Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Stewart v. State of California . . . (1969)

Receiver Liable in Representative Capacity for Sales Tax Reimbursement Collected on Sales

The order of appointment of a receiver stated that he was authorized to conduct and operate the business, but that he would incur no personal risk for his operation of the business as receiver. After operating the business, the court discharged the receiver and ordered that he file a final account and report. The receiver reported sales tax and unemployment insurance tax to the appropriate agencies and set forth in his final account and report. However, although the receiver had collected sales tax reimbursement from customers on sales of tangible personal property and had made deductions from employees' paychecks under the provisions of the Unemployment Insurance Code, he did not pay the tax amounts to the appropriate state agencies. The State of California filed objections to the accounting and sought to prevent the discharge of the receiver, requesting a surcharge against the receiver for the tax amounts due. The trial court issued an order which approved, allowed, and settled the final account and report and exonerated the receiver's bond.

The California Court of Appeals reversed, holding that the State did not seek to hold the receiver personally liable, but sought to proceed against the bond for the receiver's failure to properly discharge his duties as receiver. The court held that a receiver who collects and withholds sales tax reimbursement and unemployment disability tax 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.4th 345.