Could a buyer recover use tax paid on a private-party vehicle purchase after the FBI identified the car as stolen and confiscated it?

Plain-English summary

A buyer paid $4,000 to a private seller for an automobile and paid $200 of use tax when registering it. After nine months of use, the FBI informed the buyer that the car had been stolen and confiscated it for the rightful owner.

Counsel said use tax did not apply. The seller had no title to transfer, and the buyer's temporary possession was not the type of transfer that the Board treated as a substitute for title under section 6010.

The buyer was entitled to a refund of the $200 paid. The letter was treated as a refund claim, with payment to be issued in the corporate name because that entity had paid the tax.

What this means for you

Buyers who lose a vehicle because the seller lacked title

The historical refund depended on the seller never having valid title and the rightful owner reclaiming the property.

Accountants and tax professionals

Preserve the purchase agreement, tax receipt, title records, law-enforcement notice, confiscation proof, and identity of the person or entity that paid tax.

Common questions

Q: What did the buyer pay for the car?

A: $4,000.

Q: How much use tax was paid?

A: $200.

Q: How long did the buyer use the vehicle?

A: Nine months before FBI confiscation.

Q: Why was tax refunded?

A: The seller had no title to transfer, and the rightful owner reclaimed the car.

Citations and references

• California Revenue and Taxation Code §§ 6010 and 6201

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 585.0200
• Original supporting opinion: 585.0200 PDF

Original ruling text

STATE OF CALIFORNIA

585.0200

STATE BOARD OF EQUALIZATION
February 3, 1970

Dear Mr. ______
Mr. John Quick referred your letter of January 23, 1970 to the undersigned for reply. You purchased an automobile from a private party for $4,000 and paid $200 use tax upon registration. After you had used the vehicle for nine months, you were contacted by the F.B.I. who informed you the auto was stolen and confiscated it. You ask whether you are entitled to a refund of the $200 use tax paid. Section 6201 of the Revenue and Taxation Code imposes an excise tax on the use of tangible personal property purchased for use in this state. Section 6010 defines “purchase” to include “(a) Any transfer of title or possession, exchange, or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration. ‘Transfer of possession’, includes only transactions found by the Board to be in lieu of a transfer of title, exchange, or barter.” The type of transfer involved in your case if not the type usually found by the Board to be in lieu of a transfer of title. In my opinion, therefore, your purchase of a vehicle from a seller who did not hold title, where possession was subsequently reclaimed by the rightful owner, is not subject to use tax; and you are entitled to a refund of the amount paid. I will treat your letter as a claim for refund and forward it to our petition and refund unit for processing. The refund, however, will have to be made in the corporate name as that is the person paying the tax. Very truly yours,

Lawrence A. Augusta
Assistant Counsel
LAA:ph [lb]