Was a yacht bought from a U.S. Marshal under a federal admiralty-court order exempt from California use tax?

Plain-English summary

A federal district court ordered sale of a libeled yacht in an admiralty case. The U.S. Marshal conducted the sale, and the purchaser claimed the section 6402 exemption for property bought from an unincorporated federal agency or instrumentality.

The memorandum treated the Marshal as the retailer and as a federal instrumentality. The exemption did not depend on the retailer owning the property, and neither the surplus-property nor contractor-inventory exception appeared to apply.

The Marshal was liquidating an asset rather than conducting a business. Drawing on bankruptcy-liquidation cases, the memorandum found 28 U.S.C. section 960 inapplicable and concluded the purchaser should prevail.

What this means for you

Admiralty-sale bidders, vessel registrants, and maritime tax advisers

Retain the federal court order and Marshal sale documents. A judicial liquidation by a federal officer may differ from both an ordinary private sale and a federal lien-enforcement sale.

Common questions

Q: Was the Marshal treated as the retailer?

A: Yes.

Q: Did the Marshal need to own the yacht?

A: No.

Q: Was the purchaser exempt from use tax?

A: Yes, under section 6402 as applied in the memorandum.

Citations and references

• California Revenue and Taxation Code §§ 6005, 6275, and 6402
• 28 U.S.C. § 960
• State Board of Equalization v. Boteler, 131 F.2d 386
• State Board of Equalization v. Goggin, 191 F.2d 726

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 560.0260
• Original supporting opinion: 560.0260 PDF

Original ruling text

State of California

Board of Equalization

560.0260

Memorandum
To:

REDACTED TEXT

From:

Robert H. Anderson

Subject:

Sale of a Yacht by a U. S. Marshal

Date:

December 2, 1965

The admiralty case (REDACTED TEXT) involved the sale of a libeled yacht. The sale was ordered by the U.S. District Court for the Northern District of California, Southern Division. The sale was made by the U.S. Marshal and the purchaser, REDACTED TEXT, is claiming an exemption from use tax under Section 6402 of the Sales and Use Tax Law. The basis of his claim is that the Marshal is an officer of the Federal Court and as such is an instrumentality of the U.S. Government. Section 6402 reads in part: The storage, use or other consumption in this State of property purchased from any unincorporated agency or instrumentality of the United States, except (a) any property reported to the Surplus Property Board of the United States, or to any agency succeeding to the functions of that board, as surplus property by any owning agency and (b) any property included in any contractor inventory, is exempted from the use tax. Section 6275 of the Sales and Use Tax Law reads: Every person making any retail sale of a vehicle required to be registered under the Vehicle Code or of a vessel or an aircraft as defined in this article, is a retailer for purposes of this part of the vehicle, vessel or aircraft, regardless of whether he is a retailer by reason of other provisions of this part. (Emphasis added.) Receivers, trustees, and the United States are included in the definition of a person under Section 6005 of the Sales and Use Tax Law. Executors and administrators of estates are the persons making sales in probate matters. Thus, it seems clear that the Marshal made the sale of the yacht and is the "retailer" of the yacht. A Marshal is an officer of the United States. Henry v. Sowles (D.C. Vt. 1886) 28 F. 481. It follows that the Marshal is an "instrumentality" of the United States Government.

Section 6402 states that property purchased from an instrumentality is exempt from use tax. There are exceptions, but the yacht does not appear to come under any of them. The exemption does not turn on a requirement that the retailer own the property sold. Section 960, title 28, of the United States Code reads: Any receiver, liquidator, referee, trustee or other officers or agents appointed by any United States Court who is authorized by said court to conduct any business, shall, from and after the enactment of this act, be subject to all state and local taxes applicable to such business the same as if such business were conducted by an individual or corporation. (Emphasis added.) The bankruptcy cases (State Board of Equalization v. Boteler, 131 F.2d 386; State Board of Equalization v. Goggin, 191 F.2d 726) have held that the trustee in bankruptcy is not conducting a business when he sells business assets in the course of liquidating the business, and the provisions of 28 U.S.C. 960 are not applicable because that section specifically required the officer, trustee or agent to "conduct the business". Section 960 of the United States Code is not specifically limited to bankruptcy matters so sales made by the U.S. Marshal acting under orders by the Federal Court in admiralty matters should be considered the same as sales made by a trustee acting under orders of the Federal Court in bankruptcy matters. The Marshal in the admiralty matter was not conducting a business. Instead, he was liquidating an asset - the yacht. It seems that the purchaser, REDACTED TEXT, should prevail under Section 6402 of the Sales and Use Tax Law and also under the case law in the Goggin and Boetler decisions. RHA:dse [lb]