Was only half the price taxable when a restaurant owner sold a car used 50% for business and 50% personally?

Plain-English summary

A restaurant owner sold a car at retail for $700. The owner's books and income tax returns treated the vehicle as 50% business use and 50% personal use, with expenses and depreciation allocated the same way.

Board counsel said the full $700 was taxable gross receipts. Section 6006.5(a) treated a sale as occasional only when the property was not held or used in an activity requiring a seller's permit, and section 6367 exempted occasional sales. Because the car was used at least partly in the restaurant activity, its entire retail sale price entered the sales-tax measure.

The letter said the Sales and Use Tax Law contained no allocation rule for dividing the sale price between business and personal use.

Source record and limits

Assistant Counsel W. W. Mangels wrote the September 23, 1954 response and copied San Diego Auditing. The published PDF contains no addressee or incoming inquiry, although it says You inquire. It identifies the seller only as a restaurant owner and says the owner's books and income-tax returns showed a half-business, half-personal allocation for the vehicle and for gasoline, repairs, depreciation, and similar items.

The response asks whether taxable gross receipts were $700 or $350 and answers $700. It quotes part of section 6006.5(a), cites the section 6367 exemption, and reasons that any holding or use of the asset in a permit-requiring activity made the entire retail-sale receipts the tax measure because the Sales and Use Tax Law supplied no allocation provision.

The PDF does not include the inquiry, books, income-tax returns, expense or depreciation schedules, vehicle description, title, acquisition or tax-paid record, mileage or other use evidence, restaurant records, seller's permit, sale agreement, buyer, invoice, payment, return, audit, assessment, protest, hearing, payment, appeal, or later outcome. Its question visibly says sale of the ear even though the surrounding sentences identify a car; the page preserves that source wording rather than rewriting it.

The live annotation says a restaurant retailer's sale of equipment used one-half for business and one-half for personal purposes was taxable on the entire selling price. The supporting letter specifically says car, supplies the $700/$350 question, identifies the books and income-tax returns plus allocated expense categories, cites sections 6006.5(a) and 6367, states the any-use rationale, and says no allocation provision existed. The live entry omits those details, the source wording defect, the unidentified inquiry, the absent evidence, and the absence of an administrative outcome.

What this means for you

Retailers selling mixed-use assets

Under this historical analysis, partial personal use did not protect a matching share of the proceeds when an asset was also used in the permit-requiring retail business.

Accountants and tax professionals

Do not assume an income-tax business-use percentage carries over to sales tax. This letter applied an all-or-nothing test based on whether the asset was used at all in the permit activity, but it supplies none of the underlying books, returns, or use records.

Common questions

Q: What was the car's selling price?
A: $700.

Q: How was the vehicle used?
A: Half for restaurant business purposes and half for personal purposes, according to the owner's books and income tax returns.

Q: How much entered taxable gross receipts?
A: The entire $700.

Q: Could the owner allocate only half the price to the business?
A: No. Counsel said the law provided no allocation.

Q: Did the source show how the half-business use was proved?

A: No. It says the allocation appeared in the owner's books and income-tax returns but does not include those records.

Q: Does the PDF show an assessment or final case outcome?

A: No. It is a short counsel response and supplies no audit, determination, protest, payment, appeal, or later result.

Citations and references

• California Revenue and Taxation Code § 6006.5(a) — partial definition quoted in the supporting letter
• California Revenue and Taxation Code § 6367 — occasional-sale exemption cited in the supporting letter
• Incoming inquiry, books, income-tax returns, vehicle, use, restaurant, permit, sale, return, administrative, and outcome records — implicated but not included

Verbatim support

From the official September 23, 1954 Assistant Counsel letter:

The vehicle was shown on his books and Income tax returns as being one-half for business purposes and one-half for personal purposes with the resultant allocation of gasoline, repairs, depreciation, etc.

If an asset is at all held or used in an activity for which a sellers permit is required, for example a restaurant activity, the entire gross receipts from its retail sale constitutes the measure of the sales tax liability resulting from the sale.

There is no provision in the Law which provides for any allocation.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 395.0060
• Original supporting opinion: 395.0060 PDF

Original ruling text

395.0060

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 23, 1954

A restaurant owner sold his car at retail for $700.00. The vehicle was shown on his books and Income tax returns as being one-half for business purposes and one-half for personal purposes with the resultant allocation of gasoline, repairs, depreciation, etc. You inquire whether his taxable gross receipts from the sale of the ear are $700.00 or $350.00. Section 6006.5 (a) of the California Sales and Use Tax Law defines an Occasional sale, in part, as a sale of property not held or used by a seller in the course of an activity for which he is required to hold a seller’s permit. Under Section 6367, occasional sales are exempt from the sales tax. If an asset is at all held or used in an activity for which a sellers permit is required, for example a restaurant activity, the entire gross receipts from its retail sale constitutes the measure of the sales tax liability resulting from the sale. There is no provision in the Law which provides for any allocation.

Yours very truly,

W. W. Mangels
Assistant Counsel
WWM:ja
cc: San Diego - Auditing