Did a school become a joint adventurer and retailer when it supplied gasoline to a service-station operator and received cost reimbursement plus a variable return?

Plain-English summary

A redacted school held and paid rent on a service-station lease. A redacted individual wanted to operate the station but lacked money for inventory. Under an agreement described only through an office discussion summary, the school bought all gasoline in its own name and had it delivered to the station; the operator bought all other merchandise, ran the station and paid the school gasoline cost plus either $100 monthly or three cents per gallon sold, whichever was greater.

The operator obtained a seller's permit and operated from April 1 through May 31, 1973, but filed no returns. The Board issued a dual determination against the school as a joint adventurer. The protested schedule lists $7,811 as taxable sales understated; that is the tax measure shown, not a stated dollar amount of tax.

The school's managing director petitioned, generally denying that it was a principal in the operator's selling activity. A June 19, 1974 preliminary hearing was postponed because of the petitioner's health. Neither the taxpayer nor its representative appeared at the December 4 hearing; a November 13 letter in the file is not reproduced. Board representative Mr. Lively appeared.

The attorney said the managing director could not attend and offered to settle for 50 percent of the claimed deficiency. The source says Board staff could not compromise a claimed tax liability. It also says the deficiency was measured by estimated gasoline sales and no issue existed over the amount, but supplies no estimation method, tax rate or tax computation.

Hearing Officer W. E. Burkett relied on field information that the school bought gasoline for its own account, caused delivery to the operator and received cost reimbursement plus the greater of the fixed or per-gallon return. He found a community interest and shared profits and losses under 28 California Jurisprudence 2d, section 3, classified the school as a joint adventurer and retailer, and recommended redetermination without adjustment.

The recommendation is not a supplied final Board decision. The source includes no later adoption, redetermination, payment, appeal or collection outcome.

Source posture

The live 415.0085 annotation, in the 2026 revision of the Business Taxes Law Guide, generalizes the school as a station-owning person, preserves the operator agreement, gasoline purchase and delivery, and fixed-or-per-gallon return, and states that the parties formed a joint venture. It then says they were individually liable for joint-venture debts. The supporting recommendation does not state or analyze individual debt liability. The live page omits the lease and rent, operator's inventory shortage and other-merchandise purchases, audit period and $7,811 measure, permit and missing returns, dual-determination posture, hearings and nonappearance, 50-percent offer, compromise limitation, estimated sales, retailer classification, no-amount dispute, recommendation status, missing records and absent final Board action.

CDTFA's Annotated Legal Opinions collection says the letters are summarized as annotations and that statutory law controls whenever a statute and annotation conflict. The official three-page 415.0085 PDF has a clean native text layer and no raster images, so no OCR was required. It prints staff of the staff, omits a period before A joint venture, and contains broken redaction line joins; those visible defects remain verbatim below. Both fresh direct PDF downloads and both live-annotation downloads were byte-identical, and duplicate default PDF text extractions matched. The original-text section below 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

Business operators and tax professionals

An agreement labeled as rent or cost reimbursement can still support joint-venture treatment when one party funds inventory, retains the premises and receives a return tied to sales. Document title, inventory funding, lease obligations, management, fixed and variable compensation, profits and losses, permits and returns. Do not import the live annotation's individual-liability proposition into this recommendation without separate authority.

Common questions

Q: What facts supported joint-adventure treatment?

A: The school bought the gasoline for its own account, retained the lease and paid rent, while its return included a per-gallon component tied to sales. The hearing officer characterized this as community interest and profit/loss sharing.

Q: Did the hearing officer treat the school only as a landlord?

A: No. The officer classified it as a joint adventurer and gasoline retailer.

Q: Was this the Board's final decision?

A: No. It is a hearing officer's decision and recommendation and supplies no final Board action.

Q: Was $7,811 the tax due?

A: The protested-item table labels $7,811 Taxable sales understated; it does not state that amount as tax. The tax computation is absent.

Q: What happened to the 50-percent offer?

A: The source only says staff lacked authority to compromise the claimed liability and recommends no adjustment.

Q: Does the supporting source say each party was individually liable for joint-venture debts?

A: No. That statement appears on the live annotation, not in the supplied recommendation.

Citations and references

• 28 California Jurisprudence 2d, Joint Adventurers, section 3 — community-interest and profit/loss-sharing proposition cited in the recommendation
• November 13, 1974 letter and office discussion summary — referenced or quoted but not separately included
• Petition, dual determination, lease, agreement, gasoline and merchandise records, permit, returns, estimated-sales workpapers, tax computation, hearing evidence, settlement correspondence, final Board action and outcome — described or implicated but not included

Verbatim support

From the official January 20, 1975 hearing recommendation:

The tax deficiency is measured by estimated gasoline sales. No issue is presented with respect to the amount of the tax deficiency.

It was to receive reimbursement for the cost of the gasoline and $100 per month, or $.03 per gallon of gasoline, whichever amount was greater.

In view of this, we conclude that the school was properly classified as a joint adventurer and retailer of the property A joint venture existed by reason of a community interest in the venture, and a sharing of profits and losses (see 28 Cal. Jur. 2d, Joint Adventurers, §3).

It is recommended that the tax be redetermined without adjustment.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 415.0085
• Original supporting recommendation: 415.0085 PDF

Original ruling text

STATE OF CALIFORNIA
BOARD OF EQUALIZATION

415.0085

In the Matter of the Petition
for Redetermination Under the
Sales and Use Tax Law

DECISION AND RECOMMENDATION
OF HEARING OFFICER

Petitioner

Account No. X----------------------

This matter came on regularly for hearing on Wednesday, December 4, 1974, at San Bernardino, California. There were no appearances for the taxpayer (see letter of November 13, 1974, in file). Mr. Lively appeared for the board. Protested Item (Period 4/1/73 to 5/31/73) Taxable sales understated.

$7,811
Contentions of the Taxpayer

The school was not a principal in the selling activity carried on by X----------------. Summary of Petition The petitioner, X------------------------, Managing Director, has entered this petition for redetermination of a dual determination issued against one X------------------------, an individual who operated a service station leased by the school. The dual determination was issued against the school as a joint adventurer in X------------------ selling operation in view of the following information (per office discussion summary): “1. The X------------------- hereinafter referred to as X------------------- had a lease on a service station which was not being operated for which monthly rental payments had to be made. “2. X------------------- was desirous of operating the station but had no money with which to stock inventory.

“3.
X------------------- entered into an agreement with X------------------- to operate the station as follows: “a) X------------------- would purchase and pay for all the gasoline in their name and have it delivered to the station. “b) Any other merchandise stocked or sold would be purchased and paid for by X-------------------. “c) The lease was retained in the name of X-------------------, rent would continue to be paid by X------------------“d) X------------------- would operate the station and pay to X------------------ the cost of the gasoline plus $100 per month rent or 3¢ per gallon of gasoline sold whichever was greater. X------------------- secured a seller’s permit and operated the station from April 1, 1973 to May 31, 1973. No returns were filed." The taxpayer, through its representative X-------------------, Managing Director, has generally denied the existence of a joint adventure. A preliminary hearing was scheduled to consider the petition on June 19, 1974, but the scheduled hearing was postponed in view of the health of the petitioner. A second preliminary hearing was scheduled to consider the petition on December 4, 1974. By his attorney, taxpayer’s managing director advised that he would be unable to appear for hearing on the scheduled date. The communication included an offer to settle the protested tax deficiency at 50 percent of the amount claimed to be due. The tax deficiency is measured by estimated gasoline sales. No issue is presented with respect to the amount of the tax deficiency. Analysis and Conclusions The information assembled by the field staff indicates that the school purchased the gasoline for its own account and caused it to be delivered to X-------------------. It was to receive reimbursement for the cost of the gasoline and $100 per month, or $.03 per gallon of gasoline, whichever amount was greater. In view of this, we conclude that the school was properly classified as a joint adventurer and retailer of the property A joint venture existed by reason of a community interest in the venture, and a sharing of profits and losses (see 28 Cal. Jur. 2d, Joint Adventurers, §3). A representative of the staff of the staff of the board is not authorized to enter into an agreement to compromise a claimed tax liability.

Recommendation
It is recommended that the tax be redetermined without adjustment.

W. E. Burkett, Hearing Officer

1-20-75