Did a restaurant fixture sale occur when buyers deposited part of the price, took possession, and operated for a month before abandoning the deal?
Apply this to your situation
This page answers the general question as of 1965. Ask about yours and see what current California tax law says, with citations.
Plain-English summary
Restaurant owners agreed to sell the business, fixtures, and liquor license. The supporting PDF redacts the buyers' escrow deposit as $XX,000; the live annotation states $10,000. The buyers took possession, received the liquor-license transfer, and operated for one month under an agreement that the sellers would obtain the equipment mortgagee's consent.
When consent apparently was not obtained, the buyers stopped operating, abandoned the premises, and deposited the liquor license with the Department of Alcoholic Beverage Control for transfer back. The source does not show whether that return transfer occurred.
Section 6006(e) included possession transfers where the seller retained title as security for payment. Counsel invoked the Board's position that a partial escrow deposit, agreement to pay the balance, possession, and active operation created a section 6006 sale. Staff recommended denying the sellers' petition, but the source supplies no final Board action.
Petition facts, section 6006 analysis, and source limits
Associate Tax Counsel George A. Trigueros wrote on September 10, 1965 to the law offices of M---, C---, M--- and S---, attention Mr. S---. San Diego office had asked counsel to communicate about the restaurant sellers' redetermination petition. The letter identifies redacted restaurant V--- C--- and account SR---XX-XXXXXX and copies the Van Nuys Subdistrict Administrator.
The seller clients contracted to transfer their restaurant business, fixtures, and liquor license to J--- R. and R--- A. L---. The buyers deposited part of the price in escrow, took possession, and received the liquor license under an agreement that the sellers obtain the equipment mortgagee's consent. The live annotation gives the deposit as $10,000; the PDF shows $XX,000. No contract, escrow, payment record, or annotation source for the restored figure is included.
The buyers operated for one month. Apparently because the sellers failed to obtain mortgagee consent, the buyers ceased operations and abandoned the premises. The license was deposited with Alcoholic Beverage Control for transfer back. The source does not give transaction dates, purchase price or balance, identify the equipment or mortgagee, state the consent terms or denial, document abandonment, or show the license's return transfer.
Section 6006(e) treated possession as a sale when the seller retained title as security for payment. The letter then states the Board's position that intended purchasers complete a section 6006 sale when they deposit part of the price in escrow, agree to pay the balance, take possession, and actively operate. Counsel applied that position despite the later collapse.
Trigueros recommended denial. Because the clients had not requested a Board hearing, he said the matter would go to the nonappearance calendar and formal notice of final action would follow. The PDF does not include the referral, petition, sale agreement, escrow instructions or ledger, $10,000 support, balance obligation, possession record, liquor-license application or transfers, operation records, equipment list, mortgage, consent request or response, abandonment or return documents, price or allocation, tax return, audit, determination, protested amount, nonappearance calendar, Board order, formal notice, payment, refund, appeal, or later outcome. It does not establish that the Board denied redetermination.
The live annotation preserves the business, fixtures and license sale, $10,000 escrow deposit, possession, license transfer, mortgagee-consent agreement and failure, one-month operation, abandonment, license deposited for return, section 6006 transaction elements, and taxable tangible-property conclusion. It omits the restaurant, parties and counsel, redacted account, San Diego referral, section 6006(e), redetermination petition, staff-recommendation posture, no-hearing fact, nonappearance calendar, promised formal notice, missing records, and absent Board action or outcome.
What this means for you
Restaurant buyers and sellers
Under this letter, a transaction became a taxable sale before every condition was resolved because the buyers funded escrow, promised the balance, took possession, and operated.
Attorneys and tax professionals
Track escrow funding, balance obligations, possession, title-security terms, licensing, mortgage consents, operating control, abandonment, and any reversal separately.
Common questions
Q: Did the buyers take possession?
A: Yes, and they operated the restaurant for one month.
Q: How much did the buyers deposit in escrow?
A: The live annotation states $10,000. The supporting PDF redacts the amount as $XX,000, and the escrow record is absent.
Q: Why did the deal later collapse?
A: The sellers apparently failed to obtain the equipment mortgagee's consent.
Q: Did retained title prevent a sale?
A: No. Section 6006(e) covered possession transfers with title retained as security.
Q: What was recommended?
A: Denial of the sellers' redetermination petition, followed by nonappearance-calendar action because they had not requested a hearing.
Q: Did the liquor license transfer back?
A: The buyers deposited it with Alcoholic Beverage Control for transfer back; the source does not show the completed return transfer.
Q: Did the Board deny the petition?
A: The letter promises later formal notice but supplies no Board order or final outcome.
Citations and references
- California Revenue and Taxation Code § 6006
- California Revenue and Taxation Code § 6006(e)
- Sale agreement, escrow, $10,000 live-annotation deposit, liquor-license transfer, equipment mortgage and consent — described but not included
- San Diego office referral and redetermination petition — identified but not included
- Transaction, payment, possession, operation, abandonment, asset, allocation, tax, audit, determination, Board-action, notice, and outcome records — described or implicated but not included
Verbatim support
From the official September 10, 1965 George A. Trigueros letter:
The L--- operated the business for one month. Apparently, because of your clients’ failure to obtain the consent of the mortgagee, the L--- ceased operations and abandoned the premises.
The board has taken the position that when intended purchasers deposit a part of the purchase price in escrow, agreed to pay the balance, and take possession of the premises and begin active conduct of the business, a sale, as defined in § 6006 has taken place.
In view of the foregoing, we must recommend denial of your clients’ petition for redetermination of sales tax.
From the official live annotation:
Company B placed $10,000 in escrow, took possession of the premises, and had the liquor license transferred to it pursuant to an agreement that company A would obtain the consent of the mortgagee of the equipment.
Source
- Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
- Live annotation: Annotation 395.1245
- Original supporting opinion: 395.1245 PDF
Original ruling text
395.1245
STATE OF CALIFORNIA
STATE BOARD OF EQUALIZATION
September 10, 1965
Law Offices of
M---, C---, M--- and S--XXXXX --- --- Avenue
---, CA XXXXX
Attention:
SR --- XX XXXXXX
V--- C---
Mr. S---
Gentlemen:
Our San Diego office has requested that we communicate with you regarding your client’s petition for redetermination of sales tax. It is our understanding that your clients entered into an agreement to sell the business, fixtures, and liquor license of their restaurant, V--- C---, to J--- R. and R--- A. L---. The buyers placed $XX,000 in escrow and took possession of the premises and the liquor license was transferred to them pursuant to an agreement that your clients obtain the consent of the mortgagee of the equipment. The L--- operated the business for one month. Apparently, because of your clients’ failure to obtain the consent of the mortgagee, the L--- ceased operations and abandoned the premises. The liquor license was deposited with the Department of Alcoholic Beverage Control for transfer back to your clients. Under § 6006(e) of the Revenue and Taxation Code, a sale is defined as including a transaction whereby the possession of property is transferred but the seller retains title as security for the payment of the price. The board has taken the position that when intended purchasers deposit a part of the purchase price in escrow, agreed to pay the balance, and take possession of the premises and begin active conduct of the business, a sale, as defined in § 6006 has taken place. In view of the foregoing, we must recommend denial of your clients’ petition for redetermination of sales tax. Inasmuch as your clients have not requested a hearing before the board, this matter will be placed on the board’s nonappearance calendar and your clients will receive formal notice of the board’s final action in due course. Very truly yours,
George A Trigueros
Associate Tax Counsel
GAT:hm
cc:
Van Nuys – Subdistrict Administrator
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