Was a fair concessionaire's off-season sale of its booth, fixtures, and equipment exempt merely because temporary retail operations had ended months earlier?

Plain-English summary

Food and drink concessionaires operated at an annual fair lasting 17 consecutive days. Each owned a stand, fixtures, and equipment, paid the fair association a percentage of sales, and bought merchandise and supplies from the fair commissary. After the fair, operators removed perishables, locked their stands, and usually left the equipment inside until the next season.

Some operators sold their stands and equipment months after retail sales ended. The memorandum concluded those transfers remained taxable. A recurring seasonal business did not cease merely because the fair was closed or a temporary permit automatically closed when the return was filed.

Section 6072's active-business permit language did not bar tax. The memorandum distinguished a court case involving a taxpayer who had actually abandoned business; these concessionaires continued on the annual fair schedule until they sold their stands.

Recurring operations, abandonment distinction, and source limits

Gary Jugum of Headquarters Legal answered an October 11, 1973 memorandum from Covina–Foothills Auditing (IL). The auditing unit asked about food and drink concessionaires at A Fair, which operated for 17 consecutive days each year, usually in September.

Each concessionaire owned a grab stand and its fixtures and equipment, paid the Fair Association a predetermined percentage of sales for operating rights, and had to purchase all merchandise and supplies from the fair commissary. After the fair, operators cleaned the stands, removed perishables, locked them, and generally left the fixtures and equipment inside until the following year. Most operators had no other selling activities and reported on annual returns or temporary permits.

A few stands changed owners each year, often more than two months after the final fair sale. Compliance staff had consistently assigned the last day of retail sales as the account closeout date. The auditing unit reasoned that a concessionaire operating on the fair schedule for two, three, four, or more years remained continuously in business during the closed season until selling the stand—even if a temporary permit automatically closed upon filing a return. Legal agreed.

The memorandum said the off-season fixture and equipment transfers did not become occasional merely because the seasonal retail activity had paused. It compared the issue to a business owner taking a three-month vacation and selling upon return: that sale plainly would not become exempt solely because of the temporary closure.

Counsel considered section 6072's rule that a permit be held only by a person actively engaged in business as a tangible-personal-property seller and found it did not bar tax. The PDF prints the case citation as People v. Gabriel, 57, C.A.2d 788; the reporter citation resolves to People v. Gabriel, 57 Cal. App. 2d 788 (1943). The memorandum distinguished that case because stipulated facts showed actual abandonment due to domestic trouble, unlike recurring fair operations.

The PDF does not include the October 11 request, fair agreement or schedule, association or commissary records, operator identities, stand inventories, operating histories, permits, returns, account closeout records, fixture and equipment sale agreements, prices, invoices, tax calculations, assessments, payments, refund claims, protests, appeals, or later outcomes. It gives a general answer across recurring fact patterns rather than documenting a particular transfer or tax disposition, and asks the auditing unit to return a copy for Jugum's files.

The live annotation preserves an annual county-fair firm, off-season fixture and equipment sale, restaurant operation, taxable result, temporary inactivity rationale, and October 16, 1973 date. It omits the internal request, 17-day September schedule, grab-stand ownership and locked storage, association fee and commissary requirement, operators' limited other sales, annual returns and temporary permits, automatic closeout and compliance practice, multi-year operations, vacation analogy, section 6072, Gabriel and its abandonment facts, missing records, generalized posture, and absent outcomes.

What this means for you

Seasonal concessionaires

Selling equipment during the off-season does not by itself create occasional-sale treatment when the recurring business continues between seasons.

Accountants and tax professionals

Distinguish temporary closure from genuine abandonment by reviewing operating history, retained stands and equipment, renewal patterns, and the timing of the disposition.

Common questions

Q: How long did the fair operate each year?
A: Seventeen consecutive days, usually in September.

Q: Did filing a return that closed a temporary permit end the business for this purpose?
A: No. The memorandum agreed the recurring concession business continued while the fair was closed.

Q: Why was the cited abandonment case different?
A: That case's stipulated facts showed the taxpayer had abandoned the business, while the fair operators followed a recurring seasonal schedule.

Q: Were the off-season fixture and equipment sales taxable?
A: Yes. The memorandum said they were not occasional merely because they occurred during the closed season.

Q: What happened to the stands between fairs?

A: Operators removed perishables, cleaned and locked the stands, and generally left their fixtures and equipment inside until the next annual fair.

Q: How did compliance staff close the accounts?

A: They consistently used the last retail-sales day—the fair's last day—even though some operators sold their stands months later.

Q: Did the source document a specific assessed transfer?

A: No. It answered an auditing unit's general fact pattern and includes no identified operator, sale agreement, price, tax calculation, assessment, payment, or later proceeding.

Citations and references

• California Revenue and Taxation Code section 6072
• People v. Gabriel (1943) 57 Cal. App. 2d 788 (the source prints 57, C.A.2d 788; the reporter citation resolves to the named case)
• October 11, 1973 auditing memorandum, fair and operator records, permits and returns, closeout records, stand transfers, tax records, and outcomes — described or implicated but not included

Verbatim support

From the official October 16, 1973 Gary Jugum memorandum:

Most of the stands are left in this condition until the fair reopens the next year. Most of the grab stand operators have no other selling activities. They report their tax liability on either annual returns or under temporary permits.

We are in agreement with your conclusion that sales of fixtures and equipment of the type described are properly subject to the tax.

These sales do not qualify as “occasional” sales merely by virtue of the fact that the taxapyer is engaged in a seasonal selling activity and the sales of the fixtrues and equipment takes place during the period of the year when taxpayer's business is closed.

That case is distinguishable because the court there found that the clear import of the stipulation of facts between the parties was that taxpayer “. . . had abandoned his business on account of domestic trouble . . .”

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 395.0270
• Original supporting opinion: 395.0270 PDF

Original ruling text

State of California

Board of Equalization

Memorandum
395.0270
To:

Covina – Foothills – Auditing (IL)

Date:

October 16, 1973

From:

Headquarters – Legal – Gary Jugum

(916) 445-5550
ATSS 485-5550

Subject:

Sale of Fixtures and Equipment

This is in response to your memorandum of October 11, 1973. You raise a question as to the proper application of the tax in instances where persons who have operated food and drink concessions at the A Fair sell, sometimes months after the close of the fair, the booths, fixtures and equipment used by them in their selling activities. We understand that the A Fair is conducted each year for 17 consecutive days -usually in September. Each food and drink concessionaire within the fair grounds owns his own “grab stand” and its fixtures and equipment. For the right to operate, the concessionaire pays the Fair Association a predetermined percentage of his sales and is required to buy all merchandise and supplies from the fair’s commissary. At the conclusion of the fiar, the grab stands are cleaned up, the perishable goods removed, and the stands are closed and locked with the fixtures and equipment inside. Most of the stands are left in this condition until the fair reopens the next year. Most of the grab stand operators have no other selling activities. They report their tax liability on either annual returns or under temporary permits. Each year you find that ownership of a few of the grab stands has changed. Frequently the change has occurred months after the last day of the fair. In assigning close out dates for these accounts, the compliance staff has consistently used the last day on which retail sales were made, which is the last day of the fair.

Covina – Foothills – Auditing (IL)

-2-

October 16, 1973
395.0270

The question which has arisen is whether the sale of fixtures and equipment is an occasional sale. Although in most cases the sale of fixtures and equipment occurs more than 2 months after the last sale of merchandise in the prior fair period, it seems to you that it can be argued that a concessionaire who has operated on the fair schedule for 2, 3, 4 or more years is continuously in business even while the fair is closed until he sells his stand. You state that it would appear that this conclusion would hold true even though for convenience the board may have issued a temporary permit which closes out automatically by the filing of a return. We are in agreement with your conclusion that sales of fixtures and equipment of the type described are properly subject to the tax. These sales do not qualify as “occasional” sales merely by virtue of the fact that the taxapyer is engaged in a seasonal selling activity and the sales of the fixtrues and equipment takes place during the period of the year when taxpayer’s business is closed. If we were to conclude that sales of the type in question were exempt then it seems that we might be compelled to conclude that if a taxpayer closed his business for three months to take a vacation the sale of the business upon the taxpayer’s return from vacation would be exempt. It is clear to us that such a transaction would not be so exempt. We have considered the terms of Revenue and Taxation Code Section 6072, which provides that a tpermit shall be held only by persons actively engaged in or conducting a business as a seller of tangible personal property, and have concluded that this section does not bar the application of tax in the instance under consideration. Likewise, we have taken into consideration People v. Gabriel, 57, C.A.2d 788, in reaching our conclusion. That case is distinguishable because the court there found that the clear import of the stipulation of facts between the parties was that taxpayer “. . . had abandoned his business on account of domestic trouble . . .” Would you make a copy of this memorandum and send it to me for my files? Thank you.