Do resale transactions count with retail transactions when deciding whether a sales series requires a California seller's permit?

Plain-English summary

During a June 5 hearing in an unspecified year, staff was asked whether resale transactions count when deciding if a sales series was sufficient in number, scope, and character to require a seller's permit. The hearing concerned a redacted woman's petition for redetermination of sales tax.

The Legal Division answered yes. A sale for resale is still a sale, and a wholesaler is a seller when it sells tangible personal property of a kind taxable at retail. Regulation 1595 generally identified three sales within any 12 months as the minimum number requiring a permit, while the statute also required consideration of scope and character.

The memorandum described the specific taxpayer's positions as inconsistent: she claimed regular-course resales while also claiming that she was not in business and made only casual or isolated occasional sales. Resale and retail transactions therefore counted together in the series analysis.

Hearing provenance, statutory path, and source limits

Assistant Chief Counsel Gary J. Jugum sent the June 24 memorandum to Board members Brad J. Sherman, Ernest J. Dronenburg Jr., William M. Bennett, Matthew K. Fong, and Gray Davis. Its subject was the occasional-sale exemption. A June 26 notation added a copy to Glenn A. Bystrom; the distribution also names Cindy Rambo, Robert Nunes, and E. L. Sorensen Jr.

The question came from a June 5, 19XX Board hearing on M. W---'s sales-tax redetermination petition. The source deliberately withholds the hearing year and account digits, so the memorandum's 1991 date does not establish the hearing's year. It does not say which person at the hearing asked the question.

Jugum began with section 6066's seller-permit requirement for a person seeking to conduct business as a seller in California. He then used the definition of seller: a person selling tangible personal property of a kind taxable at retail. That definition included wholesalers even when they made no retail sales, unless their goods were exempt at retail; the memorandum used food products for human consumption as its example.

Section 6367 made qualifying occasional sales exempt. The memorandum quoted section 6006.5(a)'s relevant definition, including the rule for activities that would require a permit if conducted in California and the separate bar for a sufficiently numerous, broad, and characteristic sales series. Regulation 1595(a)(4)(A) supplied the general three-sales-in-twelve-months minimum. Section 6006 supplied the proposition that a sale includes a transfer of title for consideration, so a resale was still a sale.

Jugum said cases actually turning on the resale count were fairly rare. Usually permit status was already clear, and property held or used in a permit-requiring activity was not occasional. When the series analysis controlled, the counted transactions were almost always retail sales.

The taxpayer's unusual position supplied the practical example, but not an adjudicated result. She reportedly argued both that she made resales in the regular course of business and that she was not in business because her sales were casual or isolated. The memorandum rejected that combination and counted resales with retail sales.

The PDF omits the petition, hearing notice, transcript, exhibits, taxpayer briefs, staff submission, business and property identities, transaction dates and locations, sale count, agreements, invoices, consideration, resale certificates, permit and return records, audit, determination, tax measure and amount, Board deliberation and order, payment, refund claim, appeal, and later outcome. No source shows how the general answer affected M. W---'s petition.

The live annotation preserves the resale-and-retail counting result, number-scope-character test, wholesaler status, taxable-at-retail condition, food-products example, and June 24, 1991 date. It omits the five Board recipients, hearing and petition provenance, redacted year, specific taxpayer and her inconsistent positions, sections 6066, 6367, 6006.5(a), and 6006, Regulation 1595's three-sale guideline, rarity and property-use analysis, distribution trail, missing records, unapplied outcome, and reliance status.

What this means for you

Wholesalers and resellers

Under this historical analysis, making no retail sales did not by itself keep a wholesaler outside the seller-permit rules. The kind of property sold and all resale transactions mattered.

Accountants and tax professionals

When testing an occasional-sale claim, preserve and review both wholesale and retail transfer records. Count sales, then separately evaluate their scope and character and whether the property was held or used in a permit-requiring activity.

Common questions

Q: Are sales for resale excluded from the count because no retail tax is collected?
A: No. They are still transfers of title for consideration and therefore are sales.

Q: Can a wholesaler be a seller for permit purposes?
A: Yes, if the property it sells is of a kind taxable when sold at retail.

Q: What numerical guideline did the memorandum cite?
A: Regulation 1595 generally identifies three sales within 12 months as the minimum, while also considering scope and character.

Q: Why did the taxpayer's positions conflict?
A: The taxpayer claimed regular-course resales while also characterizing the transactions as casual or isolated occasional sales.

Q: Did the source say how many sales she made?

A: No. It gives no transaction count, dates, property, prices, or resale records.

Q: Was the hearing held in 1991?

A: The source does not establish that. It prints the hearing date as June 5, 19XX, even though the memorandum is dated June 24, 1991.

Q: Did the Board decide the redetermination petition in this memorandum?

A: No. The memorandum gives the Legal Division's answer to the counting question and supplies no Board order or later outcome.

Citations and references

• California Revenue and Taxation Code § 6066 — seller's-permit requirement quoted in substance
• California Revenue and Taxation Code § 6367 — occasional-sales exemption
• California Revenue and Taxation Code § 6006.5(a) — relevant occasional-sale definition quoted in the memorandum
• California Revenue and Taxation Code § 6006 — transfer-of-title-for-consideration definition quoted in part
• California Code of Regulations, title 18, Regulation 1595(a)(4)(A) — general three-sales-in-any-twelve-months guideline quoted in the memorandum
• M. W--- petition, June 5, 19XX hearing, sales and resale records, determination, Board action, and later outcome — described or implicated but not included

Verbatim support

From the official June 24, 1991 Legal Division memorandum:

Resale transactions are counted in determining whether a seller has made a series of sales of sufficient number, scope and character to require the holding of a seller’s permit.

This means that wholesalers, as well as retailers, are “sellers” if they sell tangible personal property which does not qualify for exemption from tax if sold at retail.

“Generally the minimum number of sales to require the holding of a seller’s permit is three within any 12-month period.”

The short answer is that resales are counted. However, it is fairly rare to come across a situation where disqualification for the occasional sale exemption would be dependent upon our counting resale transactions.

On the one hand, she was arguing that she was in business, making sales for resale. On the other hand, she was arguing that she was not in business but making only casual or isolated sales, which were exempt as occasional sales. These arguments are inconsistent.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 395.0670
• Original supporting opinion: 395.0670 PDF

Original ruling text

State of California

Board of Equalization
Legal Division

395.0670

Memorandum
To

: Honorable Brad J. Sherman
Honorable Ernest J. Dronenburg, Jr.
Honorable William M. Bennett
Honorable Matthew K. Fong
Honorable Gray Davis

From

: Gary J. Jugum
Assistant Chief Counsel

Date :

June 24, 1991

Subject : Occasional Sale Exemption

During the Board hearing held on June 5, 19XX in regard to the petition for redetermination of sales tax filed by M--- W--- (SR -- XX-XXXXXX), staff was asked whether resale transactions are counted in determining whether transactions may qualify as exempt as occasional sales. Answer: Resale transactions are counted in determining whether a seller has made a series of sales of sufficient number, scope and character to require the holding of a seller’s permit. Analysis: Every person desiring to engage in business or conduct business as a “seller in this state” is required to hold a seller’s permit. Rev. and Tax. Code sec. 6066. “Seller” means every person who sells tangible personal property of the kind which is taxable if sold at retail. This means that wholesalers, as well as retailers, are “sellers” if they sell tangible personal property which does not qualify for exemption from tax if sold at retail. In other words, wholesalers are “sellers” and need a seller’s permit even if they make no retail sales, unless they sell property like food products for human consumption, which are exempt when sold at retail. Transactions which qualify as “occasional sales” are exempt. Rev. and Tax. Code Sec. 6367. The term “occasional sale” is defined, as relevant here, as follows: “A sale of property not held or used by a seller in the course of activities for which he or she is required to hold a seller’s permit or permits or would be required to hold a seller’s permit if the activities were conducted in this state, provided the sale is not one of a series of sales sufficient in number, scope, and character to constitute an activity for which he or she is required to hold a seller’s permit or would be required to hold a seller’s permit if the activity were conducted in this state.” (Rev. & Tax. Code Sec. 6006.5, subd. (a).)

Board Members

-2-

June 24, 1991
395.0670

In determining the “number” of sales, resale transactions are counted. Regulation 1595, “Occasional Sales - - Sale of a Business - - Business Reorganization” provides, in paragraph (a)(4)(A), as follows: “Generally the minimum number of sales to require the holding of a seller’s permit is three within any 12-month period.” Sales for resale are “sales.” “Sale” means and includes “any transfer of title…for a consideration.” Rev. and Tax. Code Sec. 6006. The short answer is that resales are counted. However, it is fairly rare to come across a situation where disqualification for the occasional sale exemption would be dependent upon our counting resale transactions. Ordinarily it is clear whether the taxpayer is required to hold a seller’s permit. Any property held or used in the course of activity requiring the holding of a seller’s permit does not qualify for the occasional sale exemption and is taxable. Whether qualification for the exemption is dependent upon the series of sales analysis, the sales are almost always retail sales. What was unusual about the taxpayer’s case heard on June 5, 19XX was that she was simultaneously arguing that she was making resales in the regular course of business, but was also making occasional sales. A sale for resale must be distinguished from a “sale at retail.” A “sale at retail” or “retail sale” means a sale for any purpose other than resale in the regular course of business in the form of tangible personal property. On the one hand, she was arguing that she was in business, making sales for resale. On the other hand, she was arguing that she was not in business but making only casual or isolated sales, which were exempt as occasional sales. These arguments are inconsistent. This is why resale transactions are counted with retail transactions in determining whether there has been a series of sales requiring the holding of a permit.

GJJ:sr
cc:

Ms. Cindy Rambo
Mr. Robert Nunes
Mr. E. L. Sorensen, Jr.

6/26/91 – cc: Mr. Glenn A. Bystrom
sfg