How did California sales-tax staff classify and register an out-of-state limited liability company in 1993, before California regulated LLCs?

Plain-English summary

On August 18, 1993, Out-of-State District employee John Gibbs asked whether LLCs encountered in four states should be treated as corporations or limited partnerships. He attached a Texas certificate. The October 18 Legal Division response said Colorado, Florida, Kansas, Nevada, Texas, Utah, Virginia and Wyoming authorized LLCs, while California had not recognized or regulated the form and an introduced California bill had not passed.

The source quotes commercial-reporter background describing LLCs as sharing partnership and corporate characteristics. It also quotes federal classification rules: former Regulation 301.7701-2's four corporate characteristics, Revenue Ruling 88-76 for a Wyoming LLC, and letter rulings for Florida and Utah LLCs. Those materials supplied federal income-tax context, not the California sales-tax conclusion.

Tax Counsel Thomas Cooke concluded that an LLC validly formed under another state's law was a section 6005 person, responsible for California sales and use tax and required to register as a seller.

Staff recommended that any permit clearly say the entity was not a corporation and record it as (name), a (State) limited liability company.

For collection from members, the memorandum said staff found no California legislation or case law then either permitting or prohibiting member liability for LLC debts. Section 6829 could impose corporate-officer liability in some circumstances but was inapplicable to LLCs. Because the Sales and Use Tax Law did not mention LLCs and courts or the Legislature supplied no direction, counsel found no authority at that time to impose an LLC's tax on its members.

The included Texas certificate, dated December 30, 1992 and effective January 1, 1993, confirms a redacted LLC's organization. The included articles state a maximum 30-year duration, any lawful LLC business purpose, a Texas office and agent, and management reserved to named redacted members. These are background records; the opinion does not say that this company actually sold in California or received a permit.

Source posture and later-law warning

The live 415.0110 annotation, in the 2026 revision of the Business Taxes Law Guide, preserves the eight-state background, historical California nonrecognition, person and permit result, entity/state permit notation, and historical lack of member-liability authority. It adds (Note.—Statutory change re California limited liability companies.) without identifying the statute or date. It omits the requester, Texas certificate and articles, named states, federal classification sources, failed bill, distinction between no authority and an affirmative prohibition, missing transaction and permit records, and absence of an applied outcome.

CDTFA's Annotated Legal Opinions collection says statutory law controls over an inconsistent annotation. The official six-page PDF has a clean native text layer, recurring letterhead stencils and two page-4 seal/signature images; the text itself did not require OCR. pdftotext reports nonfatal marked-content syntax warnings, but two downloads and two extractions were identical. The source prints Commercial Clearance House and herby; those forms remain verbatim. The original-text tail remains byte-identical to its committed version and fresh extraction after removing only terminal extractor whitespace.

What this means for you

LLCs and tax professionals

This memorandum documents a transitional 1993 treatment, not today's California LLC regime. Identify the exact entity form and organizing law on registration records, but analyze current member, manager, officer, responsible-person, successor and collection rules independently.

Common questions

Q: Did staff treat an out-of-state LLC as a corporation or partnership?

A: Neither label controlled the California sales-tax result. Staff treated the LLC itself as a statutory person and recommended expressly naming its LLC form and organizing state.

Q: Did the LLC have to register as a seller?

A: Yes when it engaged in California selling activities, according to the historical memorandum. The source supplies no actual application or permit.

Q: Could the Board assess the LLC's members personally?

A: Staff found no authority under California law as it stood in October 1993 and said section 6829 did not apply. The live annotation warns of a later statutory change.

Q: What did the included Texas records establish?

A: They showed one redacted Texas LLC was organized effective January 1, 1993, had a maximum 30-year duration and was member-managed. They do not show California sales or registration.

Q: Is the historical member-liability conclusion current?

A: No such inference is warranted. It rested on the law then available, and the live annotation expressly flags later statutory change.

Citations and references

• California Revenue and Taxation Code sections 6005 and 6829
• Federal Regulation 301.7701-2; Revenue Ruling 88-76; Letter Rulings 8937010, 9010027 and 9219022
• Commercial Clearing House State Tax Reporter, Texas, section 5-013; Texas Limited Liability Company Act; Texas Business Corporation Act article 10.03
• Unnumbered California LLC bill described as introduced but not passed
• Seller identity and activities, application, permit, sales, returns, tax liability, collection, dispute and outcome — absent

Verbatim support

From the official October 18, 1993 memorandum and attachments:

A limited liability company formed under the laws of another state is a "person" within the meaning of Revenue and Taxation Code section 6005 and will be responsible for California Sales and Use Tax and is required to register as a "seller".

It is our recommendation that the Board's records note that the entity as “(name), a (State) limited liability company.”

Since California's Sales and Use Tax Law does not mention limited liability companies, in the absence of any direction from California courts or the Legislature, there is no authority to impose any tax liability accruing to a limited liability company on the company's members.

We have run across this in four states at this point and are not sure if we should treat them as corporations or a form of limited partnership.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 415.0110
• Original supporting opinion: 415.0110 PDF

Original ruling text

STATE OF CALIFORNIA

415.0110

STATE BOARD OF EQUALIZATION

Memorandum

To:

Mr. John Gibbs
Out-of-State Sacramento
District Office - OH

From:

Thomas Cooke, Tax Counsel
Legal Division – MIC:82

Subject:

LIMITED LIABILITY COMPANIES

Date:

October 18, 1993

The Legal Division has received your memorandum dated August 18, 1993 in which you state that some states have authorized a form of company ownership called limited liability companies. You also state that at least four states have created this type of entity and you ask if the Board should treat these entities as corporations or limited partnerships. The following statement appears in Commercial Clearance House, State Tax Reporter, Texas, § 5-013: "Effective August 26, 1991, Texas authorizes the creation of limited liability companies. A limited liability company is a business entity that shares characteristics of both partnerships and corporations. Like a partnership, a limited liability company is a pass-through entity in which the profits and losses are passed through to its members. However, unlike a limited partnership in which the individual partners are personally liable for amounts up to and including the amount of their contributions to the partnership or a general partnership in which all members are liable for the partnership obligations, members of a limited liability company incur no personal liability. The characteristics of a limited liability company are also similar to those of a 'S' corporation, but limited liability companies are not subject to the many restrictions placed on 'S' corporations, such as the limitations on the number and types of shareholders, the allowable classes of stock, and the flow-through of losses …. "For federal purposes, for a limited liability company to be treated as a partnership it must have more partnership characteristics than corporate characteristics. Under federal Regulation 301.7701-2, an association may avoid

STATE OF CALIFORNIA

415.0110

STATE BOARD OF EQUALIZATION
classification as 'an association taxable as a corporation' if it lacks at least two of the following four corporate characteristics: (1) continuity of life, (2) centralization of management, (3) limited liability, and (4) free transferability of interests. In Rev. Rul. 88-76, the IRS classified a Wyoming limited liability company as a partnership for federal income tax purposes. The IRS has also issued letter rulings determining that specific limited liability companies organized in Florida (Ltr. Ruls. 8937010 and 9010027) and Utah (Ltr. Rul. 9219022) will also be treated as partnerships for federal income tax purposes even if they are treated as corporations by the state in which they are organized." Among the states which permit the formation of limited liability companies are Colorado, Florida, Kansas, Nevada, Texas, Utah, Virginia and Wyoming. California has not recognized, or regulated, the concept of a limited liability company. A bill to permit the formation of limited liability companies in California was introduced in the California Legislature but was not passed. A limited liability company formed under the laws of another state is a "person" within the meaning of Revenue and Taxation Code section 6005 and will be responsible for California Sales and Use Tax and is required to register as a "seller". We recommend that any permit issued to a limited liability company clearly indicate that the entity is not a corporation. It is our recommendation that the Board's records note that the entity as “(name), a (State) limited liability company.” With respect to collections, we have been unable to discover any California legislation or case law which either permits or prohibits personal liability of a limited liability company's members for the debts of the entity. Revenue and Taxation Code section 6829 which, in some circumstances, imposes liability on corporate officers for the tax liability of a corporation is inapplicable to limited liability companies. Since California's Sales and Use Tax Law does not mention limited liability companies, in the absence of any direction from California courts or the Legislature, there is no authority to impose any tax liability accruing to a limited liability company on the company's members. TJC:plh LimLiab.gib cc:

Mr. Gary Jugum - MIC:82
Mr. James Speed - MIC:47
Mr. Glenn Bystrom - MIC:49
Ms. Sue Coty - MIC:46
Mr. Gordon Adelman - MIC:82

STATE OF CALIFORNIA

415.0110

STATE BOARD OF EQUALIZATION

Memorandum
To:

Legal Division – MIC:82

From:

John Gibbs
Out of State District

Subject:

Limited Liability Companies

Date:

August 18, 1993

Some states have authorized a form of company ownership called limited liability companies. We have run across this in four states at this point and are not sure if we should treat them as corporations or a form of limited partnership. Attached is a copy of a certificate from Texas. I was wondering if you have any information on this issue and could provide us with some guidance.

415.0110

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

The State of Texas
SECRETARY OF STATE
CERTIFICATE OF ORGANIZATION
OF
X--------------------------------------The undersigned, as secretary of State of Texas, herby certifies that the attached Articles of Organization for the above named company have been received in this office and have been found to conform to law. ACCORDINGLY, the undersigned, as Secretary of State, and by virtue of the authority vested in the Secretary by law, hereby issues this Certificate of Organization. Issuance of this Certificate of Organization does not authorize the use of a company name in this state in violation of the rights of another under the federal Trademark Act of 1946, the Texas trademark law, the Assumed Business or Professional Name Act, or the common law. Dated

December 30, 1992

Effective

January 1, 1993 at 12:00 a.m.

John Hannah Jr.
Secretary of State

STATE OF CALIFORNIA

415.0110

STATE BOARD OF EQUALIZATION
IN WITNESS WHEREOF, I have hereunto set my hand this 30th day of December, 1992. The Articles of Organization will become effective on January 1, 1993 at 12:00 a.m. in accordance with the provisions of Article 10.03 of the Texas Business Corporation Act. Gerald A. O’Brien, Organizer P.O. Box 3646 Houston, Texas 77253-3646

415.0110

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
ARTICLES OF ORGANIZATION
OF
X-----------------------------

ARTICLE ONE
The name of the limited liability company is X----------------------.

ARTICLE TWO
The period of duration of the Company shall be a maximum of thirty (30) years from the date of the filing of these Articles of Organization with the Secretary of State of the State of Texas or until termination of the Company in accordance with the Regulations of the Company.

ARTICLE THREE
The purpose for which the Company is organized is the transaction of any and all lawful business for which limited liability companies may be organized under the Texas Limited Liability Company Act (the “Act”).

ARTICLE FOUR
The address of the principal place of business of the Company in the State of Texas is X------------, Houston, Texas and the name and address of its registered agent in the state is X---------------------, Houston, Texas.

ARTICLE FIVE
The management of the Company is reserved to the members, and the names addresses of the members are as follows: Name

Address

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

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