Did flea-market and swap-meet vendors need seller's permits even if they did not return regularly?

Plain-English summary

The October 9, 1967 letter described a typical flea market as individually rented booths displaying used household goods and handcrafted items on weekends to many potential customers. Reading Revenue and Taxation Code sections 6013 and 6014, Tax Counsel T. P. Putnam said the statute specified no minimum amount of activity and treated gain-seeking commercial activity as business.

Counsel described Market Street Railway and Bank of America as requiring more than one isolated sale and indicating more than two. He also cautioned that those numerical tests were hindsight tools where a commercial enterprise was otherwise unclear; he did not regard it as settled that a first actively solicited sale in a commercial setting fell outside a selling business. On the described facts, a vendor could be required to obtain a permit when opening the booth.

The December 26 letter said a typical vendor renting a booth with the intention of making a substantial number of sales was engaged in business, whether or not the vendor returned in later weeks. Counsel recognized possible one- or two-small-item cases but expected them to be rare. The absent letters, client plan and vendor records prevent applying those generalizations to a particular seller.

The December letter also discussed a possible arrangement for the market owner to report and pay tax. On May 5, 1981, Field Operations ended the envelope system under which sellers gave tax to the operator for remittance. The new policy asked operators to help ensure repeat sellers held permits, while not focusing on garage cleanouts or people selling only once or twice a year. Staff were to allow reasonable compliance time, conduct a weekend permit survey, and perform later occasional surveys. The promised operator handout is absent, and no implementation result is supplied.

Source posture and current guidance

The live 410.0140 annotation retains only the typical-vendor permit, retailer and tax conclusions, with all three document dates. It omits the missing correspondence, commercial-setting and hindsight analysis, rare small-sale qualification, discontinued envelope system, compliance period, operator cooperation, permit surveys and absence of outcomes.

Current CDTFA Publication 111 requires swap-meet, flea-market and special-event operators to keep written seller records and not rent space without the specified documentation. It describes seller-permit verification, reasons a seller may assert no permit is required, record retention, Department information requests, visits and possible penalties. Those are current operator instructions, not terms of the 1967 or 1981 documents.

Current Regulation 1595 supplies the current occasional-sale rules, while Regulation 1699 addresses seller's permits. A vendor or operator must use those current rules and Publication 111 rather than treating the old opinions' shorthand as a fact-specific determination.

The official five-page PDF has a clean native text layer and one repeated stencil image per page, so 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

Flea-market vendors, swap-meet operators, and tax professionals

Document each seller's identity, permit or stated exemption reason, selling frequency, merchandise and event dates under current rules. A seller's failure to return weekly did not control the historical analysis, but the source does not classify any identified vendor. Operators should follow current Publication 111 record and verification procedures.

Common questions

Q: Did a typical booth vendor need a permit?

A: Tax Counsel said a typical commercial booth vendor could be required to obtain one upon opening, but the source does not decide an identified vendor's status.

Q: Did failing to return in later weeks make the first sales occasional?

A: No in the December 1967 opinion where the vendor rented a booth intending a substantial number of sales.

Q: What changed in 1981?

A: Field Operations ended the operator envelope-remittance system, sought operator cooperation on repeat-seller permits, allowed compliance time and directed permit surveys.

Q: Did counsel say every one-item household seller was in business?

A: No. The letters recognized isolated-sale and one- or two-small-item situations, though counsel expected such flea-market cases to be rare.

Q: Does the source show what happened to a vendor or operator?

A: No. It supplies no identified vendor records, permit survey, assessment, payment or other applied outcome.

Citations and references

• California Revenue and Taxation Code §§ 6013, 6014, 6066, and 6073
• California Sales and Use Tax Regulation 1699
• Market Street Railway Co. v. State Board of Equalization, 137 Cal. App. 2d 87, 95
• Bank of America v. State Board of Equalization, 209 Cal. App. 2d 780, 797
• Current California Sales and Use Tax Regulations 1595 and 1699 — live cross-references, not substitutes for the historical text
• September 7, September 26 and December 12 letters; client and vendor identities and records; proposed operator plan; earlier envelope arrangements; suggested 1981 handout; compliance period and surveys; permits; sales and tax amounts; returns; audit; assessment; payment; protest and outcome — described or implicated but not included

Verbatim support

From the official combined source:

It would appear that a flea market vendor may be required to obtain a seller's permit at the time that he opens his booth for business.

Under these circumstances, he is engaged in business for sales tax purposes regardless of whether he returns to the flea market in subsequent weeks.

The envelope system, wherein sellers turn in their tax to the swap meet operator, who in turn remits it to the Board, will be discontinued.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 410.0140
• Original supporting opinion: 410.0140 PDF
• Current operator guidance: Publication 111
• Current cross-references: Regulation 1595 and Regulation 1699

Original ruling text

STATE OF CALIFORNIA

410.0140

STATE BOARD OF EQUALIZATION
October 9, 1967
Dear Mr. X----------,
Your letter of September 26, 1967 addressed to Mr. Saltzstine has been referred to the Board's legal staff for reply. In your letter you ask to be advised of the authority for Mr. Saltzstine's position that every seller of tangible personal property is engaged in the business of selling tangible personal property. Since Mr. Saltzstine's position as expressed in his letter of September 7, 1967 related particularly to "flea market" vendors, we will consider your inquiry in that context. Our understanding of a typical flea market is that it is composed of many individual booths in each of which property is displayed and sold. The owner of the premises rents the booths to various persons who wish to sell property, commonly consisting of used household goods and handcrafted items. The selling operations are usually conducted on week ends and attract a substantial number of potential customers. According to Section 6014 of the Revenue and Taxation Code a "seller" includes every person engaged in the business of selling tangible personal property of a kind the gross receipts from the retail sale of which are required to be included in the measure of the sales tax. "Business" is defined by Section 6013 as 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. You will note that Section 6013 does not specify that any particular amount of activity is required to constitute a business. The courts have stated, however, that the term "business" requires that the seller engage in more than one isolated sale (Market Street Railway Co. v. State Board of Equalization, 137 Cal. App. 2d 87, 95; Bank of America v. State Board of Equalization, 209 Cal. App. 2d 780, 797), and have indicated that more than two sales are required. (Bank of America v. State Board of Equalization, supra, p. 797.) It appears that under the statutory and judicial tests, it may properly be concluded that flea market vendors are engaged in business as sellers. The conclusion that a flea market vendor is engaged in business as a seller seems particularly apt when it is considered that he rents a booth at an established market place with the object of making sales and directs his activity toward that object. Moreover, it should be noted that the quantitative tests prescribed by the courts are hindsight tests, to be applied after the sales have reached a certain number. Those tests are adapted to cases where it is not otherwise clear that the vendor is engaged in a commercial selling enterprise. It is by no means settled that the tests preclude a finding

STATE OF CALIFORNIA

410.0140

STATE BOARD OF EQUALIZATION
that the first sale made by a person actively soliciting customers in a commercial setting is made in the course of a selling business. It is our understanding that one of the primary purposes of your inquiry is to determine whether a flea market vendor may be required to obtain a seller's permit. In this connection we refer you to Section 6066 of the Revenue and Taxation Code, which provides that a person desiring to engage in business as a seller shall apply for a seller's permit. It would appear that a flea market vendor may be required to obtain a seller's permit at the time that he opens his booth for business. We hope that the information and discussion contained in this letter will be helpful to you. Very truly yours, T. P. Putnam Tax Counsel TPP:fb [lb]

STATE OF CALIFORNIA

410.0140

STATE BOARD OF EQUALIZATION
December 26, 1967
Dear Mr. X----------,
Your letter of December 12, 1967 addressed to Mr. Saltzstine has been referred to me for attention. You have suggested that Mr. Saltzstine prepare a workable plan under which your client can satisfy the sales tax obligations arising from the operation of your client's flea market. In connection therewith, you have raised a question as to the circumstances under which an individual flea market vendor can be regarded as engaged in the business of selling. In my opinion, the typical flea market vendor is engaged in the business of selling and all of his sales are subject to tax. This opinion is based on my understanding that such a vendor rents a booth with the intention of making a substantial number of sales. Under these circumstances, he is engaged in business for sales tax purposes regardless of whether he returns to the flea market in subsequent weeks. There may be situations in which a vendor is not engaged in business, as where he has only one or two small items to sell, but I believe these situations would be rare and for all practical purposes may be disregarded. You have also raised a question concerning onerous requirements that might be entailed in checking on each vendor if your client is made responsible for the taxes that are due. We are obligated to make a concerted effort to collect all of the sales taxes due from flea markets. Taken as a whole, a flea market is a large scale commercial enterprise in competition with other merchants who are paying sales taxes. We wish to collect these taxes, however, in the manner that is most convenient for both the flea market and the state. With respect to flea markets other than that of your client, we have developed workable arrangements whereby the flea market owner assumes responsibility for reporting and paying the taxes due. I believe that a similar arrangement can be made with your client that will not impose an undue burden. I am sure that Mr. Saltzstine and his staff will be glad to work with you and your client in developing a mutually satisfactory arrangement. Very truly yours, T.P. Putnam Tax Counsel TPP:kc [lb]

410.0140

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

CURRENT LEGAL DIGEST

PERMITS – Regulation 1699
(a)

IN GENERAL

Flea Market Vendors. – Annotation 410.0140
The last sentence of this annotation will be deleted in light of Chief of Field Operations Robert Nunes’ May 5,1981 memorandum to District and Subdistrict Administrators.

DJH:po
5/5/81
W.D. Dunn to Legal

Note – backup on which annotation is based
was reviewed and approved by Legal
Division attorney D.J. Hennessy and
Assistant Chief Counsel Gary J. Jogan.
SPJ 7/11/02

STATE OF CALIFORNIA

410.0140

STATE BOARD OF EQUALIZATION

Memorandum

To:

District and Subdistrict Administrators

From:

X--------------

Subject:

X--------------

Date:

May 5, 1981

It has become evident that there is no uniform statewide policy regarding the administration of Section 6073 of the Sales and Use Tax Law. Therefore, with the receipt of this memorandum, you are asked to adopt the following procedures. The envelope system, wherein sellers turn in their tax to the swap meet operator, who in turn remits it to the Board, will be discontinued. It will, therefore, be necessary to enlist the cooperation of the operators to ensure that repeat sellers have permits. In order to do so, these operators should be made aware of Section 6073 of the Sales and Use Tax Law. The operators should be told not to concern themselves with the person who has cleaned out his garage, or only sells once or twice a year, but only those who are repeat sellers. Swap meet operators should be allowed a reasonable amount of time to comply. After that time, you should schedule a weekend permit survey, to verify that repeat sellers hold valid seller's permits, and are in compliance with the law. Later, occasional permit surveys should be made to ensure the continued adherence to the law. Enclosed is a suggested handout to be used in contacting swap meet operators to assist you in informing them of their responsibilities. If you have any questions regarding this policy, please let me know.

RN:jw
Enclosure
Cc: Mr. J. D. Dotson & Staff