When did tax counsel recommend removing a retailer's separately labeled surcharge collections from taxable gross receipts?

Plain-English summary

After a preliminary hearing on a petition for redetermination, tax counsel recommended deleting amounts labeled surcharge from the measure of tax.

The recommendation was expressly conditional. The retailer had to have formally notified patrons of the surcharge and its amount, returned the surcharge receipts to the club or organization for which it collected them, and made the collections only at functions not open to the general public.

Because the retailer had already paid the disputed tax, the recommended adjustment would produce a refund on the amounts removed. An earlier letter already included both the petition for redetermination and a refund claim, so no new claim was needed after the adjustment.

Common questions

Was every labeled surcharge excluded from gross receipts?

No. The recommendation depended on all of the stated conditions.

Did patrons have to receive notice?

Yes, including formal notice of the surcharge and its amount.

Could the retailer keep the surcharge receipts?

No. The source required their return to the club or organization.

Was this a final ruling after the hearing?

The letter states a recommendation contingent on the facts, not a final Board determination.

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/550-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/550-1100.pdf

Original ruling text

550.1100

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

August 6, 1965

Gentlemen:
This is with reference to your client’s petition for redetermination of tax liability and the preliminary hearing held on the matter last May 19. We are recommending that there be an adjustment to delete from the measure of tax the sums of money collected by your client and labeled surcharge. The adjustment is contingent upon your client’s having formally notified its patrons of the surcharge, the amount collected, and the return of the surcharge receipts to the club or organization for whom it was collected. Also, the functions during which the collections were made were not open to the general public. We note that your client has paid the tax in question. Therefore, our recommendation will have the effect of recommending a refund of tax on any amounts deleted from the measure of tax. Your letter of April 6, 1965 to Mr. R. N. Zambelich, includes a petition for redetermination and a claim for refund. Thus, it will not be necessary to resubmit a claim following the above recommended adjustment. Very truly yours,

Robert H. Anderson
Associate Tax Counsel

RHA:dse

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