When did California require a new permit after partner changes, and could it refuse a permit for a plainly illegal sales location?

Plain-English summary

The June 19, 1952 opinion said any change in the general partners operating a business created a new entity. Staff required an application on Form 400 and a new permit number; obtaining the new partners' signatures on Form 400-P did not suffice. The page also prints legacy references 1478 and 1657.15, but supplies no change agreement, forms, old or new permit, account action or taxpayer outcome.

The rest of the PDF addresses a different subject. A September 30, 1985 memorandum from the Principal Business Taxes Compliance Supervisor circulated a September 24 legal memorandum about permits for locations where another state law prohibited selling. The supervisor said Board staff could not enforce another agency's laws or police its jurisdiction, but Board actions could affect that agency's enforcement.

The absent September 16 request said roadside sellers used a seller's permit in court as authority to sell at a state right-of-way rest area after the Department of Transportation tried to remove them. It also named a registration-file printout as an attachment. The PDF supplies neither the request, printout, governing location law, court, case, pleadings, ruling nor permit.

Staff Counsel Donald J. Hennessy concluded that the Board could refuse or revoke a permit when state law made selling tangible personal property illegal at the specified location. He reasoned that a party could not require a permit that would help carry out an illegal enterprise. He cited section 6066's “desiring to engage in or conduct business as a seller” language and analogized to Asher v. Johnson, where the court would not aid an illegal project.

Hennessy added two limits. Refusing the permit did not make illegal sales untaxed; Asher said an unlawful business may be taxed. And staff ordinarily could assume proposed selling was legal without investigating every applicant. Refusal or revocation applied only when the illegality was patent from the outset.

A later memorandum headed “Non-Attorney Opinions” says Assistant Chief Counsel Gary Jugum reviewed and agreed with the September 30 conclusion. Its header displays both July 15, 1996 and September 30, 1985. It also says a permit would grant the privilege of engaging in the “legal enterprise,” though the surrounding text repeatedly says the enterprise is illegal. This page preserves the apparent source error rather than silently rewriting it. No component supplies an applied permit refusal, revocation, tax assessment, appeal or outcome.

Source posture

The live 410.0200 annotation contains only the 1952 sentence that a general-partner change requires an application for a new permit number. It omits Form 400 and Form 400-P, the legacy references, every 1985 memorandum and roadside fact, section 6066, Asher, the patent-illegality limitation, continued taxation of illegal sales, the ordinary no-investigation rule, the later legal review, dual dates, source typo, missing records and absent outcomes.

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

Partnerships, permit applicants, and tax professionals

Under the 1952 opinion, apply for a new permit rather than merely amending signatures when general-partner ownership changes. Separately, a seller's permit did not legalize a location forbidden by another state law, and permit refusal did not make sales nontaxable. Use current forms, law and agency procedures.

Common questions

Q: Did a general-partner change require a new permit?

A: The 1952 opinion said yes because the change created a new entity. It required Form 400 and said new signatures on Form 400-P were insufficient.

Q: Could California refuse a permit for a plainly illegal location?

A: The 1985 guidance said yes when state-law illegality at that specific location was patent from the outset. It did not require staff to investigate every applicant.

Q: Did permit refusal exempt the sales from tax?

A: No.

Q: Is the roadside court decision included?

A: No. The absent request describes a court agreement with the sellers' permit argument, but identifies no court or case and supplies no ruling.

Q: Did the source show an actual refusal or revocation?

A: No. It contains policy guidance but no application, refusal, revocation, assessment, appeal or later outcome.

Citations and references

• California Revenue and Taxation Code § 6066
• Asher v. Johnson, 26 Cal. App. 2d 403, 412 (1938)
• Legacy references 1478 and 1657.15
• Form 400 and Form 400-P
• September 16, September 24 and September 30, 1985 memoranda; registration printout; governing location law; roadside permit; DOT record; court materials; applications; permit decisions; tax records; appeals; and outcomes — described or implicated but not included

Verbatim support

From the official compound source:

where there is any change in the general partners operating a business a new entity is created necessitating the application for a new permit number (under a Form 400).

It is only when the illegal activity is patent from the outset that the Board staff should refuse to aid the illegality and refuse to issue or revoke a seller's permit.

It is fundamental that an unlawful business may be taxed by governmental agencies.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 410.0200
• Original supporting opinion: 410.0200 PDF

Original ruling text

410.0200

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1478 Change in general partners requires new permit.

Sacramento, California
June 19, 1952
Mr. X------------ (WIS:WCK)
W.W. Mangels
Account No. Z--------1657.15 Change in General Partners requires application for new permit number. 6/19/52.

You are advised that where there is any change in the general partners operating a business a new entity is created necessitating the application for a new permit number (under a Form 400). It is the opinion of the legal staff that obtaining the signature of the new partners on a Form 400-P will not suffice. WWM:ja

STATE OF CALIFORNIA

410.0200

STATE BOARD OF EQUALIZATION

Memorandum
To:

District Administrators

From:

Principal Business Taxes
Compliance Supervisor

Subject:

Board’s Refusal to Issue a Seller’s Permit

Date:

September 30, 1985

Board staff cannot enforce the laws and regulations of another state agency nor can it police that agency’s jurisdictions for the publics performance in this regard. However, there may be instances when our actions impact another agencies area of enforcement. One such area involves the issuance of a seller's permit to a person who will operate at a location where, under another state law, it is illegal to sell. Attached is a copy of a memo from Mr. Donald Hennessey which addresses this area. The last paragraph of Mr. Hennessey's memo provides information as to the policy each office should follow when faced with a similar situation. Please provide this information to your staff as guidance.

PKT:jw
cc:

Mr. Douglas D. Bell
Mr. J.D. Dotson
Mr. R. Nunes
Mr. M. Taussig
Mr. D. Hennessey

STATE OF CALIFORNIA

410.0200

STATE BOARD OF EQUALIZATION

Memorandum
To:

Mr. P.K. Taylor

From:

Donald J. Hennessy

Subject:

Refusal to Issue a Seller’s Permit

Date:

September 24, 1985

This is in reply to your memorandum of September 16, 1985 which states the following facts: "Various Indian groups are selling at roadside rests within the state's right of way. When DOT attempted to remove them through the legal' process, the Indians claimed authority to sell there based on possession of a seller's permit. The court agreed with the Indians. In the case referred to, the business address on the permit was the address of the roadside rest. A printout of the registration file is attached." You then ask whether the Board staff has a legal basis for refusing to issue a seller's permit to anyone for a business location where it is illegal to sell. In our opinion, the Board does have a legal basis for refusing to issue or, we would add, revoking, a seller’s permit when state law makes it illegal to sell tangible personal property at the particular location in question. A seller’s permit is required of “Every person desiring to engage in or conduct business as a seller….” (Section 6066). A person cannot legally engage in business as a seller at locations where selling is forbidden by state law (including state regulations having the force and affect of the law). The legal basis which the Board staff should invoke in the above described factual situation is that a party to an illegal enterprise cannot require the Board to issue, or to continue in good standing, a seller’s permit which specifically grants the privilege of engaging in the illegal enterprise. The Board staff’s discretion must be exercised so as not to confer permissive authority on a person to embark on, or to continue, an illegal activity. In 1938, in Asher v. Johnson, 26 Cal.App.2d 403, the court faced an analogous situation in which the plaintiff sued for a sales tax refund of monies obtained in an illegal game of chance. The court refused the refund otherwise due on the grounds that a party to an illegal enterprise could not come into a court of law to ask that its illegal project be carried out. Likewise, the parties herein cannot come to the Board staff for aid in carrying out an illegal project. The parties herein have already invoked in court the Board's

STATE OF CALIFORNIA

410.0200

STATE BOARD OF EQUALIZATION
issuance of a seller's permit to aid in the continuing of their illegal selling. The Board staff's discretionary authority to issue seller's permits should not be so misused. Two further points. First, nothing in cur above conclusion should be construed as resulting in the gross receipts from the illegal selling going untaxed. As the Asher Court, supra, at page 412 stated, "It is fundamental that an unlawful business may be taxed by governmental agencies." Secondly, the Board staff may ordinarily assume the legality of the selling activity contemplated by a seller's permit applicant. The Board staff need not investigate every applicant's activity and determine its legality before issuing a seller's permit. It is only when the illegal activity is patent from the outset that the Board staff should refuse to aid the illegality and refuse to issue or revoke a seller's permit.

DJH:rar
cc:

R.L. Dick

STATE OF CALIFORNIA

410.0200

STATE BOARD OF EQUALIZATION
To

: Mr. Glenn Bystrom

July 15, 1996
September 30, 1985

From : Gary Jugum
Subject: Non-Attorney Opinions

I have reviewed Principal Business Taxes Compliance Supervisor's memorandum of September 30, 1985 to District Administrators. We are in agreement with his conclusion, as follows:

Refusal to Issue a Seller's Permit. The Board does have a legal basis for refusing to issue or revoking a seller's permit when state law makes it illegal to sell tangible personal property at the particular location in question. A person cannot legally engage in business as a seller at locations where selling is forbidden by state law (including state regulations which have the force and effect of law). The legal basis is that a party to an illegal enterprise cannot require the Board to issue, or to continue in good standing, a seller's permit which specifically grants the privilege of engaging in the legal enterprise. The Board's staff discretion must be exercised so as not to confer permissive authority on a person to embark on, or to continue, an illegal activity. (Asher v. Johnson, 26 Cal. App. 2d 403). 9/30/85