Did newspaper publication, creditor letters, or signing returns as owner notify California that a partner had withdrawn?

Plain-English summary

A partnership dissolved effective January 10, 1970. The former partner offered a lawyer's instruction to notify creditors, a creditor notice, and a fictitious-name certificate published in the San Mateo Times on January 16, 23 and 30 and February 6, 1970. He also relied on later returns signed as “owner.” The underlying fourth-quarter 1969 return and agency account record are not included.

The hearing officer found none of those items gave the Board actual notice. The publication said only that an individual would do business under a fictitious name; it did not disclose that a prior partnership under that name had dissolved or identify the withdrawing partner. The continuing operator had signed returns as “owner” while still a partner, so using that title after dissolution did not signal a change.

The partnership permit remained in use for the individual proprietorship. Quoting historical Regulation 1699, the officer said the permit holder had to notify the Board and deliver the permit for cancellation, subject to specified notice methods. Had the Board received notice, the opinion said it would have issued a new individual permit, closed the partnership permit as of January 10, 1970 and most likely audited the books. The first Board notice identified in the record was the former partner's March 1972 protest.

The third-quarter 1971 determination used a $13,667 estimated gross-receipts measure based on earlier quarters. The continuing operator estimated only $4,000 to $5,000 of sales and referred to bank deposits, but produced no records proving the estimate wrong. The opinion also states that average reported gross receipts since 1968 were about $11,600.

The March 24, 1972 table prints a $773.19 total, with $683.35 tax, $21.50 interest through April 23, 1972, and a $68.35 failure-to-file penalty. Those three components add to $773.20, not the printed total; the source does not resolve the one-cent conflict. The hearing officer concluded that the former partner remained jointly and severally liable for July 1 through September 30, 1971, and recommended redetermination without adjustment. The signature date line is blank, and no final Board action, payment, collection or appeal is supplied.

Source posture, citation defects, and current rule

The live 410.0192 annotation retains the historical Regulation 1699(e) notice point, insufficient newspaper publication and ambiguous change from “partner” to “owner.” It omits the dissolution and publication dates, creditor materials, first actual notice, permit consequences, estimation dispute, $13,667 measure, $773.19 printed total and one-cent component conflict, joint-liability period, recommendation posture, blank signature date, missing final action and defective case citations.

The PDF prints People v. Schwartz as (1974) 31 Cal. 2d 59, an impossible year for a decision used at a 1972 hearing. The cited People v. Schwartz was filed in 1947. The PDF garbles the name of Credit Bureaus of Merced County, Inc. v. Shipman but prints its correct 167 Cal. App. 2d 673 reporter citation. It also prints Oregon Cedar Products v. Kohler (1957) 148 Cal.App2d 67-; 148 Cal. App. 2d 67 resolves to an unrelated case, while the named decision is Oregon Cedar Etc. Co. v. Ramos & Kohler, 148 Cal. App. 2d 679. The original-text section preserves every printed form rather than silently correcting it.

Current Regulation 1699 places inactive-permit notice and liability rules in subdivision (f), including later time, penalty and ownership provisions in paragraphs (2) and (3). Those later provisions are cross-references, not retroactive findings about this 1971 liability.

The official five-page PDF has a clean native text layer and one small page-1 image, so no OCR was required. Both fresh direct PDF downloads and both live-annotation downloads were byte-identical, and the duplicate default text extractions matched. The original-text section remains byte-identical to its committed version and matches the fresh official extraction after removing only one terminal newline and two form feeds.

What this means for you

Withdrawing partners and tax professionals

Give the tax agency direct, provable notice, surrender the partnership permit, and document the continuing owner's new permit. Public notices, creditor letters and ambiguous return signatures did not replace Board notice here. Preserve books and bank records capable of rebutting any estimated assessment.

Common questions

Q: Did newspaper publication notify the Board?

A: No. The fictitious-name notice did not reveal the prior partnership, its dissolution or the withdrawing partner.

Q: Did signing returns as owner show the partnership ended?

A: No. The signer had used “owner” while still a partner, so the title did not communicate a change.

Q: When did the Board first receive notice?

A: In March 1972, when the former partner protested the determination and alleged that the partnership had dissolved.

Q: Why was the estimated measure retained?

A: The continuing operator claimed only $4,000 to $5,000 of sales but supplied no records supporting a different measure. The officer retained the $13,667 estimate based on prior quarters.

Q: How much was the determination?

A: The table prints $773.19. Its listed components are $683.35 tax, $21.50 interest through April 23, 1972, and a $68.35 failure-to-file penalty, which add to $773.20. The source does not explain the one-cent difference.

Q: Does November 21, 1972 establish an issue date?

A: No. That is the stated hearing date; the hearing officer's signature date line is blank.

Citations and references

• Former California Corporations Code § 15035.5
• California Sales and Use Tax Regulation 1699(e) — historical subdivision identified by the live annotation
• Current California Sales and Use Tax Regulation 1699(f)(2)-(3) — later cross-reference
• People v. Schwartz, 31 Cal. 2d 59 (1947) — PDF prints 1974
• Credit Bureaus of Merced County, Inc. v. Shipman, 167 Cal. App. 2d 673 (1959) — PDF garbles the case name
• Oregon Cedar Etc. Co. v. Ramos & Kohler, 148 Cal. App. 2d 679 (1957) — PDF prints Oregon Cedar Products v. Kohler at 148 Cal.App2d 67-
• Dissolution instruments; fourth-quarter 1969 return; permit and account records; creditor mailings; bank deposits; books; March 1972 protest; final Board action; and payment, collection or appeal records — described or implicated but not included

Verbatim support

From the official hearing decision and recommendation:

The legal notice is not sufficient notice to the Board of Equalization that the partnership had been dissolved.

Using the title "owner" instead of "partner" cannot be held to amount to actual notice to the Board that the partnership no longer existed.

Therefore, as for the remaining sales tax liability Mr. X--------------------- is jointly and severally liable for the tax debt owed to the state for the period from 7-1-71 through 9-30-71.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 410.0192
• Original supporting opinion: 410.0192 PDF
• Current cross-reference: Regulation 1699

Original ruling text

410.0192
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
STATE OF CALIFORNIA
BOARD OF EQUALIZATION

The above-entitled matter came on regularly for hearing on Tuesday, November 21, 1972 at 1:30 p.m., in [X], California. Appearances: For Petitioners:

For Board of Equalization

Protest
Mr. X------------ protests the tax liability asserted against him jointly and severally for sales tax determined to be due for the third quarter of 1971. Mr. X------------ did not register any specific protest except to the extent that he objected to the amount of tax. Measure of tax: $13,667. Contention Mr. X------------ contends that he was not a partner in business with Mr. X----------during the period in question and had not been [one] since midnight, January 10, 1970. He disclaims all personal liability. Mr. X--------- contends that sales during the third quarter or 1971, were between $4,000 and $5,000. The liability under consideration is measured by $13,667 representing estimated gross receipts during the third quarter of 1971. The estimate was arrived at using, as a basis, the amounts filed in the earlier quarters as representing gross receipts. Thus, the tax, interest (to 04-23-72), and penalty (for failure to file a 3 Q 71 return) as determined on March 24, 1972, was:

Tax
$683.35

Interest
$21.50

Penalty
$68.35

Total
$773.19

A determination was issued on March 24, 1972 in the following name: X---------------------Account number Z------------------- was shown on the determination. In addition, copies of the determination were sent to X----------------, X--------------- CA AND TO X------------- CA. The following exhibits were entered to support the contention that the partnership had been dissolved and Mr. X-------------- had no personal liability for the tax as determined: I. Letter dated January 10 from X------------, Attorney at Law to X--------, Messr.
------ and X---------- to send all creditors a copy of notice of dissolution of partnership. II.

Letter to Creditors. The notice advising creditors that the partnership was dissolved.

III.

Copy of a legal notice published in the San Mateo Times on January 16, 23, 30, and February 6, 197[0]. This is a notice and publication of a “Certificate of Individual Transacting Business Under a Fictitious Name”

X---

When the determination was issued Mr. X--------- wrote a letter protesting the assertion of any liability for taxes against Mr. X-------- on the ground that Mr. X----------- was not a partner during the time the alleged liability arose. We contended that the [Board of Equalization] was notified of the partnership dissolution with the return filed for the fourth quarter of 1969 and he produced copies of the above-referenced exhibits to support the contention. Mr. X------------- acknowledged the fact that the partnership had been dissolved as indicated and on the date shown. He also voiced the opinion that he was personally liable for any taxes due for the third quarter of 1971. Mr. X------------contended that the measure was too high since he estimated-the gross sales in that period to be somewhere between $4,000 and $5,000. He stated that all he had to support such a statement was bank deposits. Further, Mr. X------------- stated he did not sell the business to anyone. Instead, he merely closed the doors and abandoned it. The landlord, apparently, acquired what inventory had been abandoned. When asked about 1971 income tax returns, Mr. X------------- indicated he did not file any because he owed no taxes. Conclusions Two issues are raised by this petition: (I) What is the measure of the tax; and (2) IS Mr. X----------- legally liable for it? (1) A Notice of Determination (certificate of delinquency) carries with it the presumption that it is correct and the taxpayer has the burden of proving it wrong and producing figures from his records to support another and correct determination. People v. Schwartz (1974) 31 Cal. 2d 59. Nothing was produced by Mr. X----------- to support a conclusion that the estimated liability was wrong or excessive. The average gross receipts reported since 1968 was about $11,600.

(2)
There is no doubt about the fact that the partnership was dissolved. However, there is no record of dissolution on file with the State Board of Equalization. The legal notice, Exhibit III merely indicates that X------------, an individual, will do business under the fictitious name of X-----------, and that he is the owner of the business. No one reading it would even suspect that there was a partnership that had been doing business under that same name and that it had been dissolved and that Mr. X-------was one of the partners. The legal notice is not sufficient notice to the Board of Equalization that the partnership had been dissolved. Mr. X----------------- signed Sales and Use Tax Returns as "owner" after he was no longer a partner. However, he signed returns as "owner" when he was a partner too. This certainly cannot be deemed sufficient to put the Board of Equalization on notice that there was no longer a partnership. Further, as a partner he was an owner of an undivided portion of the business. The State of California was a creditor as far as liability for sales tax was concerned. The permit was issued to Mr. X---------- and Mr. X-------------- jointly and severally as “retailers” for the privilege of making retail sales and for that privilege they were required to pay to the state a tax measured by a certain percent of their receipts. Section 15035.5 of the California Corporations Code (Uniform Partnership Act) provides: "Whenever a partnership is dissolved, a notice of the dissolution shall be published at least once in a newspaper of general circulation in the place, or in each place if more than one, at which that partnership business was regularly carried on, and an affidavit showing the publication of such notice shall be filed with the county clerk within thirty days after such publication." Actual notice of dissolution of partnership is necessary as to firms having prior credit dealings with the partnership in order to enable a retiring partner to escape liability for obligations incurred after dissolution of the partnership. While publication of notice of dissolution of partnership may be evidence from which actual knowledge on the part of a creditor can be inferred, publication alone does not compel a finding of actual knowledge, and a retiring partner is not justified in placing sole reliance upon publication of notice of dissolution to avoid liability for debts incurred after dissolution of a partnership. Credit Bureauls ofMerced Count,. Inc. v. Shipman (1959) 167 Cal.App.2d 673. The foregoing case law indicates that a retiring partner might be liable for obligations that incurred after dissolution is only evidence from which actual knowledge on the part of a creditor can be inferred, but is does not compel a finding that there was actual knowledge. It cannot be concluded that the Board of Equalization received actual notice of the dissolution from the publications entered as Exhibit HI. Further, if the Board had been notified, a new permit would have been issued to Mr. X------------ as an individual and the partnership permit would have been closed out effective January 10, 1970. There would most likely have been an audit of the books pursuant to close-out. Using the title "owner" instead of "partner" cannot be held to amount to actual notice to the Board that the partnership no longer existed.

In an action against a former member of a partnership for good allegedly sold and delivered to the partnership, wherein defendant contended that they had been sold to a corporation formed upon dissolution of the partnership and bearing the former partnership's name with the addition of "INC.", in view of evidence that seller had considerable course for dealing with the partnership, that during the time credits were extended, business was carried on under license issued to the partnership, that there was no proof of formal notice of change and conflict as to whether the seller had knowledge of incorporation, there was sufficient evidence to support the finding that the debt was incurred on account of the partnership. Oregon Cedar Products v. Kohler (1957) 148 Cal.App2d 67-. In as much the partnership was, in fact, dissolved the permit issued in the name of the partnership showing both Mr. X--------- and Mr. X----------- as partners, was inactive, and it should not have been used to carry on and report operations of an individual proprietorship. Regulation 1699 (Title 18 Cal. Admin. Code Sec. 1699) provides in part: "Upon discontinuing or transferring a business, a permit shall promptly notify the Board and deliver his permit to the Board for cancellation. To be acceptable, the notice of transfer of discontinuance of a business must be received in one of the following ways: “(1) Oral or written statement to a Board office or authorized representative, accompanied by delivery of the permit of followed by delivery of the permit upon actual cessation of the business, The permit need not be delivered to the Board, if lost, destroyed or is unavailable for some other acceptable reason, but notice of cessation of business must be given. “(2) Receipt of the transferee of business successor's application for a seller's permit may serve to put the Board on notice of the transferor's cessation of business. "Unless the permit holder who transfers the business notifies the Board of the transfer, or delivers the permit to the Board for cancellation, he well be liable for taxes, interest, and penalties incurred by his transferee who with the permit holder's actual or constructive knowledge uses the permit in any way; e.g., by displaying the permit in the transferee's place of business, issuing resale certificate showing the number of the permit thereon, or filing returns in the name of the permit holder or his business name and under his permit number. The liability shall continue and include all liability incurred up to the time the Board receives notice of the transfer." In summary, the first time any representative of the Board had notice that there was no longer a partnership was when Mr. X-------------- wrote and alleged same, and this was in March 1972. Therefore, as for the remaining sales tax liability Mr. X--------------------- is jointly and severally liable for the tax debt owed to the state for the period from 7-1-71 through 9-30-71. Recommendation Redetermine without adjustments.

Robert H. Anderson, Hearing Officer

Date