Could a retailer treat one store location as a separate activity and exempt that location's asset sale as substantially all property?

Plain-English summary

A retailer operated at two locations and transferred assets at its Los Angeles location. Tax Counsel E. H. Stetson agreed with the attorney's unspecified views except on that transfer. The other questions and positions are absent.

Counsel treated retail selling across both places as one activity, even though the Sales and Use Tax Law required a permit for each place of business. The supporting letter identifies that provision as section 6068; the live annotation identifies it as section 6067. The published sources do not resolve the conflict.

Separate permits facilitated administration; they did not divide one selling business into separate activities for the occasional-sale exemption. The one-location transfer therefore would not be a sale of all or substantially all property used in the activity unless the assets sold represented at least 80 percent of the total assets used in selling at both locations.

The letter distinguished an April 18, 1958 ruling involving retailer property held in a genuinely separate nonselling business. Its printed text cites section 6006(a) at that point but immediately says the earlier question involved subsection (a), while this matter involved subsection (b), of section 6006.5.

Staff had requested a San Francisco office report and said it would reconsider when reviewing the audit report. Neither report nor any completed review or tax outcome is included.

Interim audit posture, one selling activity, citation conflicts, and source limits

E. H. Stetson wrote on March 16, 1959 to attorney B--- A. L--- concerning M--- & M--- - C--- & Co. He apologized for the delay in answering a February 3 letter and said he had asked the San Francisco office for a report about the questions. San Francisco Auditing was copied.

The source says the firm retailed at each location and later measures assets at both places, but identifies only Los Angeles. It gives no other address, merchandise, customers, ownership, operating structure, asset transfer date, buyer, agreement, consideration, liability, or price.

For section 6006.5(b), Stetson defined the activity as selling across locations. A one-location sale could qualify only if the assets actually sold were 80 percent or more of total assets used in selling at both places. The PDF supplies no asset inventory, use evidence, location values, retained assets, numerator, denominator, appraisal, or calculation.

Counsel treated separate permits by place of business as an administrative mechanism rather than a rule dividing one selling activity. The supporting letter calls the provision section 6068. The live annotation changes it to section 6067. Because neither source explains the difference, this page preserves both attributions without selecting one.

The attorney invoked an April 18, 1958 ruling. Stetson said it concerned a retailer's property held in a nonselling activity and would exempt the sale only if that activity was an entirely separate and distinct business. The prior ruling's ID, parties, facts, text, and outcome are absent.

At that point the source prints Section 6006(a), then immediately says the prior matter concerned exemption under (a), not (b), of Section 6006.5. The context suggests a cross-reference problem, but the official text does not correct it. This page does not silently replace the printed citation.

The final sentence says staff would consider the matter again when reviewing the audit report. The PDF supplies no February 3 request, San Francisco activity report, April 18 ruling, audit report, later staff review, business or location records, permits, asset and valuation records, transfer terms, calculation, return, assessment, payment, refund, administrative action, appeal, or outcome.

The live annotation preserves selling as the activity, multiple permitted locations, permits as administrative, and the cross-location substantially-all rule. It prints section 6067 where the supporting letter prints section 6068. It omits the attorney, taxpayer and February 3 letter; multiple questions and partial agreement; two-location and Los Angeles facts; explicit 80-percent threshold; April 18, 1958 nonselling-business ruling; section 6006(a)/6006.5 contextual problem; pending San Francisco and audit reports; missing records; and absent completed review or outcome.

What this means for you

Retailers closing one store

Under this letter, one location's assets remained part of a broader selling activity even though permits were issued by place of business.

Accountants and tax professionals

Measure location assets against all property used in the selling activity, and support any claim that a nonselling operation is an entirely separate business.

Common questions

Q: Did separate permits create separate selling activities?

A: No. The letter treated the permit-per-location rule as administrative.

Q: What threshold did counsel state?

A: At least 80 percent of total assets used in selling at both locations.

Q: Could property from a separate nonselling business be treated differently?

A: Yes, if it belonged to an entirely separate and distinct business under the earlier ruling described.

Q: Does the source print internally awkward section references?

A: Yes. The letter prints sections 6068 and 6006(a); the live annotation prints section 6067, and the letter's immediate subsection comparison refers to section 6006.5.

Q: Did the Los Angeles assets meet 80 percent?

A: The source does not say. It provides no asset values or calculation and awaited an audit report.

Q: What was the final tax result?

A: The PDF supplies no audit report, completed reconsideration, assessment, payment, refund, appeal, or later outcome.

Citations and references

• California Revenue and Taxation Code §§ 6006.5(a) and 6006.5(b)
• California Revenue and Taxation Code § 6068 — place-of-business permit provision as printed in the supporting letter
• California Revenue and Taxation Code § 6067 — corresponding provision number printed in the live annotation
• California Revenue and Taxation Code § 6006(a) — printed in the supporting letter's discussion of an earlier ruling, immediately followed by a section 6006.5(a)/(b) comparison
• April 18, 1958 ruling, February 3 request, San Francisco activity report, and audit report — identified but not included
• Business, location, permit, asset, use, value, transfer, consideration, calculation, return, tax, administrative, and outcome records — described or implicated but not included

Verbatim support

From the official March 16, 1959 E. H. Stetson letter:

If, as we understand from your letter, this firm was engaged in retailing at each location, the sale of the assets at one location only would not, in our opinion, qualify as a sale of “all or substantially all of the property held or used in such an activity” (activity requiring holding of seller’s permit), unless the assets actually sold were 80% or more of the total assets used in the activity at both places.

We think that the “activity” is the activity of selling, and not that portion of a selling activity carried on at different locations, even though because of the provisions of Section 6068 of the Sales and Use Tax Law a permit is issued for each place of business.

We will again consider the matter when we review the audit report.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 395.1460
• Original supporting opinion: 395.1460 PDF

Original ruling text

395.1460

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

March 16, 1959

Mr. B--- A. L--Attorney at Law
G---, D--- & G--XXX --- --- Street
--- --- XX, California

-- XXXXXX

Dear Mr. L---:
I apologize for being so tardy in replying to your letter of February 3. I have, however, asked our San Francisco office for a report of its activity in connection with the questions presented. From the facts set forth in your letter, I am inclined to agree with your views except as to the transfer of the assets in Los Angeles by M--- & M--- - C--- & Co. If, as we understand from your letter, this firm was engaged in retailing at each location, the sale of the assets at one location only would not, in our opinion, qualify as a sale of “all or substantially all of the property held or used in such an activity” (activity requiring holding of seller’s permit), unless the assets actually sold were 80% or more of the total assets used in the activity at both places. We think that the “activity” is the activity of selling, and not that portion of a selling activity carried on at different locations, even though because of the provisions of Section 6068 of the Sales and Use Tax Law a permit is issued for each place of business. We believe that this is a requirement to facilitate administration and does not purport to affect the occasional sale exemption by enlarging it at the particular place for which a permit is issued, even though such sale might be but a small part of the seller’s total assets used in the business of selling. This view is not inconsistent with the April 18, 1958 ruling mentioned in your letter. This related to a sale by a retailer of property held in a non-selling activity. The sale would be exempt under Section 6006(a) if the non-selling activity were an entirely separate and distinct business. Otherwise, the sale would be taxable. The question, however, concerns exemption under (b), not (a), of Section 6006.5.

Mr. B--- A. L---

-2-

We will again consider the matter when we review the audit report. Very truly yours,

E. H. Stetson
Tax Counsel

EHS:tl
cc:

San Francisco - Auditing

March 16, 1959
395.1460