Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2016
Sales And Use Tax Law
CHAPTER 10. VIOLATIONS
- 7151. Criminal penalties. [Repealed.]
- 7152. Criminal penalties.
- 7153. Same.
- 7153.5. Same.
- 7153.6. Criminal penalties: sales suppression device or software.
- 7154. Statute of limitations.
- 7155. 50 percent penalty.
- 7156. Civil proceedings.
- 7157. Restitution orders.
CHAPTER 10. VIOLATIONS
7152. Criminal penalties. (a) Any person required to make, render, sign, or verify any report who makes any false or fraudulent return, with intent to defeat or evade the determination of an amount due required by law to be made is guilty of a misdemeanor punishable as provided in Section 7153.
(b) Any person who willfully aids or assists in, or procures, counsels, or advises in, the preparation or presentation, in connection with any matter arising under this part, of a return, affidavit, claim, or other document that is fraudulent or false as to any material matter, whether or not the falsity or fraud is with the knowledge or consent of the person authorized or required to present the return, affidavit, claim, or document, is guilty of a misdemeanor punishable as provided in Section 7153.
History.—Added by Stats. 1941, Ch. 36. Stats. 1984, Ch. 1490, effective September 27, 1984, deleted all text after "misdemeanor," and added "punishable . . . Section 7153" after "misdemeanor." Stats. 1994, Ch. 903, in effect January 1, 1995, added subdivision letter designation (a) before first paragraph and added subdivision (b).
7153. Same. Any violation of this part by any person, except as otherwise provided, is a misdemeanor. Each offense shall be punished by a fine of not less than one thousand dollars ($1,000) and not more than five thousand dollars ($5,000), or imprisonment not exceeding one year in the county jail, or both the fine and imprisonment in the discretion of the court.
History.—Added by Stats. 1941, Ch. 36. Stats. 1984, Ch. 1490, effective September 27, 1984, deleted all text after "part" and added "by any person . . . of the court" after "part."
7153.5. Same. Notwithstanding any other provision of this part, any person who violates this part with intent to defeat or evade the reporting, assessment, or payment of a tax or an amount due required by law to be made is guilty of a felony when the amount of unreported tax liability aggregates twenty-five thousand dollars ($25,000) or more in any 12-consecutive-month period. Each offense shall be punished by a fine of not less than five thousand dollars ($5,000) and not more than twenty thousand dollars ($20,000), or imprisonment for 16 months, two years, or three years, or both the fine and imprisonment in the discretion of the court.
History.—Added by Stats. 1987, Ch. 1064, effective January 1, 1988. Stats. 1989, Ch. 654, in effect January 1, 1990, substituted "Deputy Director, Business Taxes," for "principal tax auditor," and "designee" for "supervisor" in the second sentence. Stats. 1992, Ch. 902, in effect September 25, 1992, operative January 1, 1993, substituted "person who violates" for "violation" after "part, any", deleted "by any person" after "this part" in the first sentence and deleted former second sentence which stated, "The determination shall be approved by the Deputy Director, Business Taxes, or that person's designee." Stats. 1994, Ch. 903, in effect January 1, 1995, substituted "reporting . . . a tax or" for "determination of" after "evade the" and added "unreported" after "amount of" in the first sentence.
7153.6. Criminal penalties: sales suppression device or software. (a) Notwithstanding any other provision of this part, any person who purchases, installs, or uses in this state any automated sales suppression device or zapper or phantom-ware with the intent to defeat or evade the determination of an amount due pursuant to this part is guilty of a misdemeanor.
(b) (1) Any person who, for commercial gain, sells, purchases, installs, transfers, or possesses in this state any automated sales suppression device or zapper or phantom-ware with the knowledge that the sole purpose of the device is to defeat or evade the determination of an amount due pursuant to this part is guilty of an offense punishable by a fine as specified in paragraph (2), by imprisonment in a county jail for not more than one year, or, pursuant to subdivision (h) of Section 1170 of the Penal Code, for 16 months, or two or three years, or by both that fine and imprisonment. In addition, any person who uses an automated sales suppression device or zapper or phantom-ware shall be liable for all taxes, interest, and penalties due as a result of the use of that device.
(2) (A) Where a person is guilty of the offense described in paragraph (1) and the person sold, installed, transferred, or possessed three or fewer automated sales suppression devices or zappers or phantom-ware, that person shall be guilty of an offense punishable by a fine of not more than five thousand dollars ($5,000).
(B) Where a person is guilty of the offense described in paragraph (1) and the person sold, installed, transferred, or possessed more than three automated sales suppression devices or zappers or phantom-ware, that person shall be guilty of an offense punishable by a fine of not more than ten thousand dollars ($10,000).
(3) This subdivision shall not apply to a person that is a corporation that possesses any automated sales suppression device or zapper or phantom-ware for the sole purpose of developing hardware or software to combat the evasion of taxes by use of automated sales suppression devices or zappers or phantom-ware.
(c) For purposes of this section:
(1) "Automated sales suppression device" or "zapper" means a software program carried on a memory stick or removable compact disc, accessed through an Internet link, or accessed through any other means, that falsifies the electronic records of electronic cash registers and other point-of-sale systems, including, but not limited to, transaction data and transaction reports.
(2) "Electronic cash register" means a device that keeps a register or supporting documents through the means of an electronic device or computer system designed to record transaction data for the purpose of computing, compiling, or processing retail sales transaction data in whatever manner.
(3) "Phantom-ware" means a hidden, preinstalled, or installed at a later time programming option embedded in the operating system of an electronic cash register or hardwired into the electronic cash register that can be used to create a virtual second till or may eliminate or manipulate transaction records that may or may not be preserved in digital formats to represent the true or manipulated record of transactions in the electronic cash register.
(4) "Transaction data" includes information regarding items purchased by a customer, the price for each item, a taxability determination for each item, a segregated tax amount for each of the taxed items, the amount of cash or credit tendered, the net amount returned to the customer in change, the date and time of the purchase, the name, address, and identification number of the vendor, and the receipt or invoice number of the transaction.
(d) This section shall not preclude prosecution under any other law.
History.—Added by Stats. 2013, Ch. 532 (AB 781), in effect January 1, 2014.
7154. Statute of limitations. Any prosecution for violation of any of the penal provisions of this part shall be instituted within five years after the commission of the offense, or within two years after the violation is discovered, whichever is later.
History.—Added by Stats. 1953, p. 3385, in effect September 9, 1953. Stats. 1986, Ch. 1361, effective January 1, 1987, added, "or within two years after the violation is discovered, whichever is later." Stats. 1992, Ch. 902, in effect September 25, 1992, operative January 1, 1993, substituted "five" for "three" after "instituted within".
Note.—Sec. 41, Stats. 1986, Ch. 1361 required that:
(a) On January 15 of each year from 1988 to 1992, inclusive, the State Board of Equalization and the Franchise Tax Board shall submit a report to the Legislature on implementation of the provisions of this act, with the exception of Section 40 of this act (for which separate reporting requirements are set out).
(b) The revenue and taxation policy committees of each house of the Legislature shall hold a public hearing no later than June 30 of each year from 1988 to 1992, inclusive, on the reports submitted pursuant to subdivision (a).
(c) The intent of this section is to assure the Legislature the opportunity to oversee the implementation of this act. The intent of the Legislature in enacting this act is to improve enforcement and voluntary compliance with the tax system and cash-pay reporting rules. The intent of the Legislature in enacting this act is not to cause harassment of or undue burden on innocent taxpayers.
Sec. 41 applies to the following Revenue and Taxation Code Sections: 6069, 6071, 6366, 6366.1, 6368, 6368.1, 6452, 6455, 6776, 6777, 7154, 8404, 9355, 30481, 32556, 40188, 41143, and 44186.
7155. 50 percent penalty. (a) Any person who, for the purpose of evading the payment of taxes due under this part, knowingly fails to obtain a valid permit prior to the date on which the first tax return is due shall be liable for a penalty of 50 percent of any tax determined to be due for the period during which the person engaged in business in this state as a seller without a valid permit.
(b) This section shall not apply to any person whose measure of tax liability over the period during which he or she was engaged in business in this state as a seller without a valid permit averaged one thousand dollars ($1,000) or less per month.
(c) This section shall not apply to the amount of taxes due on the sale or use of a vehicle, vessel, or aircraft, if the amount is subject to the penalty imposed by Section 6485.1 or Section 6514.1.
History.—Added by Stats. 1984, Ch. 1490, effective September 27, 1984.
(1) Brought by or against the State of California in connection with the determination, collection, or refund of any tax, interest, or penalty under this part, and
(2) Brought in a court of record of this state, the prevailing party may be awarded a judgment for reasonable litigation costs incurred in that proceeding.
(b) (1) A judgment for reasonable litigation costs shall not be awarded under subdivision (a) unless the court determines that the prevailing party has exhausted the administrative remedies available to that party under this part.
(2) An award under subdivision (a) shall be made only for reasonable litigation costs which are allocable to the State of California and not to any other party to the action or proceeding.
(3) No award for reasonable litigation costs may be made under subdivision (a) with respect to any declaratory judgment proceeding.
(4) No award for reasonable litigation costs may be made under subdivision (a) with respect to any portion of the civil proceeding during which the prevailing party has unreasonably protracted that proceeding.
(c) For purposes of this section—
(1) The term "reasonable litigation costs" includes any of the following:
(A) Reasonable court costs.
(B) Based upon prevailing market rates for the kind or quality of services furnished any of the following:
(i) The reasonable expenses of expert witnesses in connection with the civil proceeding, except that no expert witness shall be compensated at a rate in excess of the highest rate of compensation for expert witnesses paid by the State of California.
(ii) The reasonable cost of any study, analysis, engineering report, test, or project which is found by the court to be necessary for the preparation of the party's case.
(iii) Reasonable fees paid or incurred for the services of attorneys in connection with the civil proceeding, except that those fees shall not be in excess of seventy-five dollars ($75) per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceeding, justifies a higher rate.
(2) (A) The term "prevailing party" means any party to any proceeding described in subdivision (a) (other than the State of California or any creditor of the taxpayer involved) which—
(i) Establishes that the position of the State of California in the civil proceeding was not substantially justified, and
(ii) (I) Has substantially prevailed with respect to the amount in controversy, or
(II) Has substantially prevailed with respect to the most significant issue or set of issues presented.
(B) Any determination under subparagraph (A) as to whether a party is a prevailing party shall be made—
(i) By the court, or
(ii) By agreement of the parties.
(3) The term "civil proceeding" includes a civil action.
(d) For purposes of this section, in the case of—
(1) Multiple actions which could have been joined or consolidated, or
(2) A case or cases involving a return or returns of the same taxpayer which could have been joined in a single proceeding in the same court, these actions or cases shall be treated as one civil proceeding regardless of whether the joinder or consolidation actually occurs, unless the court in which the action is brought determines, in its discretion, that it would be inappropriate to treat these actions or cases as joined or consolidated for purposes of this section.
(e) An order granting or denying an award for reasonable litigation costs under subdivision (a), in whole or in part, shall be incorporated as a part of the decision or judgment in the case and shall be subject to appeal in the same manner as the decision or judgment.
(f) For purposes of this section, "position of the State of California" includes either of the following:
(1) The position taken by the State of California in the civil proceeding.
(2) Any administrative action or inaction by the State Board of Equalization (and all subsequent administrative action or inaction) upon which that proceeding is based.
History.—Added by Stats. 1988, Ch. 1138, in effect January 1, 1989.
Costs awarded under Taxpayer's Bill of Rights should not be offset.—Litigation costs awarded under the Taxpayer's Bill of Rights are not an ordinary debt to the taxpayer which can be offset under Government Code sections 12419.4 and 12419.5. Garg v. State Board of Equalization(1997) 53 Cal.App.4th 199.
This section complements, but does not supplant, provisions for awards of costs under Code of Civil Procedure.—If the trial court determines that the state's position was not "substantially justified" as provided in section 7156, claimant may be awarded "reasonable litigation costs," including reasonable attorney fees. The court may, despite finding that the Board's position was substantially justified, award costs under Code of Civil Procedure section 1032. Agnew v. State Board of Equalization (2005) 134 Cal.App.4th 899.
7157. Restitution orders. (a) (1) Restitution orders or any other amounts imposed by a court of competent jurisdiction for criminal offenses upon a person or any other entity that are due and payable to the board may be collected by the board in any manner provided by law for collection of a delinquent sales and use tax liability, including, but not limited to, issuance of an order and levy under Article 4 (commencing with Section 706.070) of Chapter 5 of Division 2 of Title 9 of Part 2 of the Code of Civil Procedure in the manner provided for earnings withholding orders for taxes.
(2) Amounts imposed by a court of competent jurisdiction as an order of restitution for criminal offenses shall be treated as final and due and payable to the State of California on the date that amount is established on the records of the board.
(b) Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), Part 1.6 (commencing with Section 7251), and Part 1.7 (commencing with Section 7285) shall apply to amounts collected under this section in the same manner and with the same force and effect and to the full extent as if the language of those laws had been incorporated in full into this section, except to the extent that any provision is either inconsistent with this section or is not relevant to this section.
(c) Notwithstanding Chapter 7 (commencing with Section 6901), a refund or credit shall not be allowed for any amounts paid or payments applied under this section.
(d) Amounts authorized to be collected pursuant to this section may accrue interest at the greater of the rate applicable to the amounts being collected or the rate provided under Section 6591.5 from and after the date the amounts are established on the records of the board.
(e) Amounts authorized to be collected pursuant to this section shall not be subject to any statute of limitations set forth in Chapter 6 (commencing with Section 6701).
(f) Notwithstanding Section 6738 or Chapter 14 (commencing with Section 7150) of Division 7 of Title 1 of the Government Code, any portion of the amounts authorized to be collected under this section that remain unsatisfied may be collected by the recording of a notice of state tax lien. The board may record or extend a recorded notice of state tax lien at any time until the amount due, including any accrued interest, is paid in full.
(g) This section shall apply on and after January 1, 2012, to amounts authorized to be collected pursuant to this section that are due and payable to the board before, on, or after January 1, 2012.
History.—Added by Stats. 2011, Ch. 727 (AB 242), in effect January 1, 2012.