee for that period is not subject to a further tax which can be collected by the retailer. Since the bank is liable for the payment of the tax, it will want to collect the tax from its lessee unless it receives sufficient notification with the late payment that the lessee has reported and paid tax on that particular delinquent payment.

Very truly yours,

Philip R. Dougherty
Assistant Counsel

PRD:o'b [lb]