Was an auction-yard retailer liable for sales by table-renting concessionaires that lacked seller's permits?

Plain-English summary

A redacted retailer conducted auctions inside its building, sold livestock and poultry outside, and rented tables to other sellers in the adjacent yard. According to the retailer's counsel, some table renters held seller's permits and remitted their own tax, while others lacked permits. The March 24 request and all supporting records are absent.

Tax Counsel E. H. Stetson said former Ruling 79 made the client liable for the unpermitted tenants' operations if those tenants were concessionaires. He did not impose liability on every lessor; his stated rule concerned a retailer that allowed a concessionaire to operate within an area effectively under the retailer's control.

The opinion rejected a proposed agreement under which the client would pay a stated estimated amount for the tenants' business. Counsel said the Board lacked authority for that arrangement and that concessionaire status appeared determinative.

The requester also described individual permit enforcement as costing much more than each tenant's tax liability. The source supplies no calculation or agency finding supporting that assertion. It likewise provides no final concessionaire classification, tenant enforcement, audit, assessment, payment or appeal outcome.

Rulemaking analysis, live annotation, and current regulation

Counsel cited Revenue and Taxation Code section 7051 for the Board's rulemaking authority and reasoned that a uniformly applied, natural or reasonable classification was valid unless plainly arbitrary. The source cites General Electric Company v. State Board of Equalization at 111 A.C.A. 182. That printed format does not parse in the citation service, while the named May 19, 1952 decision resolves at 111 Cal. App. 2d 180. The source does not explain the citation difference.

The live 410.0080 annotation states that a retailer leasing business-premises space to concessionaires is responsible for tax on operations there except for tenants or concessionaires holding Board permits. It omits the auction-yard facts, express conditional status, rejected estimate, enforcement-cost assertion, section 7051 analysis, case citation and absence of a final outcome.

The collection now places the annotation under Regulation 1699. Current subdivision (d) defines concessionaires, supplies separate-business indicators, describes prime-retailer joint-and-several liability and provides relief through a location permit or qualifying written statement. Those current provisions are a cross-reference, not facts or relief terms from this 1953 letter.

The official two-page PDF has a clean native text layer and one page-one stencil image; no OCR was required. Two fresh direct downloads and default text extractions matched exactly. The original-text section remains byte-identical to its committed version and matches fresh extraction after removing only terminal extractor whitespace.

What this means for you

Auction operators, market landlords, and tax professionals

The letter makes seller status, permit status and control central, but it does not establish the disputed tenants' final classification. Current operators should document the premises boundary, public-facing identity, each seller's independence and permits, actual receipts and reporting, and any written statement allowed by the current regulation.

Common questions

Q: Were permitted tenants included in the operator's liability?

A: No, under the historical rule as counsel described it, where those tenants held Board permits and remitted tax on their operations.

Q: Were all landlords automatically liable?

A: No. The opinion limited its reasoning to a retailer allowing a concessionaire to operate inside an apparently retailer-controlled business area.

Q: Could the operator pay an agreed estimated amount?

A: California said it lacked authority for that arrangement.

Q: Did counsel finally classify the unpermitted tenants as concessionaires?

A: No. The answer was conditional, and the source supplies no final classification or applied outcome.

Q: Did the Board verify that individual enforcement would cost more than the tenants' taxes?

A: The letter reports that description as coming from the requester and supplies no calculation or Board finding.

Citations and references

• California Revenue and Taxation Code § 7051 — rulemaking authority cited in the source
• Former California Sales and Use Tax Ruling 79 — historical concessionaire rule discussed but not reproduced
• General Electric Company v. State Board of Equalization, printed as 111 A.C.A. 182 — the named decision resolves at 111 Cal. App. 2d 180
• California Code of Regulations, title 18, § 1699(d) — current live concessionaire provision, not cited in the 1953 letter
• March 24 request; client, table-renter and business identities; yard plan and control evidence; table leases; permits; sales, receipts and returns; estimated-payment proposal and method; enforcement-cost calculation; tax liabilities; audit; assessment; payment; hearing; appeal and outcome — described or implicated but not included

Verbatim support

From the official March 30, 1953 Tax Counsel letter:

If the tenants in questions are “concessionaires”, we believe that, under the ruling, your client is liable for the tax with respect to their operations.

We do not believe that this Board would have any authority to enter into an agreement with your client to pay over to this Board a stated amount as the estimated tax which would be due from the business transacted by the tenants in question.

While we do not take the position that a lessor is liable in all cases for the sales tax obligations of his lessees, we think that, when a retailer operates a business within an area which to all intents and purposes is wholly under his control and permits a concessionaire to operate therein, the retailer is responsible for the sales tax with respect to all operations in such premises within a reasonable interpretation of Ruling 79.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 410.0080
• Original supporting opinion: 410.0080 PDF
• Current cross-reference: Regulation 1699

Original ruling text

410.0080

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
March 30, 1953

Attention: X-------------

1657.80 Liability of Retailer for Tax Upon Sales Made by Concessionaires Who Have Not Obtained Seller’s Permits. Under Ruling 79, a retailer who leases space on his business premises to concessionaires is responsible for the sales tax with respect to all operations in such premises, except as to those tenants or concessionaires who have obtained seller’s permits from the Board. 3/30/53

Gentlemen:
This is in answer to your letter of March 24 concerning the liability of your client, X-------------, for sales tax on account of sales made by persons to whom X----------- rents tables in the yard adjacent to a building owned by X--------------, who conducts auctions in the building and makes auction sales of livestock and poultry outside the building. You state that some of these tenants hold sellers’ permits and remit the tax with respect to their operations but that other tenants do not hold permits. It is with respect to the operations of these tenants that your inquiry relates. In your letter you quote from Sales and Use Tax Ruling 79 pursuant to which a retailer is liable for the payment of tax measured by receipts from retail sales made in his place of business by operations of concessions therein unless the concessionaires obtain permits from the Board. If the tenants in questions are “concessionaires”, we believe that, under the ruling, your client is liable for the tax with respect to their operations. We do not believe that this Board would have any authority to enter into an agreement with your client to pay over to this Board a stated amount as the estimated tax which would be due from the business transacted by the tenants in question. Whether X------- is a “concessionaire” within the meaning of Ruling 79 appears to be determinative of his liability. While we do not take the position that a lessor is liable in all cases for the sales tax obligations of his lessees, we think that, when a retailer operates a business within an area which to all intents and purposes is wholly under his control and permits a concessionaire to operate therein, the retailer is responsible for the sales tax with respect to all operations in such premises within a reasonable interpretation of Ruling 79. The situation at the auction yard, as described to us by X------------------- is such that the cost of enforcing each individual tenant or concessionaire to secure a seller’s permit is greatly in excess of the tax liabilities of such tenants or concessionaires. Under the authority of Section 7051 of the Revenue and Taxation Code this Board may prescribe, adopt, and enforce rules and regulations relating to the administration and enforcement of the Sales and Use Tax Law. While any rule or regulation prescribed by the Board must, of course, be reasonable and not contrary to law, the Courts have held that rule-making bodies such as this Board have a wide discretion in exercising the power

to classify. As long as the rule works uniformly upon all persons in a class and the classification is based upon some natural or reasonable distinction, the classification is no invalid and will not be overthrown unless plainly arbitrary. (See General Electric Company v. State Board of Equalization, 111 A.C.A. 182.) The ruling that retailers are liable for the tax liability of concessionaires operating on their premises has been consistently applied in all situations appearing to fall within the reasonable intendment of the ruling and, upon the basis of the authorities citied, we do not believe its application in the instant case is unreasonable or arbitrary or that it would not be upheld by the Courts as a reasonable exercise of the rule-making power of the Board. Very truly yours, E.H. Stetson Tax Counsel EHS:ph cc: Fresno – Tax Administrator