Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2011
Sales And Use Tax Law
CHAPTER 6. COLLECTION OF TAX
Article 4. Priority and Lien of Tax
(a) Whenever the person is insolvent.
(b) Whenever the person makes a voluntary assignment of his assets.
(c) Whenever the estate of the person in the hands of executors, administrators, or heirs is insufficient to pay all the debts due from the deceased.
(d) Whenever the estate and effects of an absconding, concealed, or absent person required to pay any amount under this part are levied upon by process of law.
This section does not give the state a preference over any lien or security interest which was recorded or perfected prior to the time when the state records or files its lien as provided in Section 7171 of the Government Code.
The preference given to the State by this section shall be subordinate to the preferences given to claims for personal services by Sections 1204 and 1206 of the Code of Civil Procedure.
History.—Stats. 1977, Ch. 481, operative July 1, 1978, deleted "recorded lien which attached prior to the date when the amounts required to be paid became a lien." in second paragraph of (d) and added the language following "over any". Stats. 1980, Ch. 600, operative January 1, 1981, substituted "as provided in Section 7171 of the Government Code" for "pursuant to subdivision (b) or (c) of Section 6757".
Expenses of last illness and family allowance prior to sales tax.—Expenses of last illness and family allowance are entitled to priority of payment over a claim for sales tax owing by decedent. Estate of Jacobs (1943) 61 Cal.App.2d 152.
Prior lien creditor.—The state has no preference over a creditor who has a prior lien, recorded or not. Durkin v. Durkin (1955) 133 Cal.App.2d 283.
Interest and penalties.—Where the taxpayer makes a voluntary assignment for the benefit of creditors, the state has priority as to interest and penalties accruing subsequent to the date of assignment as well as to the taxes and the interest and penalties accruing up to the date of the assignment. People v. Warfel (1958) 162 Cal.App.2d 400.
Transfer of liquor license.—Preferred wage claims of employees and federal tax liens are not being subordinated to state tax claims when an assignee for the benefit of creditors or a receiver in bankruptcy makes prior payment of delinquent state sales and use taxes and unemployment contributions, as a condition to the renewal or transfer of a liquor license pursuant to Section 24049 of the California Business and Professions Code since this isn't a question relating to priority of liens or claims, but rather one relating to the nature of the property rights to which such liens and claims attach. United States v. California (1960) 281 F.2d 726; Meyer v. Bass (1960) 281 F.2d 728.
Liability of receiver.—A receiver who collects and withholds sales and unemployment disability taxes is liable in his representative capacity as a receiver for the payment of such funds on a priority basis in case of the insolvency of the receivership estate. Stewart v. State of California (1969) 272 Cal.App.2d 345.
Property in hands of receiver.—A dealer's reserve account which passes into the hands of a receiver is a part of a tax debtor's "assets" against which the state has a priority claim. Wright v. Standard Engineering Corp. (1972) 28 Cal.App.3d 244.