Was a transportation company's sale of line-operating equipment exempt because transportation itself did not require a seller's permit?

Plain-English summary

A transportation company planned to sell line-operating equipment. Board counsel agreed that transportation itself did not require a seller's permit, so the equipment was not used in a permit-requiring activity.

But section 6006.5 also excluded a sale from occasional-sale treatment when it was part of a series sufficient in number, scope, and character to require a permit. The company had made enough earlier sales within the preceding twelve months. If the equipment sale occurred before July 1, 1953, counsel would treat it as taxable even though it was expected to be the last sale.

If the sale occurred after July 1, it would be the company's only sale in the relevant twelve-month period and could qualify as exempt. Because a related Sutter Packing Company lawsuit was pending, counsel suggested paying the tax and filing a refund claim that could be held until the court resolved that case.

Missing sales timeline, pending litigation, and source limits

Tax Counsel E. H. Stetson wrote to attorney H--- W---'s firm for C--- L--- T--- S---, Inc. after a recent discussion and a March 26 letter. The planned transaction was a sale of the company's line-operating equipment to T--- E--- Company. Neither the discussion nor letter is documented in the PDF.

Counsel conceded the equipment was used in transportation, which did not itself require a permit. That satisfied section 6006.5's property-use limb. The dispute concerned the separate series-of-sales limb.

The source relies on the attorney's March 5 letter to the San Jose office, which described sales before the third quarter of 1952 and a series within the twelve months immediately before the proposed transfer that was sufficient in number, scope, and character to require a permit. The PDF does not reproduce or enumerate those sales.

Stetson could find no basis to remove the final contemplated sale from that series. If it closed before July 1, 1953, counsel would treat it as taxable. If it closed after July 1, counsel understood that it would be the company's only sale in any twelve-month period and could be regarded as occasional. Both answers were prospective and conditional on the absent timeline.

The letter compared a pending San Francisco Superior Court action, Sutter Packing Company v. State Board of Equalization, No. 400260. That dispute concerned one cannery-equipment sale after ordinary operations ceased, with earlier taxable sales inside the prior twelve months but several months before the equipment sale. Counsel expected submission on stipulated facts and said a final taxpayer-favorable decision might indicate the carrier's sale was nontaxable.

Counsel suggested paying the tax and filing a refund claim to be held in abeyance until Sutter Packing ended. The source does not show that the equipment sale occurred, which date applied, tax was paid, a claim was filed or held, the trial court ruled, or the Board later acted.

The PDF does not include the March 5 or March 26 letters, discussion notes, parties' corporate records, prior-sale list or evidence, equipment inventory, sale agreement, closing date, consideration, seller's permit, return, assessment, payment, refund claim, abeyance record, Sutter Packing complaint or stipulation, trial-court decision, appeal, administrative proceeding, or later outcome. It copies an unidentified Tax Administrator.

The live annotation preserves transportation as non-permit activity, operating equipment, series-of-sales and twelve-month rule, taxable result, and April 3, 1953 date. It omits the correspondence, client and buyer, two statutory limbs, unidentified prior sales, July 1 timing alternatives, last-sale argument, Sutter Packing facts and pending status, pay-and-refund suggestion, missing records, prospective posture, and absent outcome.

What this means for you

Service and transportation businesses selling equipment

An otherwise nonretail business can become a seller through the number, scope, and character of its asset sales. The timing of earlier sales mattered here.

Accountants and tax professionals

Build a twelve-month sales timeline before treating an equipment disposal as occasional. A single closing can still belong to a larger series.

Common questions

Q: Did transportation operations require a seller's permit?
A: No, not by themselves.

Q: Why was a pre-July 1953 sale taxable?
A: Earlier sales within twelve months made it part of a permit-requiring series.

Q: What changed after July 1, 1953?
A: The proposed sale would stand alone in the relevant twelve-month period and could be occasional.

Q: What practical step did counsel suggest?
A: Pay the tax and file a refund claim pending the related court case.

Q: What earlier sales made the pre-July transfer taxable?

A: The source does not identify them. It relies on an absent March 5 letter saying a sufficient series occurred within the preceding twelve months.

Q: Was a post-July sale definitely exempt?

A: No. Counsel said it could be regarded as occasional based on the understanding that it would be the company's only sale in any twelve-month period.

Q: Does the source show how Sutter Packing ended?

A: No. The case was pending and expected to proceed on stipulated facts; no trial decision or appeal appears.

Q: Was tax paid and a refund claim filed here?

A: The letter only suggested that course. It includes no closing, return, payment, claim, abeyance, refund, or later administrative record.

Citations and references

• California Revenue and Taxation Code §§ 6006.5 and 6367
• Sutter Packing Company v. State Board of Equalization, San Francisco Superior Court No. 400260, described as pending in the letter
• March 5 and March 26, 1953 letters and recent discussion — referenced but not included
• Prior sales, equipment and transfer, permit and tax, refund claim, court stipulation and disposition, administrative proceedings, and outcome records — described or implicated but not included

Verbatim support

From the official April 3, 1953 Tax Counsel letter:

We, of course, concede that the property in question was not used in such an activity inasmuch as it was used in a transportation business, which does not in itself require a seller's permit.

We are, therefore, constrained to inform you that, if the sale in question occurs prior to July 1, 1953, we will be forced to regard it as a taxable sale. If it occurs thereafter, it will, as we understand it, be the only sale in any twelve-month period made by the company and could be regarded as an exempt occasional sale.

We anticipate that this case will be submitted to the Court on a stipulation of facts.

It is suggested, accordingly, that you might wish to advise your client to pay the tax and file a refund claim. This refund claim could be held in abeyance pending the outcome of the Sutter Packing Company case.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 395.0580
• Original supporting opinion: 395.0580 PDF

Original ruling text

395.0580

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

April 3, 1953

---, ---, --- & --Attorneys at Law
P. O. Box XXX
---, California
Attention:

Mr. H--- W---

X-XXXXX
C--- L--- T--- S---, Inc.

Gentlemen:
Following our recent discussion and receipt of your letter of March 26, we have given further consideration to the application of the tax to the sale of the line operating equipment of C--L--- T--- S---, Inc., to T--- E--- Company. It is our opinion that this sale is not an exempt occasional sale under Sections 6006.5 and 6367 of the Sales and Use Tax Law. To be an occasional sale under Section 6006.5 a sale must be of property not held or used in the course of an activity for which a seller’s permit is required. We, of course, concede that the property in question was not used in such an activity inasmuch as it was used in a transportation business, which does not in itself require a seller’s permit. The section further provides, however, that the sale must not be one of a series of sales sufficient in number, scope and character to require the holding of a seller’s permit. According to your letter of March 5 to our San Jose Office there were prior sales preceding the third quarter of 1952, and that there would be, within the twelve-month period immediately preceding the sale in question, a series of sales definitely sufficient in themselves to require the holding of a seller’s permit and to constitute the company making them a seller as defined in the statute. We are unable to find any legal basis to regard the sale in question, although the last sale contemplated, as not one of a “series of sales”. We are, therefore, constrained to inform you that, if the sale in question occurs prior to July 1, 1953, we will be forced to regard it as a taxable sale. If it occurs thereafter, it will, as we understand it, be the only sale in any twelve-month period made by the company and could be regarded as an exempt occasional sale.

---, ---, --- & ---

-2-

April 3, 1953
395.0580

Our position in this matter is consistent with that which has been taken in a considerable number of more or less similar cases. There is now pending in the Superior Court of San Francisco an action of Sutter Packing Company v. State Board of Equalization, No 400260, respecting the question of the application of the tax to a single sale of cannery equipment made by a cannery after the close of its normal business operations where the cannery had made taxable sales within the twelve-month period preceding the sale in question, although several months had elapsed between the last of these sales and the sale in question. We anticipate that this case will be submitted to the Court on a stipulation of facts. In the event of a final judicial determination that the tax does not apply, it might well be that the decision would indicate the nonapplicability of the tax with respect to the sale by C--- L--- T--- S---, Inc. It is suggested, accordingly, that you might wish to advise your client to pay the tax and file a refund claim. This refund claim could be held in abeyance pending the outcome of the Sutter Packing Company case. Very truly yours,

E. H. Stetson
Tax Counsel

EHS:ph
cc:

--- --- – Tax Administrator