Did counties and cities owe sales tax on personal-property tax sales and execution sales?

Plain-English summary

The Board surveyed cities and counties about personal property sold for delinquent taxes or under judgments and writs of execution. Some counties did not use personal-property sales for tax collection, others did so only minimally, and execution sales were more common. Few jurisdictions appeared to collect sales-tax reimbursement or report the proceeds as gross receipts.

Although the city or county could pass title to the buyer, the debtor retained title until the sale. Counsel analogized the public officers to executors and trustees, whose infrequent sales were generally occasional. Reports suggested that tax collectors, sheriffs, or marshals would rarely sell a particular debtor's property more than twice in 12 months, while quantity sales would likely be for resale.

The memorandum therefore adopted a presumption: absent contrary evidence, these tax and execution sales were occasional sales or sales for resale and did not create sales-tax liability. It also directed staff to correct a contrary December 15, 1961 letter and state that tax would not be asserted on such sales.

Survey, presumption, correction, and source limits

Headquarters Tax Counsel, identified by the initials JHK, sent this memorandum to the San Diego Tax Administrator. Two subjects were listed: a county's sales-tax liability when personal property seized for delinquent taxes was sold, and property seized by a marshal and sold under a judgment and writ of execution.

The memorandum relied on replies to Board inquiries dated December 13, 1961. It reported that some counties did not sell personal property to enforce tax collections, others did so minimally, and execution sales were more common. Probably few, if any, cities or counties charged sales-tax reimbursement or declared the sales in gross receipts. The published source identifies none of the responding jurisdictions and reproduces no inquiry or report.

Counsel reasoned that the tax or judgment debtor retained title until the city or county passed it to the buyer and that the former owner ordinarily would be an occasional seller. The memorandum analogized to an unidentified Board position under which executors and trustees generally made fewer than three sales. Based on the reports, counsel expected extremely few tax-collector, sheriff, or marshal cases to exceed two sales of one debtor's property within 12 months and expected quantity sales most likely to be for resale. The resulting no-liability position was expressly a presumption that contrary evidence could rebut.

Counsel also disclosed that a December 15, 1961 letter to the San Diego County Tax Collector had been released without knowledge of another person's December 13 letter and contradicted this memorandum. He asked the Tax Administrator to tell the Collector the earlier opinion was incorrect and that tax would not be asserted on tax or execution sales. The source does not reproduce either letter or show that this correction occurred. Its last sentence prints opinion expresses herein and repeats the opinion expressed in that letter is incorrect clause; the original tail preserves those forms.

The PDF does not include the December 13 inquiries or reports, jurisdiction identities, the statute prescribing municipal duties, the prior executor-and-trustee position, either December letter, correspondence with the Collector, property descriptions, debtor or buyer identities, tax bills, seizure records, judgments, writs, title records, sale notices, bid or quantity records, sale dates, twelve-month sale histories, resale evidence, reimbursement, gross-receipts or return records, tax computations, assessments, correction, appeal, or later policy and outcome. It applies a general presumption rather than deciding an identified sale.

The live annotation preserves only the absent-contrary-evidence condition, city and county tax sales, occasional-sale or resale presumption, no-sales-tax-liability result, and January 19, 1962 date. It omits execution sales, seized personal property, delinquent taxes, judgments and writs, debtor title, statutory-duty statement, sales-frequency reasoning, quantity-sale premise, survey and report provenance, executor-and-trustee analogy, prior contrary advice and requested correction, source wording defects, missing records, and absent applied outcome.

What this means for you

Public agencies conducting enforcement sales

The historical position depended on low sale frequency for each debtor and the likelihood that quantity purchasers bought for resale. Contrary facts could overcome the presumption.

Buyers and tax professionals

Identify the enforcing officer, debtor, number of sales within 12 months, quantity sold, and resale evidence rather than assuming every government-conducted sale is exempt.

Common questions

Q: Who held title before the enforcement sale?
A: The tax or judgment debtor held title until it vested in the buyer.

Q: How frequent were the expected sales?
A: The reports suggested rarely more than two sales of a particular debtor's property in 12 months.

Q: How were quantity sales treated?
A: Counsel expected them generally to be sales for resale.

Q: Was the presumption absolute?
A: No. The memorandum expressly applied it only in the absence of evidence to the contrary.

Q: Did the published source identify the surveyed cities and counties?

A: No. It summarizes replies to December 13, 1961 inquiries but supplies neither the jurisdictions nor the inquiries and reports.

Q: Was the earlier contrary advice shown to have been corrected?

A: No. Counsel requested a correction, but the source includes neither the earlier letters nor a response or later outcome.

Citations and references

• December 13, 1961 Board inquiries to cities and counties and their reports — described but not included
• Unidentified statute prescribing the city or county's duties — mentioned but not cited or quoted
• Prior Board position concerning occasional sales by executors and trustees — described but not identified or included
• December 15, 1961 contrary letter to the San Diego County Tax Collector and an unidentified person's December 13 letter — described but not included
• Tax, seizure, judgment, writ, title, sale, frequency, resale, gross-receipts, return, correction, administrative, and outcome records — implicated but not included

Verbatim support

From the official January 19, 1962 Tax Counsel memorandum:

The reports indicate that probably few, if any, cities or counties are charging sales tax reimbursement or declaring the sales in their gross receipts.

While the city or county has the power to pass title to the goods, the title remains in the tax or judgment debtor until it is vested in the buyer.

Accordingly, in the absence of evidence to the contrary, it will be presumed that sales of the kind in question are occasional sales or sales for resale with respect to which liability for sales tax does not arise.

Since it is contrary to the opinion expresses herein, I would appreciate it if you would contact Mr. A and inform him that the opinion expressed in that letter is incorrect and that the opinion expressed in that letter is incorrect and that tax will not be asserted on tax or execution sales.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 395.0080
• Original supporting opinion: 395.0080 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

395.0080

To:

San Diego – Tax Administrator

From:

Headquarters - Tax Counsel (JHK)

Subject:

(1)
(2)

Date:

January 19, 1962

Liability of a county for sales tax upon the sale of personal property that has been seized for delinquent taxes Sale of property seized by Marshal’s office and sold pursuant to a judgment and writ of execution

Replies to our inquiries dated December 13, 1961, concerning execution and tax sales by cities and counties of personal property indicated that some counties do not enforce tax collections by sales of personal property while others do on a very minimum basis. Execution sales of personal property are more common place. The reports indicate that probably few, if any, cities or counties are charging sales tax reimbursement or declaring the sales in their gross receipts. While the city or county has the power to pass title to the goods, the title remains in the tax or judgment debtor until it is vested in the buyer. Ordinarily, the former owner would be an occasional seller. Furthermore, the city or county is carrying out its duties as prescribed by statute. After considering this matter, we believe there is an analogy to the position we have taken concerning executors and trustees. While they may at times make sufficient sales to take them out of the classification of occasional sellers, for the most part their sales amount to less than three and therefore are occasional. From the reports received, it seems that there would be extremely few cases in which sales by tax collectors would exceed two in any twelve-month period of the property of a particular delinquent taxpayer, or in which execution sales by sheriffs or marshals would exceed such number. Furthermore, we are informed that sales in quantity would most likely be for resale. Accordingly, in the absence of evidence to the contrary, it will be presumed that sales of the kind in question are occasional sales or sales for resale with respect to which liability for sales tax does not arise. Under date of December 15, 1961, I wrote Mr. A, County Tax Collector of San Diego County. This letter was released by me without knowledge of Mr. ---s letter of December 13, 1961. Since it is contrary to the opinion expresses herein, I would appreciate it if you would contact Mr. A and inform him that the opinion expressed in that letter is incorrect and that the opinion expressed in that letter is incorrect and that tax will not be asserted on tax or execution sales. JHK:dm