Was a motel's business-asset sale occasional when another authorized retailer reported tax on the motel's only prior vending-machine sales?

Plain-English summary

A motel operator sold the business, including personal property. The operator's only prior retail activity was vending-machine sales, and another party authorized by the Board under section 6015 had reported tax as the retailer for those sales.

Because the operator was not required to hold a seller's permit in those circumstances, the motel business sale qualified as an occasional sale under section 6006.5 and was not taxable.

The memorandum separately discussed whether a soft-drink bottler could be designated as retailer for over-the-counter delicatessen sales. It said section 6015 could support that treatment when reasonably necessary for efficient tax administration and the parties concurred, but not merely to avoid Regulation 1595's consequences for a later delicatessen asset sale.

Two questions, statutory discretion, and source limits

T. P. Putnam sent the internal memorandum to Robert Nunes on December 13, 1977 in response to Nunes's November 28 memorandum. Putnam said the first answer confirmed an earlier statement, but neither the November 28 request nor the earlier communication appears in the PDF.

For the motel question, Putnam described a sale of the motel business including personal property. The operator's only previous sales were vending-machine items, and another party had been authorized by the Board under section 6015 to report the tax as the retailer. Through that exercise of Board discretion, the motel operator did not need a seller's permit. Its asset disposition therefore fit section 6006.5's property-not-held-or-used-in-a-permitted-activity definition and qualified as an occasional sale.

The separate question asked whether a soft-drink bottling company could be placed under section 6015 as retailer for drinks it furnished to a delicatessen for over-the-counter sales. Putnam favored liberally construing the section to accomplish efficient administration. With party concurrence, the Board could designate the bottler when it could reasonably determine that designation was necessary for efficient sales-tax administration. But the reason had to be more than a desire to avoid Regulation 1595's consequences for a later delicatessen asset sale.

The memorandum says the motel opinion would be annotated. It does not identify the motel operator, vending items, authorized reporting party, bottler, delicatessen, or any transaction value. It does not include the November 28 memorandum, earlier statement, Board authorization or designation, party concurrence, vending or drink agreements and sales, tax reports or payments, seller's-permit records, motel or delicatessen asset-sale records, return, audit, assessment, refund proceeding, Board action, or later outcome. It does not establish that the bottler designation was sought or granted.

The live annotation preserves the motel-business and personal-property sale, vending sales as the only prior sales, another party's Board-authorized section 6015 reporting, and occasional-sale result. It omits the internal request, earlier statement, section 6015 discretion and no-permit reasoning, section 6006.5 text, the bottler and delicatessen question, liberal-construction and efficient-administration rationale, party-concurrence condition, Regulation 1595 anti-avoidance limit, promised annotation, missing records, and absent outcomes.

What this means for you

Motel and vending-machine operators

Confirm the formal section 6015 retailer designation and who reported the vending tax. The occasional-sale result depended on the operator not being required to hold a permit.

Tax professionals and distributors

A designated-retailer arrangement should rest on genuine administrative reasons, not solely on changing the tax treatment of a future asset sale.

Common questions

Q: Why did the motel asset sale qualify as occasional?
A: Another authorized party reported the operator's only prior vending-machine sales as retailer, so the motel operator was not required to hold a seller's permit.

Q: What property did the occasional sale include?
A: The motel business, including its personal property.

Q: Could the Board designate a soft-drink bottler as retailer?
A: The memorandum said yes if reasonably necessary for efficient administration and the parties concurred.

Q: Was avoiding Regulation 1595 enough reason for designation?
A: No. The memorandum said the ground should be something other than avoiding that consequence for a delicatessen asset sale.

Q: Did the memorandum identify the motel or reporting retailer?

A: No. It described their roles but supplied no names, authorization record, vending records, or transaction documents.

Q: Did it establish that a bottler designation was granted?

A: No. It gave a conditional legal view but included no application, concurrence, Board determination, designation, or later transaction.

Citations and references

• California Revenue and Taxation Code sections 6006.5 and 6015
• California Sales and Use Tax Regulation 1595
• November 28, 1977 internal request and earlier staff statement — referenced but not included
• Section 6015 authorizations, parties and concurrence, vending and bottler transactions, permits, sales and tax reports, asset sales, administrative proceedings, and outcomes — described or implicated but not included

Verbatim support

From the official December 13, 1977 T. P. Putnam memorandum:

Under those circumstances, the motel operator, through the exercise by the Board of its discretion under Section 6015, is not required to hold a seller's permit.

Accordingly, his sale of his business qualifies as an occasional sale under Section 6006.5, i.e., a sale of property not held or used by a seller in the course of activities for which he is required to hold a seller's permit.

Accordingly, if there is some ground on which the Board can reasonably determine that it is necessary for the efficient administration of the sales tax law to treat the bottler as the retailer, I believe the Board could appropriately do so, with the concurrence of the parties involved.

However, the ground should be something other than a desire to avoid the consequences of Regulation 1595 with respect to a sale of assets by the delicatessen operator.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 395.0260
• Original supporting opinion: 395.0260 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. Robert Nunes

From:

T. P. Putnam

Subject:

Section 6015 Retailers

395.0260

Date:

December 13, 1977

In response to your memorandum of November 28, this will confirm my earlier statement to you that a sale by a motel operator of his business, including personal property, is not subject to tax if the only prior sales by him were of items through a vending machine on which tax was reported by another party who had been authorized by the Board to report the tax as the retailer under Section 6015. Under those circumstances, the motel operator, through the exercise by the Board of its discretion under Section 6015, is not required to hold a seller's permit. Accordingly, his sale of his business qualifies as an occasional sale under Section 6006.5, i.e., a sale of property not held or used by a seller in the course of activities for which he is required to hold a seller's permit. You also asked whether we can place a soft drink bottling company under Section 6015 as a retailer with respect to soft drinks it furnishes to a delicatessen operator for over-the-counter sales by him. I believe the terminology of Section 6015 should be liberally construed to give effect to its basic purpose, i.e., to achieve efficient administration. Accordingly, if there is some ground on which the Board can reasonably determine that it is necessary for the efficient administration of the sales tax law to treat the bottler as the retailer, I believe the Board could appropriately do so, with the concurrence of the parties involved. However, the ground should be something other than a desire to avoid the consequences of Regulation 1595 with respect to a sale of assets by the delicatessen operator. As you suggest, the opinion with respect to the motel operator will be annotated. TPP:po