Could a retiring partner avoid predecessor liability by publishing a dissolution notice without directly notifying California?

Plain-English summary

The San Bernardino district administrator asked whether a partner leaving a partnership had to give actual notice under Regulation 1699(e) before being relieved of liability on the partnership account. Staff Counsel SMW said yes. This was a general internal question: the source identifies no taxpayer, partnership, permit, transfer, tax period, amount, audit, petition or outcome.

Counsel referred to a phone conversation from the previous day and said prior correspondence on the topic could not be found. That call and earlier writing are absent. The memorandum therefore restated counsel's conclusion.

The historical regulation accepted an oral or written statement to the Board with permit delivery, or the successor's permit application as notice. Notice to another state agency did not itself qualify. Counsel read this language to require actual Board notice.

Counsel then summarized Credit Bureaus of Merced County, Inc. v. Shipman. In that case, a written agreement dissolved a partnership, newspaper notice was published, one partner continued as sole proprietor and agreed to pay the bills, and direct-dealing businesses received no actual notice. The court's rule, as quoted by counsel, was that publication could support an inference of knowledge but did not compel one, so a retiring partner could not rely on publication alone for existing creditors.

Treating California as a creditor, counsel concluded that the Board should receive actual notice before a departing partner was relieved of personal liability for partnership debts. The memorandum cites Johnson v. Totten and Williams v. Bowers as additional support and says Regulation 1699(e) implemented the case law. It does not apply that conclusion to a particular partner or liability.

Source posture, citation defect, and current rule

The live 410.0194 annotation turns the Credit Bureaus litigation facts into its opening factual paragraph before presenting the memorandum's California-as-creditor analogy. Those are case facts, not facts about an identified Board account. The live annotation also changes the quoted phrase “publication alone” to “publication above,” and omits the internal request, missing prior correspondence, previous-day phone call, Johnson, Williams, absence of an applied taxpayer outcome and the defective Williams citation.

The PDF prints Williams v. Bowers, 15 C. 3221 (1860). The named Williams v. Bowers is reported at 15 Cal. 321. Johnson v. Totten resolves at the printed 3 Cal. 343, and Credit Bureaus of Merced County, Inc. v. Shipman resolves at the printed 167 Cal. App. 2d 673. The original-text section preserves the 3221 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 are current cross-references, not a contemporary application to an unidentified partner.

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

What this means for you

Retiring partners and tax professionals

Give direct, provable notice to the tax agency and address the existing permit under current procedures. Public filings or newspaper notices may serve other purposes without proving agency notice. This memorandum states a general historical view and supplies no applied result.

Common questions

Q: Was newspaper publication enough?

A: No. The cited case said publication could support an inference of knowledge but did not compel a finding of actual knowledge.

Q: What notice methods did the regulation describe?

A: An oral or written statement to a Board office or authorized representative with permit delivery, or receipt of the successor's seller's-permit application. The quoted rule included qualifications for an unavailable permit.

Q: Did notice to another agency count automatically?

A: No. The historical regulation said notice to another state agency did not by itself notify the Board.

Q: Did this memorandum decide a named taxpayer's liability?

A: No. It answers an internal legal question and gives no taxpayer, account, amount, proceeding or outcome.

Q: Were the live annotation's dissolution facts Board case facts?

A: No. They were facts from the cited Credit Bureaus decision that counsel used by analogy.

Citations and references

• California Sales and Use Tax Regulation 1699(e) — historical text quoted in the memorandum
• Current California Sales and Use Tax Regulation 1699(f)(2)-(3) — later cross-reference
• Credit Bureaus of Merced County, Inc. v. Shipman, 167 Cal. App. 2d 673, 678 (1959)
• Johnson v. Totten, 3 Cal. 343 (1853)
• Williams v. Bowers, 15 Cal. 321 (1860) — PDF prints 15 C. 3221
• Previous-day phone call and unlocated prior staff correspondence — described but not supplied
• Taxpayer, partnership, permit, transfer, notice, liability, administrative and outcome records — not identified or supplied

Verbatim support

From the official Staff Counsel memorandum:

This language indicates that actual notice must be given to the board.

A retiring partner is not justified in placing sole reliance upon the publication of notice of dissolution, but should assure himself that existing creditors who have extended credit to the partnership receive actual notice of such dissolution.

As the State of California is, in effect, a creditor, it should receive actual notice of a partner's leaving the partnership before that retiring partner is relieved of his personal liability for the debts of the partnership.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 410.0194
• Original supporting opinion: 410.0194 PDF
• Current cross-reference: Regulation 1699

Original ruling text

State of California

Board of Equalization

410.0194

Memorandum
To:

San Bernardino – District Administrator
(John Miller)

From:

Staff Counsel (SMW) - Headquarters

Subject:

Regulation 1699, notice

Date:

July 23, 1979

You have asked whether actual notice is required pursuant to Regulation 1699 (e) before a partner can be relieved of liability on an account held by his partnership. When we spoke on the phone yesterday I was sure I had previously written something on this topic; however, as I was unable to locate the correspondence I will summarize my conclusions again. Regulation 1699 (e) provides in part that: “Upon discontinuing or transferring a business, a permit holder shall promptly notify the board and deliver his permit to the board for cancellation. To be acceptable, the notice of transfer or 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, or 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 or business successor’s application for a seller’s permit may serve to put the board on notice of the transferor’s cessation of business. It further provides that “Notice to another state agency of a transfer or cessation of business does not in itself constitute notice to the board. This language indicates that actual notice must be given to the board. This conclusion is supported by case law. In Credit Bureaus of Merced County v. Shipman, 167 C.A.2d 673 (1959), a partnership was dissolved by written agreement. A notice of dissolution was published in a newspaper of general circulation. No actual

notice of dissolution was given to businesses which had direct dealings with the partnership. One of the partners was, by agreement, to continue the business as a sole proprietor and pay all the bills. When the sole proprietor failed to pay the bills the court held that: “… as to firms having prior credit dealings, with the partnership, actual notice of dissolution is necessary. While publication may be evidence from which actual knowledge could be inferred, publication alone would not compel a finding of actual knowledge. A retiring partner is not justified in placing sole reliance upon the publication of notice of dissolution, but should assure himself that existing creditors who have extended credit to the partnership receive actual notice of such dissolution.” (167 C.A.2d at 678.) As the State of California is, in effect, a creditor, it should receive actual notice of a partner’s leaving the partnership before that retiring partner is relieved of his personal liability for the debts of the partnership. (See also, Johnson v. Totten, 3 C. 343 (1853); Williams v. Bowers, 15 C. 3221 (1860). Regulation 1699 (e) implements this case law and puts the taxpayer on notice that in order to avoid predecessor liability, actual notice must be given to the Board. If you wish to discuss this further please do not hesitate to phone again.

SMW/at
cc:

Collections
Ms. Margaret H. Howard