Did an executor's three or more substantial tangible-property sales within twelve months qualify as occasional estate sales?

Plain-English summary

Executors argued that estate sales were not business activity requiring a seller's permit. The recommendation rejected that position because section 6013 included activity pursued for gain, benefit, or advantage, even without a profit motive.

Three or more substantial retail sales of tangible personal property occurred within twelve months. That series classified the executors as sellers required to hold a permit, so each sale failed occasional-sale treatment. The letter does not identify any sale or give the exact count beyond the threshold.

The recommendation also accepted field staff's net-book-value ratio for allocating part of a bulk sale price to tangible personal property. The record did not show that adding a few months of depreciation or assigning more price to land would be more accurate. Redetermination without adjustment was recommended, with official Board notice still to follow.

Petition contentions, cited cases, allocation record, and source limits

Tax Counsel W. E. Burkett wrote to a redacted representative on August 30, 1967 after staff completed review of an unnamed taxpayer's petition for redetermination of sales and use taxes. The source refers to executors but does not identify the estate, decedent, fiduciaries, addressee, petition date, tax period, assessed amount, assets, transactions, or procedural history.

The petition raised two issues. First, the representative argued that an executor did not sell in the conduct of a business or other permit-requiring activity, so the sales were outside sales tax. Second, the representative challenged the portion of a bulk price allocated to tangible personal property. The particular objection was that the net-book-value ratio failed to deduct depreciation through the sale date.

Burkett cited Market Street Railway Co. v. State Board of Equalization, 137 Cal.App.2d 87, for reading “business” through the statutory definition rather than only its commercial sense. Section 6013 included any activity pursued for direct or indirect gain, benefit, or advantage. The letter found the estate sales served one of those purposes and, citing Union League Club v. Johnson, 18 Cal.2d 275, said an intent to profit was unnecessary.

The recommendation cited Pacific Pipeline Construction Co. v. State Board of Equalization, 49 Cal.2d 729, and U.S. Industries, Inc. v. State Board of Equalization, 198 Cal.App.2d 775, for limiting occasional sales to the classifications in section 6006.5. It said three or more substantial retail sales of tangible personal property occurred within a twelve-month period. The executors were therefore sellers required to hold permits—citing Revenue and Taxation Code section 6006 exactly as printed—and each transaction was part of a series sufficient in number, scope, and character under section 6006.5(a). The source does not explain the section 6006 permit citation.

The letter also cites Sales Tax General Bulletin 52-6 and says a copy was enclosed. The bulletin is not part of the published two-page PDF. Nor does the PDF identify the three-or-more sales, their values, whether more transactions occurred, or the particular twelve-month window.

On allocation, staff had assigned part of a bulk sale price to tangible personal property using a net-book-value ratio. Before the sale, the decedent had depreciated the personal property under the 150-percent declining-balance method. Building improvements used the same basic rate. Burkett found no evidence the personal property declined faster than the improvements, no evidence supporting a greater pro rata allocation to land, and no basis to believe a few additional months of depreciation would be more accurate.

The source supplies no purchase agreement, bulk price, closing date, appraisal, asset schedule, book values, depreciation dates and calculations, land and improvement values, ratio, field audit schedule, alternative computation, or evidentiary submissions. It also omits the petition, General Bulletin 52-6, estate and fiduciary records, transaction invoices, permits and returns, assessment, hearing record, payment or refund, and final Board action.

Burkett recommended that the tax be redetermined without adjustment and told the representative the client would later receive official notice of the Board's action. That notice is not included, so the memorandum documents staff's recommendation—not the final action or tax outcome.

The live annotation preserves the executor setting, three-or-more substantial retail sales, twelve-month period, seller classification, permit requirement, and series-of-sales reason occasional treatment failed. It omits the petition and both contentions; gain, benefit, or advantage analysis; lack of a profit-motive requirement; section 6013; four cited cases; General Bulletin 52-6; section 6006 citation; unidentified sales and missing count or amounts; bulk-price allocation, 150-percent declining-balance method, building and land comparisons, and few-month depreciation issue; no-adjustment recommendation; promised official notice; missing records; and final-action gap.

What this means for you

Executors and estate administrators

Fiduciary status did not automatically make repeated estate asset sales occasional under this historical analysis. Frequency, amount, scope, character, and benefit to the estate mattered.

Accountants and tax professionals

Track all tangible-property sales within each twelve-month period and document any proposed allocation among land, improvements, and personal property with contemporaneous appraisals and depreciation support.

Common questions

Q: Did the executor need a profit motive?
A: No. Activity for gain, benefit, or advantage was sufficient under the historical definition.

Q: How many sales triggered the recommendation's seller classification?
A: Three or more substantial retail sales within a 12-month period.

Q: Why were the sales not occasional?
A: Each was part of a series sufficient in number, scope, and character to require a permit.

Q: Was the bulk-price allocation adjusted?
A: No. The recommendation found the net-book-value ratio reasonable on the evidence presented.

Q: Does the source identify the three or more sales?

A: No. It gives no property, exact count, dates, values, buyers, or twelve-month window.

Q: What depreciation method had the decedent used?

A: The 150-percent declining-balance method for tangible personal property; the letter says building improvements used the same basic rate.

Q: Does the source show the allocation ratio or bulk price?

A: No. It describes the method and rejected alternatives but supplies no underlying figures or schedules.

Q: Was the recommendation the Board's final action?

A: The source does not establish that. It says official notice of Board action would arrive later, and that notice is absent.

Citations and references

• California Revenue and Taxation Code § 6013
• California Revenue and Taxation Code § 6006 — cited exactly as printed for the permit requirement; the source does not explain the citation
• California Revenue and Taxation Code § 6006.5(a)
• Market Street Railway Co. v. State Board of Equalization, 137 Cal.App.2d 87
• Union League Club v. Johnson, 18 Cal.2d 275
• Pacific Pipeline Construction Co. v. State Board of Equalization, 49 Cal.2d 729
• U.S. Industries, Inc. v. State Board of Equalization, 198 Cal.App.2d 775
• Sales Tax General Bulletin 52-6 — cited and said to be enclosed, but not included
• Petition, estate, sale, bulk-price, asset, appraisal, depreciation, audit, notice, and final-outcome records — described or implicated but not included

Verbatim support

From the official August 30, 1967 W. E. Burkett letter:

Since three or more retail sales of tangible personal property of substantial amount were made with a 12-month period, the executors are classified as a “seller” for sales and use tax purposes (see Sales Tax General Bulletin 52-6, copy enclosed).

Under the circumstances, we cannot conclude that the addition of a few months depreciation would produce a more accurate allocation.

For the reasons set forth above, we have recommended that the tax be redetermined without adjustment. In due course you client will receive official notice of action taken by the Board on its petition for redetermination.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 395.0920
• Original supporting opinion: 395.0920 PDF

Original ruling text

STATE OF CALIFORNIA

395.0920

STATE BOARD OF EQUALIZATION

August 30, 1967

Dear Mr. ---:
We have completed review of the above-named taxpayer’s petition for redetermination of sales and use taxes. You have contended that (1) sales by an executor are not made in the course of the conduct of a business or any activity for which a seller’s permit is required and, therefore, are not subject to sales tax. (2) In any event, the allocation of a portion of the sales price to the tangible personal property assets is incorrect. Specifically, you have contended that the use of the ratio of the net book value of the property sold to establish the sales price of the tangible personal property is incorrect for the reason that depreciation was not deducted to the date of sale. With respect to the first contention, we direct your attention to Market Street Railway Co. v. State Board of Equalization, 137 Cal. App 2d 87, wherein the court held “business” is not to be used in the commercial sense for sales or use tax purposes but is to be interpreted in the light of the statutory definition set forth in the act. Section 6013 of the Revenue and Taxation Code defines business to include: “…any activity engaged in by any person or caused to be engaged in by him with the object of gain, benefit, or advantage, either direct or indirect.” It is our opinion the sales in question were made for gain, benefit, or advantage within the meaning of this section. It is not required that the sales be made within the intention of making a profit. Union League Club v. Johnson, 18 Cal. 2d 275. As we view it, the narrow question is whether the sales qualify as “occasional sales”. What constitutes an occasional sale is limited to the classifications set forth in Section 6006.5 of the Revenue and Taxation Code. Pacific Pipeline Construction Co. v. State Board of Equalization, 49 Cal 2d 729; U.S. Industries, Inc. v. State Board of Equalization, 198 Cal. App. 2d 775.

-2-

August 30, 1967
395.0920

Since three or more retail sales of tangible personal property of substantial amount were made with a 12-month period, the executors are classified as a “seller” for sales and use tax purposes (see Sales Tax General Bulletin 52-6, copy enclosed). Persons classified as sellers are required to hold seller’s permits (Revenue and Taxation Code § 6006). It follows that the sales fail to qualify as occasional sales for the reason that each transaction was “one of a series of sales sufficient in number, scope and character to constitute an activity requiring the holding of a seller’s permit” (see Revenue and Taxation Code § 6006.5(a)). We have examined the field staff’s basis for allocating a portion of the bulk sales price to the tangible personal property assets. We consider it a reasonable basis for allocation. Prior to the date of the sale, decedent had depreciated the tangible personal property assets at 150 percent by the declining balance method. There is no evidence that the personal property assets declined in value at a greater rate than the building improvements which were depreciated at the same basic rate. Nor is there any evidence that warrants a finding that a greater pro rata portion of the sales price was attributable to the land. Under the circumstances, we cannot conclude that the addition of a few months depreciation would produce a more accurate allocation. For the reasons set forth above, we have recommended that the tax be redetermined without adjustment. In due course you client will receive official notice of action taken by the Board on its petition for redetermination. Very truly yours,

W. E. Burkett
Tax Counsel

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