Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales And Use Tax Law

CHAPTER 5. DETERMINATIONS

* Article 1.1 was added by Stats. 196, p. 185, in effect April 18, 1966, operative July 1, 1966.
** Article 1.2 was added by Stats. 1991, in effect January 1, 1992.
*** Article 1.5 was added by Stats. 1986, Ch. 214, Operative on July 1, 1986.
**** Article 1.6 was added by Stats. 1991, Ch. 770, operative January 1, 1992.

CHAPTER 5. DETERMINATIONS

Article 1. Returns and Payments

6451. Due date. The taxes imposed by this part are due and payable to the board quarterly on or before the last day of the month next succeeding each quarterly period.

History.—Stats. 1947, p. 1556, operative July 1, 1947, substituted "last " for "fifteenth."

Payment of tax by administrator.—An administrator operating the business of a deceased retailer is under a duty to pay the sales tax promptly. The probate court should, accordingly, direct the immediate payment of all sales taxes which are due. Estate of Morris (1940) 37 Cal.App.2d 155. See also Section 6756, which specifically provides for priority under certain circumstances.

6451.5. Qualified use tax due date. [Repealed by Stats. 2004, Ch. 527 (SB 1881), in effect January 1, 2005.]

6452. Return. (a) On or before the last day of the month following each quarterly period of three months, a return for the preceding quarterly period shall be filed with the board in the form as prescribed by the board, which may include, but not be limited to, electronic media. Returns shall be authenticated in a form or pursuant to methods as may be prescribed by the board.

(b) For purposes of the sales tax, a return shall be filed by every seller and also by every person who is liable for the sales tax under this part. For purposes of the use tax, a return shall be filed by every retailer engaged in business in this state and by every person purchasing tangible personal property, the storage, use, or other consumption of which is subject to the use tax, who has not paid the use tax due to a retailer required to collect the tax.

(c) Any retailer or other person who fails or refuses to furnish any return required to be made, or who fails or refuses to furnish a supplemental return or other data required by the board, is guilty of a misdemeanor punishable as provided in Section 7153.

History.—Stats. 1947, p. 1557, operative July 1, 1947, substituted "last" for "fifteenth" in first paragraph. Stats. 1963, p. 1491, in effect September 20, 1963, substituted "engaged in business" for "maintaining a place of business"; changed "the State" to "this State." Stats. 1978, Ch. 827, effective January 1, 1979, added "and also by every person who is liable for the sales tax under this part" following "seller" in the first sentence of the second paragraph. Stats. 1986, Ch. 1361, effective January 1, 1987, added (c), providing a penalty for failing or refusing to file a return. Stats. 1993, Ch. 1109, in effect January 1, 1994, substituted "the" for "such" before "form" in subdivision (a), added "(1)" following "(b)", added "or her" following "his" in the second sentence of subdivision (b), and added "If a return . . . that information" in paragraph (2) to subdivision (b). Stats. 1994, Ch. 903, in effect January 1, 1995, added "or federal . . . number" after "security number" in the fourth sentence of paragraph (1) of subdivision (b). Stats. 1999, Ch. 865, (SB 1302), in effect January 1, 2000, substituted "prescribed by . . . media" for "the board may prescribe" after "the form as" in subdivision (a), and relettered former subparagraphs (A) and (B) as "(a)" and "(b)" in paragraph (2) of subdivision (b). Stats. 2000, Ch. 923 (AB 2894), in effect January 1, 2001, added second sentence in subdivision (a); deleted former subparagraph designation (1) in subdivision (b), and deleted former second, third and fourth sentences therein, which stated, "Returns shall be signed by the person required to file the return or by his or her duly authorized agent but need not be verified by oath. If a return is prepared by a paid preparer, that preparer shall enter his or her name, social security number or federal employee identification number, and business name and address in the space provided on the return. Any paid preparer who fails to provide the information specified by the preceding sentence shall be subject to a fifty dollar ($50) fine for each failure to provide that information."; and deleted former subparagraph (2) of subdivision (b), which stated, "(2) For purposes of paragraph (1), "paid preparer" means any person who for compensation prepares, or employs one or more persons to prepare, any sales and use tax return required to be filed under this part. For purposes of this paragraph, the preparation of a substantial portion of any sales and use tax return required to be filed under this part shall be considered the equivalent of preparing that return in its entirety. A person is not a "paid preparer" as defined in this paragraph solely by reason of doing any of the following: (a) Furnishing typing, reproduction, or other mechanical assistance. (b) Preparing in a fiduciary capacity a return for any other person."

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.

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6452.1. Election to report use tax on California income tax return. [Repealed by Stats. 2010, Ch. 721 (SB 858), in effect October 19, 2010.]

6452.1. Election to report use tax on California income tax return. (a) Notwithstanding Section 6451, every person that purchases tangible personal property, the storage, use, or other consumption of which is subject to qualified use tax, as defined in subdivision (d), that is otherwise required to report and remit that tax pursuant to this part, may elect to report and remit qualified use tax on an acceptable tax return.

(b) (1) A person that reports qualified use tax on an acceptable tax return is deemed to have made the election authorized by this section.

(2) (A) In the case of a married individual filing a separate California personal income tax return, an election may be made to report either one-half of the qualified use tax or the entire qualified use tax on his or her separate California personal income tax return.

(B) If an individual elects to report one-half of the qualified use tax, that election will not be binding with respect to the remaining one-half of the qualified use tax owed by that individual and that individual's spouse.

(c) An election to report qualified use tax on an acceptable tax return shall be irrevocable. An acceptable tax return that contains use tax shall be considered a tax return for purposes of this part.

(d) For purposes of this section:

(1) "Acceptable tax return" means a timely filed original return that is filed pursuant to Article 1 (commencing with Section 18501), Article 2 (commencing with Section 18601), Section 18633, Section 18633.5 of Chapter 2 (commencing with Section 18501) of Part 10.2, or Article 3 (commencing with Section 23771) of Chapter 4 of Part 11.

(2) (A) Except as provided in subparagraph (B), "qualified use tax" means either of the following:

(i) For one or more single nonbusiness purchases of individual items of tangible personal property each with a sales price of less than one thousand dollars ($1,000), either of the following:

(I) The use tax imposed under this part, Article XIII of the California Constitution, in conformity with the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)), or in accordance with the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)) that has not been paid to a retailer holding a seller's permit or certificate of registration-use tax.

(II) The estimated amount of use tax as calculated by the board. The board shall annually calculate the estimated amount of use tax due according to a person's adjusted gross income and by July 30 of each calendar year make available to Franchise Tax Board such amounts in the form of a use tax table as part of the accompanying instructions of the acceptable tax return.

(ii) For one or more single nonbusiness purchases of individual items of tangible personal property each with a sales price of one thousand dollars ($1,000) or more, or for any tangible personal property purchased for use in a trade or business, the amount of use tax imposed under this part, Article XIII of the California Constitution, the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)), or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)) that has not been paid to a retailer holding a seller's permit or certificate of registration-use tax.

(B) "Qualified use tax" does not include:

(i) Use tax imposed on the storage, use, or other consumption of a mobilehome or a commercial coach that is required to be registered annually pursuant to the Health and Safety Code or use tax imposed on the storage, use, or other consumption of a vehicle subject to identification under Division 16.5 (commencing with Section 38000) of the Vehicle Code, or a vehicle that qualifies under the permanent trailer identification plate program pursuant to subdivision (a) of Section 5014.1 of the Vehicle Code.

(ii) Use tax imposed on the storage, use, or other consumption of a vehicle, vessel, or aircraft.

(iii) Use tax imposed on a lease of tangible personal property.

(iv) Use tax imposed on the storage, use, or other consumption of cigarettes, tobacco products, or cigarettes and tobacco products for which the purchaser is registered with the board as a cigarette consumer, a tobacco products consumer, or a cigarette and tobacco products consumer.

(e) (1) If a person elects to report qualified use tax on an acceptable tax return, that person shall report and remit the qualified use tax by reporting the amount due based on all taxable purchases of tangible personal property made during the taxable year for which the acceptable tax return is required to be filed. A person that has made one or more single nonbusiness purchases of individual items of tangible personal property each with a sales price of less than one thousand dollars ($1,000) may satisfy his or her tax liability for those purchases by using the use tax table shown in the accompanying instructions of the acceptable tax return.

(2) The qualified use tax shall be reported on and remitted with an acceptable tax return that is required to be filed for the taxable year in which the liability for the qualified use tax was incurred.

(f) (1) The penalties and interest imposed under this part, in conformity with the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)), or in accordance with the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)) shall apply to use tax reported as qualified use tax on an acceptable return.

(2) Any claims for refunds or credits of any use tax reported as qualified use tax on an acceptable tax return shall be made in accordance with Chapter 7 (commencing with Section 6901) of this part.

(3) Qualified use tax shall be considered to be timely reported and remitted for purposes of this part, in conformity with the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)), and in accordance with the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), if the qualified use tax is timely reported on and remitted with an acceptable tax return in accordance with the provisions of this section.

(g) Notwithstanding a person's payment of qualified use tax on an acceptable tax return, the board is not precluded from making any determinations for understatements of qualified use tax against that person in accordance with this chapter. However, with respect to one or more single nonbusiness purchases of individual items of tangible personal property each with a sales price of less than one thousand dollars ($1,000), the board shall be precluded from making any such determination against any person who uses the use tax table for purposes of satisfying his or her use tax liability when the person uses that table in accordance with the accompanying instructions.

(h) Any payments and credits shown on the return, together with any other credits associated with that person's account, of a person that elects to report qualified use tax on an acceptable tax return shall be applied in the following order:

(1) Taxes imposed under Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001), including penalties and interest, if any, imposed under Part 10.2 (commencing with Section 18401).

(2) Qualified use tax reported on the acceptable tax return in accordance with this section.

(i) (1) This section does not apply to a person who is otherwise required to hold a seller's permit or to register with the State Board of Equalization pursuant to Part 1 (commencing with Section 6001) of this division.

(2) This section applies to purchases of tangible personal property made on or after January 1, 2010, in taxable years beginning on or after January 1, 2010.

(3) The amendments made by the act adding this paragraph shall apply to purchases of tangible personal property made on or after January 1, 2011, in taxable years beginning on or after January 1, 2011.

History.—Added by Stats. 2010, Ch. 721 (SB 858), in effect October 19, 2010. Stats. 2011, Ch. 14 (SB 86), in effect March 24, 2011, (1) Substituted subdivision (d)(2)(A) for former subdivision (d)(2)(A) which read: "(A) Except as provided in subparagraph (B), 'qualified use tax' means the use tax imposed under this part, Section 35 of Article XIII of the California Constitution, in conformity with the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)), or in accordance with the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)) that has not been paid to a retailer holding a seller's permit or certificate of registration-use tax."; (2) substituted "imposed on the storage, use, or other consumption of" for "that applies to" after "Health and Safety Code or use tax" in subdivision (d)(2)(B)(i); (3) substituted "the storage, use, or other consumption" for "a purchase" after "Use tax imposed on" in subdivision (d)(2)(B)(iv); (4) added the second sentence of subdivision (e)(1); (5) amended subdivision (g) by (a) substituting "this chapter" for "Part 5 (commencing with Section 6451)" after "in accordance with" in the first sentence; and (b) adding the second sentence; and (6) added subdivision (i)(3).

Former § 6452.1, similar to the present section, was added by Stats. 2003, Ch. 718, (SB 1009), in effect January 1, 2004; and repealed by Stats. 2010, Ch. 721 (SB 858), in effect October 19, 2010.

6453. Contents of return. For purposes of the sales tax, the return shall show the gross receipts of the seller during the preceding reporting period and, in the case of a person who is liable for the sales tax and is not a seller, the gross receipts of such person for the period in which the liability was incurred. For purposes of the use tax, in case of a return filed by a retailer, the return shall show the total sales price of the property sold by him or her, the storage, use, or consumption of which property became subject to the use tax during the preceding reporting period; in case of a return filed by a purchaser, except as provided in Section 6452.1, the return shall show the total sales price of the property purchased by him or her, the storage, use, or consumption of which became subject to the use tax during the preceding reporting period.

The return shall also show the amount of the taxes for the period covered by the return and any other information which the board deems necessary for the proper administration of this part.

History.—Stats. 1978, Ch. 827, effective January 1, 1979, added the phrase commencing with "and in the case of . . ." to the first sentence. Stats. 1980, Ch. 1326, effective September 30, 1980, added "the information required by Section 25377 of the Public Resources Code, if required by the board,". Stats. 1983, Ch. 337, in effect January 1, 1984, added "or her" after "him" in both instances of occurrence in the second sentence of the first paragraph, deleted "the information required by Section 25377 of the Public Resource Code, if required by the board" after "return," and substituted "any" for "such" before "other" and "which" for "as" after "information" in the second paragraph. Stats. 2010, Ch. 721 (SB 858), in effect October 19, 2010, added "except as. . . 6452.1" after "by a purchaser," in the second sentence of the first paragraph.

6454. Filing return. Except as provided in Section 6479.3 and 6479.31, a person required to file the return shall deliver the return together with a remittance of the amount of the tax due to the office of the board.

History.—Stats. 1991, Ch. 473, in effect January 1, 1992, substituted "Except as provided in Section 6479.3, a" for "The" before "person". Stats. 1999, Ch. 865, (SB 1302), in effect January 1, 2000, added "and 6479.31" after "Section 6479.3".

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6455. Return periods. (a) The board if it deems it necessary in order to insure payment to or facilitate the collection by the State of the amount of taxes, may require returns and payment of the amount of taxes for quarterly periods other than calendar quarters depending upon the principal place of business of the seller, retailer or purchaser as the case may be, or for other than quarterly periods.

(b) On or before the last day of the month following each designated period, a return for the preceding designated period shall be filed with the board in such form as the board may prescribe.

(c) Any retailer or other person who fails or refuses to furnish any return required by law to be made, or who fails or refuses to furnish a supplemental return or other data required by the board, is guilty of a misdemeanor punishable as provided in Section 7153.

History.—Stats. 1986, Ch. 1361, effective January 1, 1987, added (b) and (c), to provide a designated period for filing a return, and penalties for failing or refusing to file a return.

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.

6456. Relief of spouse. (a) Under regulations prescribed by the board, if:

(1) A tax liability under this part was understated by a failure to file a return required to be filed under this part, by the omission of an amount properly includable therein, or by erroneous deductions or credits claimed on a return, and the understatement of tax liability is attributable to one spouse; or any amount of the tax reported on a return was unpaid and the nonpayment of the reported tax liability is attributable to one spouse,

(2) The other spouse establishes that he or she did not know of, and had no reason to know of, that understatement or nonpayment, and

(3) Taking into account whether or not the other spouse significantly benefited directly or indirectly from the understatement or the nonpayment and taking into account all other facts and circumstances, it is inequitable to hold the other spouse liable for the deficiency in tax attributable to that understatement or nonpayment, then the other spouse shall be relieved of liability for tax (including interest, penalties, and other amounts) to the extent that the liability is attributable to that understatement or nonpayment of tax.

(b) For purposes of this section, the determination of the spouse to whom items of understatement or nonpayment are attributable shall be made without regard to community property laws.

(c) This section shall apply to all calendar quarters subject to the provisions of this part, but shall not apply to any calendar quarter that is more than five years from the final date on the board-issued determination, five years from the return due date for nonpayment on a return, or one year from the first contact with the spouse making a claim under this section; or that has been closed by res judicata, whichever is later.

(d) For purposes of paragraph (2) of subdivision (a), "reason to know" means whether or not a reasonably prudent person would have had reason to know of the understatement or nonpayment.

(e) For purposes of this section, with respect to a failure to file a return or an omission of an item from the return, "attributable to one spouse" may be determined by whether a spouse rendered substantial service as a retailer of taxable items to which the understatement is attributable. If neither spouse rendered substantial services as a retailer, then the attribution of applicable items of understatement shall be treated as community property. An erroneous deduction or credit shall be attributable to the spouse who caused that deduction or credit to be entered on the return.

(f) Under procedures prescribed by the board, if, taking into account all the facts and circumstances, it is inequitable to hold the other spouse liable for any unpaid tax or any deficiency (or any portion of either) attributable to any item for which relief is not available under subdivision (a), the board may relieve the other spouse of that liability.

History.—Added by Stats. 1993, Ch. 181, in effect January 1, 1994. Stats. 1996, Ch. 1087, in effect January 1, 1997, deleted former paragraph (1) of subdivision (a) which stated, "On the application for a seller's permit described in Section 6066, both spouses names appear as applicants," renumbered former paragraphs (2), (3), and (4) of subdivision (a) as (1), (2), and (3), respectively, deleted "or" after "this part," and added "or any . . . one spouse," after ";spouse" in new paragraph (1); added "or the nonpayment" after "understatement" in paragraph (4) and added "or nonpayment" after "understatement" twice in paragraph (4) of subdivision (a) and in subdivisions (b) and (d); added "is more than . . . or that" after "quarter that", deleted "a statute of limitations," after "closed by", and substituted "whichever is later" for "or otherwise" after "res judicata"," in subdivision (c); and substituted "(2)" for "(3)" after "paragraph" in subdivision (d). Stats. 2000, Ch. 1052 (AB 2898), in effect January 1, 2001, added "a" after "understated by" in paragraph (1) of subdivision (a), and added subdivision (f).

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6457. Lessor and lessee. Section 6453 shall not be applicable with respect to a lease of tangible personal property, but the lessor shall report the rentals paid by the lessee during the preceding reporting period; a lessee shall report the rentals payable in the preceding reporting period upon which tax has not been paid to his lessor required to collect the tax. The return shall also show the amount of the taxes for the period covered by the return and such other information as the board deems necessary for the proper administration of this part.

History.—Stats. 1965, p. 5453, operative August 1, 1965, amended prior Section 6457 which required reporting of gross receipts from rentals and leases of tangible personal property in accordance with such rules and regulations as the board may prescribe.

6459. Extension of time. (a) The board for good cause may extend for not to exceed one month the time for making any return or paying any amount required to be paid under this part. The extension may be granted at any time provided a request therefor is filed with the board within or prior to the period for which the extension may be granted.

Any person to whom an extension is granted shall pay, in addition to the tax, interest at the modified adjusted rate per month, or fraction thereof, established pursuant to Section 6591.5, from the date on which the tax would have been due without the extension until the date of payment.

(b) The board may grant an extension for more than one month if both of the following conditions occur:

(1) A budget for the state has not been adopted by July 1.

(2) The person requesting the extension is a creditor of the state who has not been paid because of the state's failure to timely adopt a budget.

Any extension granted under this subdivision shall expire no later than the last day of the month following the month in which the budget is adopted or one month from the due date of the return or payment, whichever comes later.

Any person to whom an extension has been granted, under this subdivision shall pay, in addition to the tax, interest at the modified adjusted rate per month, or fraction thereof, established pursuant to Section 6591.5, from the date on which the tax would have been due without the extension until the date of payment. However, no interest shall be due on that portion of the payment equivalent to the amount due to the person from the state on the due date of the payment.

History.—Stats. 1945, p. 1001, operative July 1, 1945, added second sentence to first paragraph, and changed rate of interest from 6 percent per annum to one-half of 1 percent per month, or fraction thereof. Stats. 1975, Ch. 661, operative to interest accruing on or after January 1, 1976, substituted "1 percent" for "one-half of 1 percent." Stats. 1982, Ch. 5, First Extra Session, in effect May 27, 1982, substituted "adjusted . . . 19269" for "rate of . . . thereof" in the first sentence of the second paragraph. Stats. 1983, Ch. 10 (1X), in effect February 17, 1983, added "and by the method" after "rate" and substituted "on" for "of" before "which" in the second paragraph. Stats. 1984, Ch. 1020, operative July 1, 1985, in second paragraph added "modified" before "adjusted," deleted "annual" before "rate," substituted "per month, or fraction thereof" for "and by the method", substituted "Section 6591.5" for "Section 19269." Stats. 1993, Ch. 324, in effect January 1, 1994, added subdivision letter (a) and added subdivision (b). Stats. 2004, Ch. 527 (SB 1881), in effect January 1, 2005, added "following the month" after "of the month" in paragraph (2) of subdivision (b).


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Article 1.1. Prepayment

* Article 1.1 was added by Stats. 196, p. 185, in effect April 18, 1966, operative July 1, 1966.


6470. Application of article. The provisions of this article do not apply to persons filing returns for other than quarterly periods. The provisions of this article apply to taxes imposed under ordinances adopted pursuant to Part 1.5 (commencing with Section 7200), Part 1.6 (commencing with Section 7251), or Article 2 (commencing with Section 37021) of Part 17 of this division in the same manner and to the same extent that the provisons of this article apply to taxes imposed under this part.

History.—Stats. 1967, p. 3905, operative October 1, 1967, reworded section to make prepayments applicable to taxes imposed pursuant to Part 1.5. Stats. 1968, p. 1796, in effect November 13, 1968, added "or Article 2 (commencing with Section 37021) of Part 17." Stats. 1969, p. 118, in effect November 10, 1969, added "Part 1.6 (commencing with Section 7251)".

6471. Prepayment. [Repealed by Stats. 1982, Ch. 327, in effect June 30, 1982.]

6471. Prepayment. [Repealed by Stats. 1985, Ch. 106, effective January 1, 1986.]

6471. Prepayment. (a) Upon written notification by the board, any person whose estimated measure of tax liability under this part averages seventeen thousand dollars ($17,000) or more per month, as determined by the board, shall, without regard to the measure of tax in any one month make prepayments as prescribed in this section.

(1) In the first, third, and fourth calendar quarters, the person shall prepay not less than 90 percent of the amount of state and local tax liability for each of the first two monthly periods of each quarterly period.

(2) In the second calendar quarter, the person shall make a first prepayment of 90 percent of the amount of state and local tax liability for the first monthly period of the quarterly period and a second prepayment of either of the following:

(A) Ninety percent of the amount of state and local tax liability for the second monthly period of the quarterly period, plus 90 percent of the amount of state and local tax liability for the first 15 days of the third monthly period of the quarterly period.

(B) Ninety percent of the amount of state and local tax liability for the second monthly period of the quarterly period, plus 50 percent of 90 percent of the amount of state and local tax liability for the second monthly period of the quarterly period.

(b) Persons engaged in their present business during all of the corresponding quarterly period of the preceding year, or persons who are successors to a business that was in operation during all of that quarterly period, may satisfy the above monthly prepayment requirements for the first, third, and fourth calendar quarters by payment of an amount equal to one-third of the measure of tax liability reported on the return or returns filed for that quarterly period of the preceding year multiplied by the state and local tax rate in effect during the month for which the prepayment is made. These persons may satisfy their prepayment requirements for the second calendar quarter by making a first prepayment of an amount equal to one-third of the measure of tax liability reported, and a second prepayment of an amount equal to one-half of the measure of tax liability reported, on the return or returns filed for that quarterly period of the preceding year multiplied by the state and local tax rate in effect during the month for which the prepayment is made.

Prepayments shall be made during the quarterly periods designated by the board and during each succeeding quarterly period until further notified in writing by the board.

History.—Added by renumbering former Section 6471.5 by Stats. 1985, Ch. 106, effective January 1, 1986. Stats. 1999, Ch. 484, (AB 384), in effect January 1, 2000, substituted "Ninety" for "Ninety-five"in subparagraphs (A) and (B), and substituted "90" for "95" in paragraph (2), and subparagraphs (A) and (B) therein in subdivision (a); and substituted "that" for "which" after "to a business" in subdivision (b). Stats. 2000, Ch. 135 (AB 2539), in effect January 1, 2001, added a comma after "month" in subdivision (a), substituted "make" for "prepay" after "the person shall", and substituted "the" for "each" after "monthly period of" in subparagraph (2) of subdivision (a); substituted "state and local" for "the" after "the amount of" in subsection (b) of subparagraph (2) of subdivision (a); substituted "These" for "The" after "payment is made." in the second paragraph of, and substituted "periods" for "period" after "succeeding quarterly" in the third paragraph of, subdivision (b).

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6471.4. Prepayment exception. Any person required to make prepayment pursuant to Article 1.5 (commencing with Section 6480) may not be required to make additional prepayment pursuant to this article, provided that more than 75 percent of the gross receipts of that person are from the retail sale of motor vehicle fuel, diesel fuel, aircraft jet fuel, or any combination of those fuels.

History.—Added by Stats. 1986, Ch. 214, operative on July 1, 1986. Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002, substituted "may" for "shall" after "Section 6480)" and added ", diesel fuel . . . those fuels" after "motor vehicle fuel".

6471.5. Prepayment. [Renumbered as Section 6471 by Stats. 1985, Ch. 106, effective January 1, 1986.]

6472. Prepayment form; when due. [Repealed by Stats. 1982, Ch. 327, in effect June 30, 1982.]

6472. Prepayment form; when due. [Repealed by Stats. 1985, Ch. 106, effective January 1, 1986.]

6472. Prepayment form; when due. Except in the case of persons required to remit amounts due in accordance with Article 1.2 (commencing with Section 6479.3), for purposes of Section 6471, a prepayment shall be accompanied by a report of the amount of the prepayment in a form prescribed by the board and shall be made to the board as follows:

(a) In the first, third, and fourth calendar quarters, on or before the 24th day next following the end of each of the first two monthly periods of each quarterly period.

(b) In the second calendar quarter, as follows:

(1) The first prepayment on or before the 24th day next following the end of the first monthly period of the quarterly period.

(2) The second prepayment on or before the 24th day of the third monthly period of the quarterly period for the second monthly period and the first 15 days of the third monthly period of the quarterly period.

History.—Added by renumbering former Section 6472.5 by Stats. 1985, Ch. 106, effective January 1, 1986. Stats. 1987, Ch. 56, effective January 1, 1988, deleted "6471.5" in the first sentence and substituted "6471". Stats. 1991, Ch. 473, in effect January 1, 1992, added "Except in the . . . Section 6479.3)," before "for", and substituted "for" for "For" before "purposes" in the first paragraph. Stats. 1999, Ch. 484, (AB 384), in effect January 1, 2000, substituted "24th" for "23rd" after "on or before the" in paragraph (2) of subdivision (b). Stats. 2000, Ch. 135 (AB 2539), in effect January 1, 2001, added a comma after "quarter" in subdivision (b); and substituted "the" for "each" after "monthly period of" in subparagraph (1) of, and twice in subparagraph (2) of, subdivision (b).

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6472.5. Prepayment form; when due. [Renumbered as Section 6472 by Stats. 1985, Ch. 106, effective January 1, 1986.]

6473. Credit for prepayment. The amount of the prepayment shall constitute a credit against the amount of the taxes due and payable for the quarterly period in which the prepayment became due.

6474. Determination of estimated measure of tax liability. [Repealed by Stats. 1982, Ch. 327, in effect June 30, 1982.]

6474. Determination of estimated measure of tax liability. [Repealed by Stats. 1985, Ch. 106, effective January 1, 1986.]

6474. Determination of estimated measure of tax liability. In determining whether a person's estimated measure of tax liability averages seventeen thousand dollars ($17,000) or more per month for purposes of Section 6471.5, the board may consider tax returns filed pursuant to this part as well as any information in the board's possession or which may come into its possession.

History.—Added by renumbering former Section 6474.5 by Stats. 1985, Ch. 106, effective January 1, 1986.

6474.5. Determination of estimated measure of tax liability. [Renumbered as Section 6474 by Stats. 1985, Ch. 106, effective January 1, 1986.]

6476.Penalty for late prepayment. Any person required to make a prepayment pursuant to Section 6471 who fails to make a timely prepayment but makes such prepayment before the last day of the monthly period following the quarterly period in which the prepayment became due, shall also pay a penalty of 6 percent of the amount of prepayment.

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6477. Penalty for failure to prepay when timely quarterly return filed. Any person required to make a prepayment pursuant to Section 6471 or Section 6471.5 who fails to make a prepayment before the last day of the monthly period following the quarterly period in which the prepayment became due and who files a timely return and payment for the quarterly period in which the prepayment became due shall pay a penalty of 6 percent of the amount equal to 90 percent of the tax liability, as prescribed in those sections, for each of the periods during that quarterly period for which a required prepayment was not made.

History.—Stats. 1983, Ch. 10 (1X), in effect February 17, 1983, operative April 1, 1983, added "or Section 6471.5" after "Section 6471," "or 95 percent" after "90 percent" and "as prescribed in those sections" after "liability". Stats. 1983, Ch. 337, in effect January 1, 1984, deleted "monthly" before "periods." Stats. 1999, Ch. 484, (AB 384), in effect January 1, 2000, deleted "or 95 percent" after "90 percent".

6478. Negligence penalty. (a) If a failure to make a prepayment as described in Section 6477 is due to negligence or intentional disregard of this part or authorized rules and regulations, the penalty shall be 10 percent instead of 6 percent.

(b) If any part of a deficiency in prepayment is due to negligence or intentional disregard of this part or authorized rules and regulations, a penalty of 10 percent of the deficiency shall be paid.

(c) The provisions of this section shall not apply to amounts subject to the provisions of Sections 6484, 6485, 6511, 6514, and 6591.

(d) The 10 percent negligence penalty shall become due and payable and shall be ascertained and determined in the same manner as the deficiency determination under Article 2 (commencing with Section 6481) of this chapter. The provisions of Article 5 (commencing with Section 6561) of this chapter shall be applicable with respect to the finality of the determination and the right to petition for redetermination.

History.—Stats. 2007, Ch. 342 (AB 1748), in effect January 1, 2008, added subdivision (d).

6479. Notification. Notification by the board, provided for in Section 6471, may be served personally or by mail in the manner prescribed in Section 6486 for service of notice of a deficiency determination.

History.—Stats. 1974, Ch. 610, effective January 1, 1975, revised the section and substituted the reference to
R. & T. C. 6486 for C. C. P. 1013.

Note.—Stats. 1974, Ch. 610, Section 16, explains the purpose of the enactment.

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Article 1.2. Payment by Electronic Funds Transfer**

** Article 1.2 was added by Stats. 1991, in effect January 1, 1992.

6479.3. Electronic funds transfer payments. (a) Any person whose estimated tax liability under this part averages ten thousand dollars ($10,000) or more per month, as determined by the board pursuant to methods of calculation prescribed by the board, shall remit amounts due by an electronic funds transfer under procedures prescribed by the board. Any person who collects use tax on a voluntary basis is not required to remit amounts due by electronic funds transfer.

(b) Any person whose estimated tax liability under this part averages less than ten thousand dollars ($10,000) per month or any person who voluntarily collects use tax may elect to remit amounts due by electronic funds transfer with the approval of the board.

(c) Any person remitting amounts due pursuant to subdivision (a) or (b) shall perform electronic funds transfer in compliance with the due dates set forth in Article 1 (commencing with Section 6451) and Article 1.1 (commencing with Section 6470). Payment is deemed complete on the date the electronic funds transfer is initiated, if settlement to the state's demand account occurs on or before the banking day following the date the transfer is initiated. If settlement to the state's demand account does not occur on or before the banking day following the date the transfer is initiated, payment is deemed to occur on the date settlement occurs.

(d) Any person remitting taxes by electronic funds transfer shall, on or before the due date of the remittance, file a return for the preceding reporting period in the form and manner prescribed by the board. Any person who fails to timely file the required return shall pay a penalty of 10 percent of the amount of taxes, exclusive of prepayments, with respect to the period for which the return is required.

(e) (1) Except as provided in paragraph (2), any person required to remit taxes pursuant to this article who remits those taxes by means other than appropriate electronic funds transfer shall pay a penalty of 10 percent of the taxes incorrectly remitted.

(2) A person required to remit prepayments pursuant to this article who remits a prepayment by means other than an appropriate electronic funds transfer shall pay a penalty of 6 percent of the prepayment amount incorrectly remitted.

(f) Except as provided in Sections 6473 and 6477, any person who fails to pay any tax to the state or any amount of tax required to be collected and paid to the state, except amounts of determinations made by the board under Article 2 (commencing with Section 6481) or Article 3 (commencing with Section 6511), within the time required shall pay a penalty of 10 percent of the tax or amount of tax, in addition to the tax or amount of tax, plus interest at the modified adjusted rate per month, or fraction thereof, established pursuant to Section 6591.5, from the date on which the tax or the amount of tax required to be collected became due and payable to the state until the date of payment.

(g) In determining whether a person's estimated tax liability averages ten thousand dollars ($10,000) or more per month, the board may consider tax returns filed pursuant to this part and any other information in the board's possession.

(h) Except as provided in subdivision (i), the penalties imposed by subdivisions (d), (e), and (f) shall be limited to a maximum of 10 percent of the taxes due, exclusive of prepayments, for any one return. Any person remitting taxes by electronic funds transfer shall be subject to the penalties under this section and not Section 6591.

(i) The penalties imposed with respect to paragraph (2) of subdivision (e) and Sections 6476 and 6477 shall be limited to a maximum of 6 percent of the prepayment amount.

(j) The board shall promulgate regulations pursuant to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code for purposes of implementing this section.

History.—Stats. 1992, Ch. 1294, in effect January 1, 1993, deleted "For purposes of payments pursuant to Article 1 (commencing with Section 6451) and prepayments pursuant to Article 1.1 (commencing with Section 6470)," after "(a)" and added "Any person . . . funds transfer" in subdivision (a); added "or any person who voluntarily collects use tax" after "per month", added "elect to" after "may", deleted "voluntarily" before "remit", and added "The election . . . one year." after "the board" in subdivision (b); substituted "remitting" for "required to remit" after "Any person", substituted "by electronic funds transfer" for "pursuant to this section" after "taxes", substituted "due date of the remittance" for "last day of the month following each quarter" after "before the", substituted "reporting period" for "quarter" after "the preceding", added "required" after "timely file the", deleted "required by this subdivision" after "return", substituted "pay" for "be assessed" after "shall", and substituted "period" for "quarter" after "respect to the" in subdivision (d); substituted "taxes" for "amounts" after "who remits", substituted "transfer" for "transfers in accordance with board procedures" after "electronic funds", substituted "pay" for "be assessed" after "shall", added "the" after "10 percent of", and substituted "incorrectly remitted" for "due at the time of the payment" after "the taxes" in subdivision (e); deleted "for purposes of this section" after "per month", substituted "and" for ", in addition to" after "this part", added "other" after "any", deleted "which is" after "information", and deleted ", or may come into," after "information in" in subdivision (f). Stats. 1994, Ch. 903, in effect January 1, 1995, added subdivision (f) and relettered former subdivisions (f), (g), and (h) as (g), (h), and (i), respectively. Stats. 1996, Ch. 1087, in effect January 1, 1997, added new subdivision (h), relettered former subdivision (h) as (i), and deleted former subdivision (i) which stated, "This section shall become operative on January 1, 1995.". Stats. 1998, Ch. 420, in effect January 1, 1999, substituted "fails to pay . . . established" for "is required to remit taxes pursuant to this article, who fails to timely remit those taxes, and who is issued a deficiency determination", and substituted "6591.5, . . . date of payment" for "6481 with respect to those taxes, shall, in addition to any other penalties imposed, pay a 10 percent penalty of the amount of those taxes" in subdivision (f); added "and" after "this part" in subdivision (g); and added the second sentence in subdivision (h). Stats. 1999, Ch. 865, (SB 1302), in effect January 1, 2000, substituted "(1) Except as provided in paragraph (2), any" for "Any" and added paragraph (2) in subdivision (e); substituted "Except as provided in Sections 6476 and 6477, any" for "Any" in subdivision (f); substituted "Except as provided in subdivision (i), the" for "The" in subdivision (h); added new subdivision (i); and relettered former subdivision (i) as (j). Stats. 2005, Ch. 74 (AB 1765), Section 1, in effect October 4, 2005, deleted former second sentence of subdivision (b) which provided, "The election shall be operative for a minimum of one year."; Section 2, in effect October 4, 2005, but operative January 1, 2006, substituted "ten thousand dollars ($10,000)" for "twenty thousand dollars ($20,000)" in subdivisions (a), (b), and (g)

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6479.31. Electronic filing. (a) Any return, declaration, statement, or other document required to be made under this part that is filed using electronic media shall be filed and authenticated pursuant to any method or form the board may prescribe.

(b) Notwithstanding any other law, any return, declaration, statement, or other document otherwise required to be signed that is filed by the taxpayer using electronic media in a form as required by the board shall be deemed to be a signed, valid original document, including upon reproduction to paper form by the board.

(c) Electronic media includes, but is not limited to, computer modem, magnetic media, optical disk, facsimile machine, or telephone.

(d) Payment is deemed timely for electronically filed returns if the transmission is completed on or before the due date of the return.

History.—Added by Stats. 1999, Ch. 865, (SB 1302), in effect January 1, 2000. Stats. 2000, Ch. 923 (AB 2894), in effect January 1, 2001, substituted "filed and . . . may prescribe" for "in a form as the board may prescribe and is not complete, and therefore not filed, unless an electronic filing declaration is signed by the taxpayer. The board may prescribe forms and instructions for requiring the electronic filing declaration to be retained by the preparer or taxpayer and may require the declaration to be furnished to the board upon request" in subdivision (a) ; and substituted "Payment is deemed . . . of the return" for "Unless remittance is made pursuant to Section 6479.3, a person filing any return under this section shall deliver remittance of the amount of the tax due to the office of the board, along with a voucher in a form prescribed by the board, on or before the date the return is required to be filed" in subdivision (d).

6479.4. Relief of penalty. If the board finds that a person's failure to make payment by an appropriate electronic funds transfer in accordance with board procedures is due to reasonable cause and circumstances beyond the person's control, and occurred notwithstanding the exercise of ordinary care and in the absence of willful neglect, that person shall be relieved of the penalty provided in subdivision (e) of Section 6479.3.

6479.5. Definitions. (a) "Electronic funds transfer" means any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, that is initiated through an electronic terminal, telephonic instrument, or computer or magnetic tape, so as to order, instruct, or authorize a financial institution to debit or credit an account. Electronic funds transfers shall be accomplished by an automated clearinghouse debit, an automated clearinghouse credit, or by Federal Reserve Wire Transfer (Fedwire).

(b) "Automated clearinghouse" means any federal reserve bank, or an organization established in agreement with the National Automated Clearing House Association, that operates as a clearinghouse for transmitting or receiving entries between banks or bank accounts and which authorizes an electronic transfer of funds between these banks or bank accounts.

(c) "Automated clearinghouse debit" means a transaction in which the state, through its designated depository bank, originates an automated clearinghouse transaction debiting the person's bank account and crediting the state's bank account for the amount of tax. Banking costs incurred for the automated clearinghouse debit transaction shall be paid by the state.

(d) "Automated clearinghouse credit" means an automated clearinghouse transaction in which the person through his or her own bank, originates an entry crediting the state's bank account and debiting his or her own bank account. Banking costs incurred for the automated clearinghouse credit transaction charged to the state shall be paid by the person originating the credit.

(e) "Fedwire transfer" means any transaction originated by a person and utilizing the national electronic payment system to transfer funds through the federal reserve banks, when that person debits his or her own bank account and credits the state's bank account. Electronic funds transfers pursuant to Section 6479.3 may be made by Fedwire only if payment cannot, for good cause, be made according to subdivision (a), and the use of Fedwire is preapproved by the board. Banking costs incurred for the Fedwire transaction charged to the person and to the state shall be paid by the person originating the transaction.

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Article 1.5. Prepayment of Sales Tax on Motor Vehicle Fuel Distributions***

*** Article 1.2 was added by Stats. 1991, in effect January 1, 1992.

6480. Definitions. (a) For purposes of the imposition of the prepayment of sales tax on motor vehicle fuel or aircraft jet fuel pursuant to this article, the terms "aircraft jet fuel," "aircraft jet fuel dealer," "aviation gasoline," "entry," "in this state," "motor vehicle fuel," "person," "removal," "sale," and "supplier" are defined pursuant to Part 2 (commencing with Section 7301), except as provided in subdivision (b).

(b) For purposes of this article, "motor vehicle fuel" does not include aviation gasoline for use in propelling aircraft.

(c) For purposes of the imposition of the prepayment of sales tax on diesel fuel pursuant to this article, the terms "diesel fuel," "entry," "in this state," "removal," "person," and "supplier," are defined pursuant to Part 31 (commencing with Section 60001).

(d) "Wholesaler" includes every person other than a supplier, dealing in motor vehicle fuel, aircraft jet fuel, or diesel fuel. "Wholesaler" does not include anyone dealing in motor vehicle fuel or diesel fuel in the capacity of an operator of a service station. "Wholesaler" does not include anyone dealing in aircraft jet fuel in the capacity of an aircraft jet fuel dealer.

(e) With respect to diesel fuel and aircraft jet fuel, "sale" means:

(1) The transfer of title or possession, exchange, or barter, conditional or otherwise, in any manner or by any means whatsoever, of aircraft jet fuel or diesel fuel (other than aircraft jet fuel or diesel fuel in a terminal) to a purchaser for a consideration.

(2) The transfer of the inventory position in the aircraft jet fuel or diesel fuel in a terminal if the purchaser becomes the positionholder with respect to the taxable fuel.

(f) For purposes of this article, aircraft jet fuel will be subject to the prepayment of sales tax at such time and in such manner as if it were subject to diesel fuel tax under the Diesel Fuel Tax Law in Part 31 (commencing with Section 60001), except that in the case of bulk transfers, aircraft jet fuel is not subject to the prepayment of sales tax as to the removal of diesel fuel in this state from any refinery as described in paragraph (1) of subdivision (a) of Section 60052, the entry of diesel fuel into this state as described in paragraph (1) of subdivision (b) of Section 60052, or the removal of diesel fuel in this state as described in subdivision (c) of Section 60052.

History.—Stats. 1987, Ch. 210, in effect July 23, 1987, in subdivision (a) deleted period and added ", except as provided in subdivision (b)" following "(commencing with Section 7301)", and renumbered former (b) as (c) and added new (b). Stats. 2001, Ch. 429 (AB 309), substituted "the imposition . . . supplier" for "this article . . . this state"" after "For purposes of" in subdivision (a); deleted the former second sentence of subdivision (b) which provided, "For purposes of this subdivision, "aviation gasoline" means gasoline, natural gasoline, and any inflammable liquid intended for use in propelling aircraft operated by the explosion type engine."; substituted "For purposes . . . 60001)" for "This article does not apply to motor vehicle fuel exempt from license taxes pursuant to paragraph (3) of subdivision (a) of Section 7401" in subdivision (c); and added subdivisions (d) and (e).

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6480.1. Prepayments. [Repealed by Stats. 2011, Ch. 6 (AB 105), effective March 24, 2011.]

6480.1. Prepayments. (a) At any time that motor vehicle fuel tax or diesel fuel tax is imposed or would be imposed, but for the dyed diesel fuel exemption in paragraph (1) of subdivision (a) of Section 60100, or the train operator exemption in paragraph (7) of subdivision (a) of Section 60100 or paragraph (11) of subdivision (a) of Section 7401, or, pursuant to subdivision (f) of Section 6480, would be deemed to be imposed, on any removal, entry, or sale in this state of motor vehicle fuel, aircraft jet fuel, or diesel fuel, the supplier shall collect prepayment of retail sales tax from the person to whom the motor vehicle fuel, aircraft jet fuel, or diesel fuel is sold. However, if no sale occurs at the time of imposition of motor vehicle fuel tax or diesel fuel tax, the supplier shall prepay the retail sales tax on that motor vehicle fuel, aircraft jet fuel, or diesel fuel. The prepayment required to be collected by the supplier constitutes a debt owed by the supplier to this state until paid to the board, until satisfactory proof has been submitted to prove that the retailer of the fuel has paid the retail sales tax to the board, or until a supplier or wholesaler who has consumed the fuel has paid the use tax to the board. Each supplier shall report and pay the prepayment amounts to the board, in a form as prescribed by the board, in the period in which the fuel is sold. On each subsequent sale of that fuel, each seller, other than the retailer, shall collect from his or her purchaser a prepayment computed using the rate applicable at the time of sale. Each supplier shall provide his or her purchaser with an invoice for, or other evidence of, the collection of the prepayment amounts which shall be separately stated thereon.

(b) (1) A wholesaler shall collect prepayment of the retail sales tax from the person to whom the motor vehicle fuel, aircraft jet fuel, or diesel fuel is sold. Each wholesaler shall provide his or her purchaser with an invoice for or other evidence of the collection of the prepayment amounts, which shall be separately stated thereon.

(2) Each wholesaler shall report to the board, in a form as prescribed by the board and for the period in which the motor vehicle fuel, aircraft jet fuel, or diesel fuel was sold, all of the following:

(A) The number of gallons of fuel sold and the amount of sales tax prepayments collected by the wholesaler.

(B) The number of tax-paid gallons purchased and the amount of sales tax prepayments made by the wholesaler.

(C) In the event that the amount of sales tax prepayments collected by the wholesaler is greater than the amount of sales tax prepayments made by the wholesaler, then the excess constitutes a debt owed by the wholesaler to the state until paid to the board, or until satisfactory proof has been submitted that the retailer of the fuel has paid the tax to the board.

(c) A supplier or wholesaler who pays the prepayment and issues a resale certificate to the seller, but subsequently consumes the motor vehicle fuel, aircraft jet fuel, or diesel fuel, shall be entitled to a credit against his or her sales and use taxes due and payable for the period in which the prepayment was made, provided that he or she reports and pays the use tax to the board on the consumption of that fuel.

(d) The amount of a prepayment paid by the retailer or a supplier or wholesaler who has consumed the motor vehicle fuel, aircraft jet fuel, or diesel fuel to the seller from whom he or she acquired the fuel shall constitute a credit against his or her sales and use taxes due and payable for the period in which the sale was made. Failure of the supplier or wholesaler to report prepayments or the supplier's or wholesaler's failure to comply with any other duty under this article shall not constitute grounds for denial of the credit to the retailer, supplier, or wholesaler, either on a temporary or permanent basis or otherwise. To be entitled to the credit, the retailer, supplier, or wholesaler shall retain for inspection by the board any receipts, invoices, or other documents showing the amount of sales tax prepaid to his or her supplier, together with the evidence of payment.

(e) The rate of the prepayment required to be collected during the period from July 1, 1986, through March 31, 1987, shall be four cents ($0.04) per gallon of motor vehicle fuel distributed or transferred.

(f) The rate of prepayment required to be collected for motor vehicle fuel, aircraft jet fuel, and diesel fuel as established by the board in effect on January 1, 2013, shall remain in effect through June 30, 2013.

(g) On July 1 of each succeeding year, the prepayment rate per gallon for motor vehicle fuel, rounded to the nearest one-half of one cent ($0.005), of the required prepayment shall be established by the board based upon 80 percent of the combined state and local sales tax rate established by Sections 6051, 6051.2, 6051.3, 6051.5, 7202, and 7203.1, and Section 35 of Article XIII of the California Constitution on the arithmetic average selling price (excluding sales tax deletion) as reported by an industry publication of all grades of gasoline sold through a self-service gasoline station. The board shall make its determination of the rate no later than March 1 of the same year as the effective date of the new rate. Immediately upon making its determination and setting of the rate, the board shall each year, no later than May 1, notify every supplier, wholesaler, and retailer of motor vehicle fuel. In the event the price of fuel decreases or increases or an exemption from sales tax for sales of fuel is enacted, and the established rate results in or could result in prepayments which consistently exceed or are significantly lower than the retailers' sales tax liability, the board may readjust the rate.

(h) On July 1 of each succeeding year, the prepayment rate per gallon for aircraft jet fuel, rounded to the nearest one-half of one cent ($0.005), shall be established by the board based upon 80 percent of the combined state and local sales tax rate established by Sections 6051, 6051.2, 6051.3, 6051.5, 7202, and 7203.1, and Section 35 of Article XIII of the California Constitution on the arithmetic average selling price (excluding sales and state excise taxes) as determined by the board based on published industry reports. The board shall make its determination of the rate no later than March 1 of the same year asdeletion the effective date of the new rate. deletion Immediately upon making its determination and setting of the rate, the board shall each year, no later than May 1, notify every supplier, wholesaler, and retailer of aircraft jet fuel. In the event the price of aircraft jet fuel decreases or increases, and the established rate results in prepayments that consistently exceed or are significantly lower than the retailers' sales tax liability, the board may readjust the rate.

(i) On July 1 of each succeeding year, the prepayment rate per gallon for diesel fuel, rounded to the nearest one-half of one cent ($0.005), shall be established by the board based upon 80 percent of the combined state and local sales tax rate established by Sections 6051, 6051.2, 6051.3, 6051.5, 6051.8, 7202, and 7203.1, and Section 35 of Article XIII of the California Constitution on the arithmetic average selling price (excluding sales and state excise taxes) as determined by the board based on published industry reports. The board shall make its determination of the rate no later than March 1 of the same year as the effective date of the new rate. deletion Immediately upon making its determination and setting of the rate, the board shall each year, no later than May 1, notify every supplier, wholesaler, and retailer of diesel fuel. In the event the rate of sales tax imposed on sales of diesel fuel increases or decreases or the price of diesel fuel decreases or increases, and the established rate results in or could result in prepayments that consistently exceed or are significantly lower than the retailers' sales tax liability, the board may readjust the rate.

(j) (1) Notwithstanding any other provision of this section, motor vehicle fuel sold by a supplier or wholesaler to a qualified purchaser who, pursuant to a contract with the State of California or its instrumentalities, resells that fuel to the State of California or its instrumentalities shall be exempt from the prepayment requirements.

(2) A qualified purchaser who acquires motor vehicle fuel for subsequent resale to the State of California or its instrumentalities pursuant to this subdivision shall furnish to the supplier or wholesaler from whom the fuel is acquired an exemption certificate, completed in accordance with any instructions or regulations as the board may prescribe. The supplier or wholesaler shall retain the certificate in his or her records in support of the exemption. To qualify for the prepayment exemption, both of the following conditions shall apply:

(A) The qualified purchaser does not take possession of the fuel at any time.

(B) The fuel is delivered into storage tanks owned or leased by the State of California or its instrumentalities via facilities of the supplier or wholesaler, or by common or contract carriers under contract with the supplier or wholesaler.

(3) For purposes of this subdivision, "qualified purchaser" means a wholesaler who does not have or maintain a storage facility or facilities for the purpose of selling motor vehicle fuel.

History.—Added by Stats. 2011, Ch. 6 (AB 105), in effect March 24, 2011. Stats. 2012, Ch. 769 (AB 2679), in effect January 1, 2013, added new subdivision (f); relettered former subdivisions (f), (g), (h), and (i) as (g), (h), (i), and (j), respectively; substituted "July" for "April" after "On" in the first sentence of subdivisions (g), (h), and (i); substituted "reported by an industry publication" for "determined by the State Energy Resources Conservation and Development Commission, in its latest publication of the "Quarterly Oil Report,"" after "sales tax) as" in the first sentence, deleted former second sentence which read, "In the event the "Quarterly Oil Report" is delayed or discontinued, the board may base its determination on other sources of the arithmetic average selling price of gasoline.", substituted "March 1 of the same year as" for "November 1 of the year prior to" after "no later than" in the former third sentence, and substituted "May" for "January" after "no later than" and deleted "by mail" after "1, notify" in the former forth sentence of subdivision (g); substituted "taxes" for "tax" after "state excise" in the first sentences of subdivisions (h) and (i); substituted "March" for "November" after "no later than" in the second sentence, and substituted "May 1, notify" for "January 1, notify by mail" after "no later than" in the fourth sentence of subdivision (h); added 6051.8, after 6051.5,, and substituted "taxes" for "tax" after "state excise" in the first sentence, substituted "March 1 of the same year as" for "November 1 of the year prior to" after "no later than" in the second sentence, and substituted May 1, notify" for "January 1, notify by mail" after "no later than" in the fourth sentence of subdivision (i). Stats. 2013, Ch. 523 (SB 788), in effect January 1, 2014, added "based on . . . reports" after "by the board" in the first sentence of subdivisions (h) and (i), and deleted the former third sentence therein, which read, "The rate of the prepayment required to be collected for diesel fuel shall be equal to 80 percent of the arithmetic average selling price of diesel fuel as specified by industry publications.

Former § 6480.1, similar to the present section, was added by Stats. 1986, Ch. 214 (SB 1610); amended by Stats. 1987, Ch. 210 (SB 190), Stats. 1989, Ch. 768 (SB 151), Stats. 1992, Ch. 1336 (SB 1607), Stats. 1995, Ch. 555 (SB 718); Stats. 1996, Ch. 1087 (SB 1827); Stats. 1999, Ch. 865 (SB 1302); Stats 2000, Ch. 256 (SB 2174); Stats. 2001, Ch. 429 (AB 309); Stats. 2004, Ch. 527 (SB 1881); Stats. 2010, Ch. 9 (SB 70); and repealed by Stats. 2011, Ch. 6 (AB 105), in effect March 24, 2011.

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6480.2. Supplemental reports. (a) If the board determines that it is necessary for the efficient administration of this part, the board may require a supplier or wholesaler to provide the board with a list of purchasers to whom the motor vehicle fuel, aircraft jet fuel, or diesel fuel was sold.

(b) In addition to any other reports required under this article, the board may, by rule and otherwise, require additional, other, or supplemental reports, in any form which the board may require, from suppliers or wholesalers with respect to their sales of motor vehicle fuel, aircraft jet fuel, or diesel fuel.

(c) Any supplier or wholesaler who fails to comply with this section is guilty of a misdemeanor punishable as provided in Section 7153.

History.—Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002, substituted "supplier or wholesaler" for "distributor or broker" after "may require a", added ", aircraft jet fuel, or diesel fuel" after "motor vehicle fuel", and substituted "sold" for "transferred" after "fuel was" in subdivision (a); substituted "suppliers or wholesalers" for "distributors or brokers" after "require, from", and substituted ", aircraft jet fuel, or diesel fuel" for "defined pursuant to Part 3 (commencing with Section 8601)" after "motor vehicle fuel" in subdivision (b); and substituted "supplier or wholesaler" after "(c) Any" in subdivision (c).

6480.3. Filing prepayments. The supplier or wholesaler shall file his or her prepayment form together with a remittance of the prepayment amounts, if any, required to be collected pursuant to Section 6480.1 payable to the State Board of Equalization, on or before the last day of the month following the monthly period to which the prepayment form or each prepayment relates.

History.—Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002, substituted "supplier or wholesaler" for "distributor or broker" after "The", added ", if any," after "prepayment amounts", substituted "last" for "25th" after "or before the", and deleted "calendar" after "day of the".

6480.3. Prepayment exemption; diesel fuel resold for agricultural purposes. [Renumbered as Section 6480.9 by Stats. 2004, Ch. 527 (SB 1881), in effect January 1, 2005.]

6480.4. Penalties and interest. (a) Any supplier or wholesaler who fails to make a timely remittance to the board of the prepayment amounts, if any, required pursuant to Sections 6480.1 and 6480.3 shall also pay a penalty of 10 percent of the amount of the prepayment due but not paid, plus interest at the modified adjusted rate per month, or fraction thereof, established pursuant to Section 6591.5, from the date the prepayment became due and payable to the state until the date of payment.

(b) The penalty amount specified in subdivision (a) shall be 25 percent if the supplier or wholesaler knowingly or intentionally fails to make a timely remittance.

History.—Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002, added subdivision letter designation (a) before first paragraph, substituted "supplier or wholesaler" for "distributor or broker" after "Any", added "amounts, if any," after "of the prepayment", and substituted "10" for "25" after "a penalty of", therein; and added subdivision (b).

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6480.5. Notification by the board; manner. [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.6. Refunds. (a) The following persons who have paid prepayment amounts either directly to the board or to the person from whom the motor vehicle fuel, aircraft jet fuel, or diesel fuel was purchased shall be refunded those amounts:

(1) Any person who exports the fuel for subsequent sale outside this state.

(2) Any person who sells the fuel which is exempt from the sales or use tax pursuant to Sections 6352, 6357, 6381, and 6396.

(3) Any person who has lost the fuel through fire, flood, theft, leakage, evaporation, shrinkage, spillage, or accident, prior to any retail sale.

(4) Any supplier who has removed fuel from an approved terminal at the terminal rack, but only to the extent that the supplier can show that tax on the same amount of fuel has been paid more than one time by the same supplier.

(5) Any person who is unable to collect the prepayment from the purchaser insofar as the sales of the fuel are represented by accounts which have been found to be worthless and charged off for income tax purposes, or, if the person is not required to file income tax returns, accounts which have been charged off in accordance with generally accepted accounting principles. If partial payments have been made, the payments shall be prorated between amounts due for fuel and amounts due for the related prepayment. If any of those accounts are thereafter in whole or in part collected by the seller, the gallons of fuel represented by the amounts collected shall be included in the first return filed after that collection and the amount of the prepayment thereon paid with the return.

(b) In lieu of a refund, the board may authorize a credit to be taken by the person to whom the refund is due upon his or her prepayment form or sales and use tax return.

History.—Stats. 1987, Ch. 210, in effect July 23, 1987, added subdivision (a)(4). Stats. 1999, Ch. 865, (SB 1302), in effect January 1, 2000, added paragraph (5) to subdivision (a). Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002, substituted "the motor . . . diesel fuel" for "it" after "person from whom", deleted ", on the distribution of motor vehicle fuel which was subject to the motor vehicle fuel license tax," after "was purchased" in subdivision (a); deleted "motor vehicle" after "exports the" in paragraph (1); deleted "motor vehicle" after "who sells the" in paragraph (2),deleted "motor vehicle" after "has lost the" in paragraph (3), added paragraph (4); renumbered former paragraph (4) as (5), and added ", or, if the . . . principles" after "income tax purposes", deleted former fourth sentence which provided, "as a condition for eligibility for refund, the board may require the seller to submit periodical reports listing accounts delinquent for a 90 day period of over." therein; deleted former paragraph (5) which provided, "Any person who is licensed under Section 7451 and is authorized by the board to acquire exempt motor vehicle fuel pursuant to paragraph (3) of subdivision (a) of Section 7401, who purchases the motor vehicle fuel from a person who is not authorized by the board to acquire exempt motor vehicle fuel pursuant to paragraph (3) of subdivision (a) of Section 7401."

6480.7. Security. (a) The board may require any supplier or
wholesaler subject to this article to place with the board any security that the board determines is necessary to ensure compliance with this article. The amount of the security shall be fixed by the board but shall not be greater than three times the estimated average liability of suppliers or wholesalers required to file returns for monthly periods, determined in any manner that the board deems proper, or five hundred thousand dollars ($500,000), whichever amount is less. These amounts apply regardless of the type of security placed with the board. The amount of the security may be increased or decreased by the board subject to the maximum amounts. The security required pursuant to this section is in addition to the bond or bonds required pursuant to Section 7486.

(b) The board may sell the security at public auction if it becomes necessary to so do in order to recover any tax or any amount required to be collected or penalty due. Notice of the sale may be served upon the person who placed the security personally or by mail. If service is by mail, service shall be made in the manner prescribed for service of a notice of a deficiency determination and shall be addressed to the person at his or her address as it appears in the records of the board. However, security in the form of a bearer bond issued by the United States or the State of California which has a prevailing market price may be sold by the board at a private sale at a price not lower than the prevailing market price thereof. Upon any sale, any surplus above the amounts due shall be returned to the supplier or wholesaler who placed the security.

History.—Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002, substituted "supplier or wholesaler" for "distributor or broker" after "may require any" in the first sentence, and substituted "suppliers or wholesalers" for "distributors or brokers" after "average liability of" in the second sentence of subdivision (a); and substituted "supplier or wholesaler" for "distributor or broker" after "returned to the" in the fifth sentence of subdivision (b).

Bankruptcy.—Property held by the Board as security prior to the taxpayer's filing of a petition for reorganization pursuant to Chapter 11 of the bankruptcy law belongs to the bankruptcy estate and is not immune from the claims of general creditors. The Board violated the automatic stay in bankruptcy by cashing the certificate of deposit taken as security from the taxpayer. In re Sluggo's Chicago Style, Inc. (9th Cir., 1990) 912 F.2d 1073.

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6480.8. Credits. [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002.]

6480.9. Prepayment exemption, diesel fuel resold for agricultural purposes. (a) A person qualified under subdivision (b) may issue a certificate to a seller with respect to the amount of sales tax required to be prepaid pursuant to Section 6480.1 when purchasing diesel fuel from the seller. The certificate shall be completed in accordance with any instructions or regulations as the board may prescribe, and shall clearly specify that the person will purchase the volume of diesel fuel that the person reasonably expects he or she will sell that qualifies for the exemption under Section 6357.1. A seller that receives a properly completed certificate from a person qualified under subdivision (b) shall not be required to collect the prepayment of the retail sales tax otherwise required in Section 6480.1 on that volume of the diesel fuel sold pursuant to the certificate.

(b) A person is qualified for purposes of this section if both of the following conditions are met:

(1) The person sold diesel fuel that was used by the consumer in a manner that qualified, or would have qualified for an exemption under Section 6357.1, and in the prior year, those sales totaled more than 25 percent of the person's total taxable sales.

(2) The person's sales consist primarily of either bulk deliveries of fuel or of fuel sales through a cardlock, keylock, or other unattended mechanism, or both. For purposes of the preceding sentence, "bulk deliveries" means transfers of fuel into storage tanks of 500 gallons or more.

(c) A person issuing a certificate pursuant to this section is liable for sales tax that is imposed under the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or in accordance with the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)) and sales tax that is imposed under Section 6051.2 or 6201.2, or under Section 35 of Article XIII of the California Constitution.

(d) A person issuing a certificate pursuant to this section shall be liable for sales tax on any portion of the gross receipts derived from the sale of
fuel that is not sold in a manner that qualifies for an exemption under
Section 6357.1.

(e) A person liable for the sales tax under subdivision (c) or (d) of this section shall report and pay that sales tax with the return for the reporting period in which the person sells the fuel.

(f) Any person who gives a certificate pursuant to this section for
purchases of diesel fuel that he or she knows at the time of purchase do not qualify for the exemption from the prepayment pursuant to this section for the purpose of evading payment of the prepayment of the retail sales tax is guilty of a misdemeanor punishable as provided in Section 7153. In addition, the person shall be liable to the state for a penalty of one thousand dollars ($1,000) for each certificate issued for personal gain or to evade the payment of taxes.

History.—Added as Section 6480.3 by Stats. 2002, Ch. 446, (SB 1901), in effect September 9, 2002, but operative October 9, 2002. Renumbered as Section 6480.9 by Stats. 2004, Ch. 527 (SB 1881), in effect January 1, 2005.

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Article 1.6. Prepayment of Sales Tax on Fuel [4] [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002.]****

**** Article 1.6 was added by Stats. 1991, Ch. 770, operative January 1, 1992.

6480.10. Definitions. [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002.]

6480.11. "Importer." [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.12. "Producer." [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.13. "Produce." [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.14. "Jobber." [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.15. "Sale." [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.16. Prepayments. [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.17. Supplemental reports. (a) [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.18. Filing prepayments. [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.19. Penalties and interest. [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.20. Notification to board: manner. [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.21. Refunds. [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.22. Security. [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].

6480.23. Credits. [Repealed by Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002].


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Article 2. Deficiency Determinations


6481. Deficiency determination. If the board is not satisfied with the return or returns of the tax or the amount of tax, or other amount, required to be paid to the state by any person, it may compute and determine the amount required to be paid upon the basis of the facts contained in the return or returns or upon the basis of any information within its possession or that may come into its possession. One or more deficiency determinations may be made of the amount due for one or for more than one period. When a business is discontinued a determination may be made at any time thereafter, within the periods specified in Section 6487, as to liability arising out of that business, irrespective of whether the determination is issued prior to the due date of the liability as otherwise specified in this part.

History.—Stats. 1949, p. 1167, operative July 1, 1949, added last sentence. Stats. 1984, Ch. 930, effective January 1, 1985, added "or other amount" before "required" in first sentence.

Nature of determination.—A determination hereunder does not create a new obligation or liability, but is merely a determination by the board of the amounts that a retailer has failed to pay. People v. Buckles (1943) 57 Cal.App.2d 76.

Determination based on estimate.—The board does not exceed its authority in establishing taxable receipts on the basis of cost of goods sold plus appropriate markups, since the Sales and Use Tax Law clearly contemplates an examination of the documents of original entry to ascertain whether the books and the sales tax returns reflect accurately the taxable transactions made by the taxpayer. Maganini v. Quinn (1950) 99 Cal.App.2d 1.

Consistency of Taxpayer's Books and Records Not Conclusive.—Even though a taxpayer's books and records are comprehensive and in agreement with each other, the Board is not required to accept such evidence as conclusive and may use recognized and standard accounting procedures to establish tax liability. Where the Board establishes a deficiency, the burden of proof is upon the taxpayer to explain any disparity between his books and records and the results of the Board's audit. Riley B's, Inc. v. State Board of Equalization (1976) 61 Cal.App.3d 610.

6482. Interest. The amount of the determination, exclusive of penalties, shall bear interest at the modified adjusted rate per month, or fraction thereof, established pursuant to Section 6591.5, from the last day of the month following the quarterly period for which the amount or any portion thereof should have been returned until the date of payment.

History.—Stats. 1947, p. 1557, operative July 1, 1947, substituted "last day of the month following" for "fifteenth day after the close of." Stats. 1975, Ch. 661, operative to interest accruing on or after January 1, 1976, substituted "1 percent" for "one-half of 1 percent." Stats. 1982, Ch. 5, First Extra Session, in effect May 27, 1982, substituted "adjusted . . . 19269" for "rate . . . thereof" before "from". Stats. 1983, Ch. 10 (1X), in effect February 17, 1983, added "and by the method" after "rate". Stats. 1984, Ch. 1020, operative July 1, 1985, added "modified" before "adjusted," deleted "annual" before "rate," added "per month, or fraction thereof" before "established," substituted "Section 6591.5" for "Section 19269."

6483. Offsets. In making a determination the board may offset overpayments for a period or periods, together with interest on the overpayments, against underpayments for another period or periods, against penalties, and against the interest on the underpayments. The interest on underpayment and overpayments shall be computed in the manner set forth in Sections 6591 and 6907.

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6484. 10 percent penalty. If any part of the deficiency for which a deficiency determination is made is due to negligence or intentional disregard of this part or authorized rules and regulations, a penalty of 10 percent of the amount of the determination shall be added thereto.

Previous errors.—Evidence that the board in 1950 had informed the taxpayer of errors in its 1947 to 1950 tax returns supported a negligence penalty for the years 1950 to 1953 where the same errors were continued in those years; nor could the taxpayer successfully contend that an honest dispute existed as to the legality of a tax on certain transactions for 1950 to 1953 where it did not dispute the imposition in 1950 of a tax on similar transactions for the years 1947 to 1950. Independent Iron Works, Inc. v. State Board of Equalization (1959) 167 Cal.App.2d 318.

6485. 25 percent penalty. If any part of the deficiency for which a deficiency determination is made is due to fraud or an intent to evade this part or authorized rules and regulations, a penalty of 25 percent of the amount of the determination shall be added thereto.

Standard of proof for civil fraud is clear and convincing evidence.—In a bankruptcy case, a federal appeals court predicted that the California Supreme Court would apply a standard of clear and convincing evidence, not merely a preponderance of evidence, to establish civil tax fraud. In re Renovizor's, Inc. (9th Cir. 2002) 282 F.3d 1233.

6485.1. 50 percent penalty. Any purchaser of a vehicle, vessel, or aircraft who registers it outside the State of California for the purpose of evading the payment of taxes due under this part shall be liable for a penalty of 50 percent of any tax determined to be due on the sales price of the vehicle, vessel, or aircraft.

History.—Added by Stats. 1984, Ch. 1490, effective September 27, 1984.

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6486. Notice of determination. The board shall give to the retailer or person storing, using, or consuming tangible personal property written notice of its determination. The notice shall be placed in a sealed envelope, with postage paid, addressed to the retailer or person storing, using, or consuming tangible personal property at his or her address as it appears in the records of the board. The giving of notice shall be deemed complete at the time of the deposit of the notice in the United States Post Office, or a mailbox, sub-post office, substation or mail chute or other facility regularly maintained or provided by the United States Postal Service, without extension of time for any reason. In lieu of mailing, a notice may be served personally by delivering it to the person to be served and service is complete at the time of delivery. Personal service to a corporation may be made by delivery of a notice to any person designated in the Code of Civil Procedure to be served for the corporation with summons and complaint in a civil action.

History.—Stats. 1943, p. 2457, operative July 1, 1943, added a statement that service by mail was complete upon deposit in the United States post office. Stats. 1953, p. 2723, in effect September 9, 1953, revised the language of that statement. Stats. 1974, Ch. 610, effective January 1, 1975, expanded and revised the section and deleted reference to Section 1013 of the C. C. P. Stats. 1981, Ch. 714, in effect January 1, 1982, added "or her" after "his" in the second sentence; and, added "it" after "delivering", substituted "is" for "shall be deemed", and deleted "such" before "delivery" in the fourth sentence.

Note.—Stats. 1974, Ch. 610, Section 16, explains the purpose of that enactment.

6487. Limitations; deficiency determinations. (a) For taxpayers filing returns, other than a return filed pursuant to Section 6452.1, on other than an annual basis, except in the case of fraud, intent to evade this part or authorized rules and regulations, or failure to make a return, every notice of a deficiency determination shall be mailed within three years after the last day of the calendar month following the quarterly period for which the amount is proposed to be determined or within three years after the return is filed, whichever period expires the later. In the case of failure to make a return, every notice of determination shall be mailed within eight years after the last day of the calendar month following the quarterly period for which the amount is proposed to be determined.

(b) For taxpayers filing returns on an annual basis, except in the case of fraud, intent to evade this part or authorized rules and regulations, or failure to make a return, every notice of a deficiency determination shall be mailed within three years after the last day of the calendar month following the one-year period for which the amount is proposed to be determined or within three years after the return is filed, whichever period expires the later. In the case of failure to make a return, every notice of determination shall be mailed within eight years after the last day of the calendar month following the one-year period for which the amount is proposed to be determined.

(c) The limitation specified in this section does not apply in case of a sales tax proposed to be determined with respect to sales of property for the storage, use, or other consumption of which notice of a deficiency determination has been or is given pursuant to subdivision (a) or (b) or pursuant to Section 6486, 6515, or 6536. The limitation specified in this section does not apply in case of an amount of use tax proposed to be determined with respect to storage, use, or other consumption of property for the sale of which notice of a deficiency determination has been or is given pursuant to subdivision (a) or (b) or pursuant to Section 6486, 6515, or 6536.

History.—Stats. 1943, p. 2457, operative July 1, 1943, added last sentence. Stats. 1947, p. 1557, operative July 1, 1947, substituted "last" for "fifteenth" in first paragraph. Stats. 1951, p. 2638, operative July 1, 1951, added eight-year limitation period in cases of failure to make a return. Stats. 1969, p. 893, in effect November 10, 1969, deleted "or claim for additional amount pursuant to Section 6563" from the first and second sentences of the first paragraph. Stats. 1977, Ch. 921, operative January 1, 1978, added "For taxpayers filing returns on other than an annual basis" to first paragraph, and added new second paragraph for annual basis taxpayers. Stats. 1983, Ch. 337, in effect January 1, 1984, added "or second" after "first" in the last sentence of the third paragraph. Stats. 1991, Ch. 236, in effect July 29, 1991, added the subdivision letters, added "subdivision (a) or (b) or pursuant to" after "given pursuant to" and substituted "or 6536" for "and 6537" twice in subdivision (c). Stats. 2003, Ch. 718 (SB 1009), in effect January 1, 2004, added ", other than a return filed pursuant to Section 6452.1," after "filing returns" in subdivision (a); added a hyphen in "one-year" after "month following the" twice in subdivision (b); added "a" after "which notice of", deleted "and to the first or second paragraph of this section" after "6515, or 6536" twice in subdivision (c).

Sufficiency of return.—A return by a taxpayer on a "Sales and Use Tax Return" form prescribed by the State Board of Equalization for a combined showing of sales and use tax liability in which the taxpayer fills in entries in all but one of the lines under the sales tax subheading, leaves blank the lines under the use tax subheading, enters the sales tax total in the line for the total amount due for both sales tax and use tax and signs a concluding certificate stating the report to be "a true and complete return" pursuant to the sales and use tax acts is a return for use tax as well as sales tax purposes and starts the running of the limitation period specified in this section against a use tax deficiency determination. People v. Universal Film Exchanges, Inc. (1950) 34 Cal.2d 649.

Burden of proof.—In a suit for refund of sales tax paid pursuant to a deficiency determination issued after the period of limitations has run, the burden of proving fraud is on the State Board of Equalization, and the taxpayer is entitled to recover in the absence of such proof. Marchica v. State Board of Equalization (1951) 107 Cal.App.2d 501.

Setoffs of overpayments against underpayments.—The Board may properly credit and set off underpayment of taxes barred by the statute of limitations in one quarter against an overpayment of taxes in another quarter, so long as both setoffs and overpayments occurred during the period put at issue by the taxpayer's claim for refund. Sprint Communications Company v. State Board of Equalization (1995) 40 Cal.App.4th 1254.

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6487.05. Deficiency determinations; unregistered out-of-state retailers. (a) Notwithstanding Section 6487, the period during which a deficiency determination may be mailed to a qualifying retailer is limited to three years after the last day of the calendar month following the quarterly period for which the amount is proposed to be determined. For purposes of this section, a "qualifying retailer" is a retailer that meets all of the following conditions:

(1) The retailer is located outside this state, and has not previously registered with the board.

(2) The retailer is engaged in business in this state, as defined in Section 6203.

(3) The retailer voluntarily registers with the board.

(4) The retailer has not been previously contacted by the board or its agents regarding the provisions of Section 6203.

(5) As determined by the board, the retailer's failure to file a return or failure to report or pay the tax or amount due required by law was due to reasonable cause and was not a result of negligence or intentional disregard of the law, or because of fraud or an intent to evade the provisions of this part.

(b) If the board or its designee finds that the retailer's failure to make a timely return or payment is due to reasonable cause and circumstances beyond the retailer's control, and occurred notwithstanding the exercise of ordinary care and the absence of willful neglect, the retailer shall be relieved of the penalties imposed pursuant to this part. Any retailer seeking relief of penalty shall file a statement under penalty of perjury setting forth the facts upon which he or she bases his or her claim for relief.

History.—Added by Stats. 1994, Ch. 903, in effect January 1, 1995.

Text of section operative January 1, 2004 through January 1, 2008

6487.06. Deficiency determinations; unregistered California purchasers. (a) Notwithstanding Section 6487, the period during which a deficiency determination may be mailed to a qualifying purchaser is limited to the three-year period beginning after the last day of the calendar month following the quarterly period for which the amount is proposed to be determined.

(b) For purposes of this section, a "qualifying purchaser" is a person that voluntarily files an Individual Use Tax Return for tangible personal property that is purchased from a retailer outside of this state for storage, use, or other consumption in this state, and that meets all of the following conditions:

(1) The purchaser resides or is located within this state and has not previously done either of the following:

(A) Registered with the State Board of Equalization.

(B) Filed an Individual Use Tax Return with the State Board of Equalization.

(2) The purchaser is not engaged in business in this state as a retailer, as defined in Section 6015.

(3) The purchaser has not been contacted by the State Board of Equalization regarding failure to report the use tax imposed by Section 6202.

(4) The State Board of Equalization has made a determination that the purchaser's failure to file an Individual Use Tax Return or to otherwise report, or pay the use tax imposed by Section 6202 was due to reasonable cause and was not caused by reason of negligence, intentional disregard of the law, or by an intent to evade the taxes imposed by this part.

(c) If the State Board of Equalization makes a determination that the purchaser's failure to timely report or remit the taxes imposed by this part is due to reasonable cause or due to circumstances beyond the purchaser's control, the purchaser may be relieved of any penalties imposed by this part. Any purchaser seeking relief from penalties imposed by this part shall file a statement, signed under penalty of perjury, setting forth the facts that form the basis for the claim for relief.

(d) This section shall not apply to purchases of vehicles, vessels, or aircraft as defined in Article 1 (commencing with Section 6271) of Chapter 3.5 of this part.

(e) The State Board of Equalization shall submit to the Legislature before January 1, 2008, a report that includes the following information:

(1) The number of qualifying purchasers who received the benefits afforded by this section.

(2) The amount of use tax revenue received by the state from the qualifying purchasers described in paragraph (1).

(3) Recommendations for modifying, eliminating, or continuing the operation of, any or all of the provisions of this section.

(f) This section shall remain in effect only until January 1, 2008, and as of that date is repealed.

History.—Added by Stats. 2003, Ch. 697 (AB 1741), in effect January 1, 2004. Stats. 2005, Ch. 308 (AB 671), in effect January 1, 2006, substituted "2008" for "2005" after "before January 1," in subdivision (e), and substituted "2008" for "2006" after "until January 1," in subdivision (f).


Text of section operative January 1, 2009

6487.06. Deficiency determinations; unregistered California purchasers. (a) Notwithstanding Section 6487, the period during which a deficiency determination may be mailed to a qualifying purchaser is limited to three years after the last day of the calendar month following the quarterly period for which the amount is proposed to be determined.

(b) For purposes of this section, a "qualifying purchaser" is a person that voluntarily files an individual use tax return for tangible personal property that is purchased from a retailer outside of this state for storage, use, or other consumption in this state, and that meets all of the following conditions:

(1) The purchaser resides or is located within this state and has not previously done any of the following:

(A) Registered with the State Board of Equalization.

(B) Filed an individual use tax return with the State Board of Equalization.

(C) Reported an amount on his or her individual California income tax return.

(2) The purchaser is not engaged in business in this state as a retailer, as defined in Section 6015.

(3) The purchaser has not been contacted by the State Board of Equalization regarding failure to report the use tax imposed by Section 6202.

(4) The State Board of Equalization has made a determination that the purchaser's failure to file an individual use tax return or to otherwise report or pay the use tax imposed by Section 6202 was due to reasonable cause and was not caused by reason of negligence, intentional disregard of the law, or by an intent to evade the taxes imposed by this part.

(c) If the State Board of Equalization makes a determination that the purchaser's failure to timely report or remit the taxes imposed by this part is due to reasonable cause or due to circumstances beyond the purchaser's control, the purchaser may be relieved of any penalties imposed by this part. Any purchaser seeking relief from penalties imposed by this part shall file a statement, signed under penalty of perjury, setting forth the facts that form the basis for the claim for relief.

(d) This section shall not apply to purchases of vehicles, vessels, or aircraft as defined in Article 1 (commencing with Section 6271) of Chapter 3.5.

History.—Added by Stats. 2008, Ch. 306 (AB 3079), in effect January 1, 2009.

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6487.1. Limitations; deficiency determination; decedent. In the case of a deficiency arising under this part during the lifetime of a decedent, a notice of deficiency determination shall be mailed within four months after written request therefor, in the form required by the board, by the fiduciary of the estate or trust or by any other person liable for the tax or any portion thereof.

History.—Added by Stats. 1968, p. 2449, in effect November 13, 1968.

6487.2. Limitations; deficiency determinations; general partners.

(a) A notice of determination issued pursuant to Section 6486, 6515, or 6536 to an individual who was a general partner, as shown on the board's records, and who, prior to the period covered by the determination, withdrew from the partnership, causing a change in ownership, and failed to notify the board, shall be mailed within four years after the last day of the calendar month following the quarterly period in which the change of ownership occurred.

(b) An individual who was a general partner, as shown on the board's records, who withdraws from a partnership without notifying the board of the change in ownership, shall not be liable for any unpaid, self-assessed liability of the partnership that becomes due at least three years after the last day of the calendar month following the quarterly period in which the change in ownership occurred.

(c) Subdivisions (a) and (b) shall not apply to either of the following:

(1) Cases of fraud or intent to evade this part or other administrative or interpretive regulations.

(2) Any partners who retain an ownership interest in a corporation that is a successor to the partnership.

(d) For purposes of this part, change in ownership means that a new "person," as defined in Section 6005, is created by the action of the former owner by means of a sale, an incorporation, an addition or elimination of one or more partners, or the termination of a spouse's ownership or community property interest due to legal separation or divorce.

(e) For purposes of this section, "individual" includes only natural persons.

History.—Added by Stats. 1993, Ch. 1109, in effect January 1, 1994.

6487.3. Deficiency determination; qualified use tax. [Repealed by Stats. 2010, Ch. 721 (SB 858), in effect October 19, 2010.]

6487.3. Deficiency determination; qualified use tax. (a) (1) For persons that elect to report qualified use tax in accordance with Section 6452.1, except in the case of fraud, intent to avoid this part or authorized rules and regulations issued by the board, or the gross understatement of qualified use taxes, every notice of a deficiency determination with respect to the qualified use tax shall be mailed within three years after the last day for which an acceptable tax return is due or filed, whichever occurs later.

(2) In the case of a gross understatement of qualified use tax, every notice of a deficiency determination with respect to the qualified use tax shall be mailed within six years after the last day for which an acceptable tax return is due or filed, whichever occurs later.

(3) For purposes of this subdivision a "gross understatement of qualified use tax" is a deficiency that is in excess of 25 percent of the amount of qualified use tax reported on a person's acceptable tax return. In the case of married individuals filing separate California personal income tax returns, the total amount of qualified use tax reported will be considered in determining whether there is a gross understatement of qualified use tax.

(4) For purposes of this section "acceptable tax return" means a timely filed original return that is filed pursuant to Article 1 (commencing with Section 18501), Article 2 (commencing with Section 18601), Section 18633, Section 18633.5 of Chapter 2 (commencing with Section 18501) of Part 10.2, or Article 3 (commencing with Section 23771) of Chapter 4 of Part 11.

(b) This section applies to reporting of purchases of tangible personal property made on or after January 1, 2010, in taxable years beginning on or after January 1, 2010.

History.—Added by Stats. 2010, Ch. 721 (SB 858), in effect October 19, 2010.

6488. Waiver. If before the expiration of the time prescribed in Section 6487 for the mailing of a notice of deficiency determination the taxpayer has consented in writing to the mailing of the notice after such time, the notice may be mailed at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.

History.—Added by Stats. 1945, p. 1001, operative July 1, 1945.


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Article 3. Determinations if No Return Made

6511. Determination; failure to file return. If any person fails to make a return, the board shall make an estimate of the amount of the gross receipts of the person, or, as the case may be, of the amount of the total sales price of tangible personal property sold or purchased by the person, the storage, use, or other consumption of which in this state is subject to the use tax. The estimate shall be made for the period or periods in respect to which the person failed to make a return and shall be based upon any information which is in the board's possession or may come in its possession. Upon the basis of this estimate the board shall compute and determine the amount of tax or other amount required to be paid to the state, adding to the sum thus arrived at a penalty equal to 10 percent thereof. One or more determinations may be made for one or for more than one period. When a business is discontinued a determination may be made at any time thereafter, within the periods specified in Section 6487, as to liability arising out of that business, irrespective of whether the determination is issued prior to the due date of the liability as otherwise specified in this part.

History.—Stats. 1949, p. 1168, operative July 1, 1949, added last sentence. Stats. 1984, Ch. 930, effective January 1, 1985, added "of tax or other amount" before "required to be paid."

Penalty when retailer bankrupt.—A penalty added pursuant to this section for failure to file a return for periods prior to commencement of bankruptcy proceedings is not allowable as a claim in bankruptcy. State Board of Equalization v. Goggin (1950) 183 F.2d 489, cert. den. (1950) 340 U.S. 891.

6512. Offsets. In making a determination the board may offset overpayments for a period or periods, together with interest on the overpayments, against underpayments for another period or periods, against penalties, and against the interest on the underpayments. The interest on underpayments and overpayments shall be computed in the manner set forth in Sections 6591 and 6907.

6513. Interest. The amount of the determination, exclusive of penalties, shall bear interest at the modified adjusted rate per month, or fraction thereof, established pursuant to Section 6591.5, from the last day of the month following the quarterly period for which the amount or any portion thereof should have been returned until the date of payment.

History.—Stats. 1947, p. 1557, operative July 1, 1947, substituted "last day of the month following" for "fifteenth day after the close of." Stats. 1975, Ch. 661, operative to interest accruing on or after January 1, 1976, substituted "1 percent" for "one-half of 1 percent." Stats. 1982, Ch. 5, First Extra Session, in effect May 27, 1982, substituted "adjusted . . . 19269" for "rate . . . thereof" before "from". Stats. 1983, Ch. 10 (1X), in effect February 17, 1983, added "and by the method" after "rate". Stats. 1984, Ch. 1020, effective January 1, 1985, added "modified" before "adjusted," deleted "annual" before "rate," substituted "per month, or fraction thereof" for "and by the method," substituted "Section 6591.5" for "Section 19269."

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6514. Penalties. If the failure of any person to file a return is due to fraud or an intent to evade this part or rules and regulations, a penalty of 25 percent of the amount required to be paid by the person, exclusive of penalties, shall be added thereto in addition to the 10 percent penalty provided in Section 6511.

6514.1. 50 percent penalty. Any purchaser of a vehicle, vessel, or aircraft who registers it outside the State of California for the purpose of evading the payment of taxes due under this part shall be liable for a penalty of 50 percent of any tax determined to be due on the sales price of the vehicle, vessel, or aircraft.

History.—Added by Stats. 1984, Ch. 1490, Effective September 27, 1984.

6515. Notice of determination. Promptly after making its determination the board shall give to the person written notice of the estimate, determination, and penalty, the notice to be served personally or by mail in the manner prescribed for service of notice of a deficiency determination.


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Article 4. Jeopardy Determinations

6536. Jeopardy determination. If the board believes that the collection of any tax or any amount of tax required to be collected and paid to the state or of any determination or other amount required to be paid to the state will be jeopardized by delay, it shall thereupon make a determination of the tax or amount of tax required to be collected or other amount, noting that fact upon the determination. The amount determined is immediately due and payable.

History.—Added by Stats. 1941, Ch. 36. Stats. 1984, Ch. 930, effective January 1, 1985, added "or other . . . to the state" before "will be jeopardized," added "or other amount," before "noting that fact."

6537. Interest and penalty. If the amount specified in the determination is not paid within 10 days after service of notice thereof upon the person against whom the determination is made, the amount becomes final at the expiration of the 10 days, unless a petition for redetermination is filed within the 10 days, and the delinquency penalty and the interest provided in Section 6591 shall attach to the amount of the tax or the amount of the tax required to be collected.

6538. Petition for redetermination; security. The person against whom a jeopardy determination is made may petition for the redetermination thereof pursuant to Article 5 of this chapter. He shall, however, file the petition for redetermination with the board within 10 days after the service upon him of notice of the determination. The person shall also within the 10-day period deposit with the board such security as it may deem necessary to insure compliance with this part. The security may be sold by the board in the manner prescribed by Section 6701.

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6538.5. Administrative hearing. In accordance with such rules and regulations as the board may prescribe, the person against whom a jeopardy determination is made may apply for an administrative hearing for one or more of the following purposes:

(a) To establish that the determination is excessive; or

(b) To establish that the sale of property that may be seized after issuance of the jeopardy determination or any part thereof shall be delayed pending the administrative hearing because the sale would result in irreparable injury to the person; or

(c) To request the release of all or a part of the property to the person; or

(d) To request a stay of collection activities.

The application shall be filed within 30 days after service of the notice of jeopardy determination and shall be in writing and state the specific factual and legal grounds upon which it is founded. No security need be posted to file the application and to obtain this hearing. However, if the person does not deposit within the 10-day period prescribed in Section 6538, such security as the board may deem necessary to ensure compliance with this part, the filing of the application shall not operate as a stay of collection activities, except sale of property seized after issuance of the jeopardy determination. Upon a showing of good cause for failure to file a timely application for administrative hearing, the board may allow a filing of the application and grant the person an administrative hearing. The filing of an application pursuant to this section shall not affect provisions of Section 6537 relating to the finality date of the determination or to penalty or interest.

History.—Added by Stats. 1977, Ch. 329, operative January 1, 1978.

6539. Service of notice. Any notice required by this article shall be served personally or by mail in the manner prescribed for service of notice of a deficiency determination.

History.—Added by Stats. 1963, p. 1492, in effect September 20, 1963.


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Article 5. Redeterminations

6561. Petition for redetermination. Any person against whom a determination is made under Article 2 (commencing with Section 6481) or 3 (commencing with Section 6511) or any person directly interested may petition for a redetermination within 30 days after service upon the person of notice thereof. If a petition for redetermination is not filed within the 30-day period, the determination becomes final at the expiration of that period.

History.—Stats. 1982, Ch. 454, in effect January 1, 1983, added "(commencing with Section 6481)" after "Article 2" and "(commencing with Section 6511)" after "or 3," and deleted "of this chapter" before "or any" in the first sentence, and substituted "that" for "the" after "expiration of" in the second sentence.

Exhaustion of administrative remedies.—A taxpayer failing to file a return or to petition for redetermination of use tax liability determined by the board on an estimated basis cannot assert alleged errors in computation of the tax liability in the state's action for the enforcement thereof. Even though objectives to the determination involve only questions of law, the board should be given opportunity to rectify its determination. People v. West Publishing Co. (1950) 35 Cal.2d 80.

6561.5. Form and content of petition. Every petition for redetermination shall be in writing and shall state the specific grounds upon which the petition is founded. The petition may be amended to state additional grounds at any time prior to the date on which the board issues its order or decision upon the petition for redetermination.

History.—Added by Stats. 1967, p. 2328, in effect November 8, 1967.

6562. Oral hearing. If a petition for redetermination is filed within the 30-day period, the board shall reconsider the determination and, if the person has so requested in his petition, shall grant the person an oral hearing and shall give him 10 days' notice of the time and place of the hearing. The board may continue the hearing from time to time as may be necessary.

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6563. Decrease or increase of determination. (a) The board may decrease or increase the amount of the determination before it becomes final, but the amount may be increased only if a claim for the increase is asserted by the board at or before the hearing. Unless the penalty imposed by Section 6485 or Section 6514 applies to the amount of the determination as originally made or as increased, the claim for increase must be asserted during one of the following applicable periods:

(1) In the case of any taxpayer whose reported gross receipts and total sales price of property sold or purchased by him or her is less than ten million dollars ($10,000,000) in each calendar quarter of the period or periods to which the determination applies, within three years after the first deficiency determination or within three years after the time tax records requested by the board were made available, whichever is later.

(2) In the case of any other taxpayer, within eight years after the first deficiency determination or within eight years after the time tax records requested by the board were made available, whichever is later.

(b) If the taxpayer and the board mutually agree, the time limits specified in subdivision (a) may be waived.

(c) The board shall specify the information on which it bases its increase.

History.—Stats. 1945, p. 1725, operative July 1, 1945, added "before it becomes final." Stats. 1969, p. 893, in effect November 10, 1969, added the second sentence. Stats. 1984, Ch. 1728, effective January 1, 1985, deleted "within . . . asserted" after "must be asserted," added "during . . . periods" and paragraphs (1) and (2) and subdivisions (b) and (c) after "must be asserted," added "(a)" designation at beginning of section.

Note.—Sec. 3, Stats. 1984, Ch. 1728 provided (a) The Legislative Analyst shall investigate and report to the Legislature no later than January 1, 1986, on each of the following:

(1) If there are feasible cost-effective methods for the State Board of Equalization to obtain, file, and retrieve information regarding the types of specific transactions reported by taxpayers and the types of transactions covered by an audit by the board's staff. The information so obtained, filed, and retrieved would be for later use in administrative or court proceedings in determining, with respect to any taxpayer's activity or transaction, whether or not other taxpayers have paid sales or use tax on the same activity or transaction and whether or not the board has applied tax to other taxpayers engaged in the same activity or transaction.

(2) In what manner the information so obtained from other taxpayers should be disclosed, in order to protect to the greatest possible extent the confidentiality of the information.

(3) If it is feasible to provide by statute that a new product not previously marketed in California is not subject to tax unless the new product is specifically described in board regulations as subject to tax.

(b) Notwithstanding the provisions of Section 7056 of the Revenue and Taxation Code and Title 1.8 (commencing with Section 1798) of Part 4 of Division 3 of the Civil Code, the board shall make available to the Legislative Analyst any confidential taxpayer accounts and audits requested by the Legislative Analyst in order to complete the required investigation and report. The Legislative Analyst shall maintain the confidentiality of any taxpayer accounts and audits provided by the board. Sec. 4 provided it is the intent of the Legislature that the State Board of Equalization shall explore and use every available means of regularly informing California businesses of the provisions of Section 6596 of the Revenue and Taxation Code.

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6564. Finality date of order or decision. The order or decision of the board upon a petition for redetermination becomes final 30 days after service upon the petitioner of notice thereof.

Finality date of decision.—A decision of the Board of Equalization upon a petition for redetermination becomes final thirty days after service of notice of the decision upon the petitioner. Manz v. California State Board of Equalization (2003) 343 F3d 11207, 1213.

6565. Due date of determination; penalty. All determinations made by the board under Articles 2 or 3 of this chapter are due and payable at the time they become final. If they are not paid when due and payable, a penalty of 10 percent of the amount of the determination, exclusive of interest and penalties, shall be added thereto.

Penalty when retailer bankrupt.—Since a tax and penalty computed in accordance with Section 6511 for periods prior to commencement of bankruptcy proceedings could not be paid by a receiver in bankruptcy, the amount added as a penalty for the receiver's failure to pay is not allowable as a claim in bankruptcy. State Board of Equalization v. Goggin (1950) 183 F.2d 489, cert. den. (1950) 340 U.S. 891.

6566. Service of notice. Any notice required by this article shall be served personally or by mail in the manner prescribed for service of notice of a deficiency determination.


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Article 6. Interest and Penalties

6591. Interest and penalties. (a) Any person who fails to pay any tax to the state or any amount of tax required to be collected and paid to the state, except amounts of determinations made by the board under Article 2 (commencing with Section 6481) or Article 3 (commencing with Section 6511) of this chapter, within the time required shall pay a penalty of 10 percent of the tax or amount of the tax, in addition to the tax or amount of tax, plus interest at the modified adjusted rate per month, or fraction thereof, established pursuant to Section 6591.5, from the date on which the tax or the amount of tax required to be collected became due and payable to the state until the date of payment.

(b) Any person who fails to file a return in accordance with the due date set forth in Section 6451 or the due date established by the board in accordance with Section 6455, shall pay a penalty of 10 percent of the amount of taxes, exclusive of prepayments, with respect to the period for which the return is required.

(c) The penalties imposed by this section shall be limited to a maximum of 10 percent of the taxes for which the return is required, exclusive of any prepayments, for any one return.

History.—Stats. 1975, Ch. 661, operative to interest accruing on or after January 1, 1976, substituted "1 percent" for "one-half of 1 percent." Stats. 1982, Ch. 5, First Extra Session, in effect May 27, 1982, substituted "Article 2 . . . Section 6511" for "Articles 2 or 3" after "under" and "adjusted . . . Section 19269" for "rate . . . thereof" after "interest at the." Stats. 1983, Ch. 10 (1X), in effect February 17, 1983, added "and by the method" after "rate". Stats. 1984, Ch. 1020, effective January 1, 1985, operative July 1, 1985, added "modified" before "adjusted," deleted "annual" before "rate," substituted "per month, or fraction thereof" for "and by the method," substituted "Section 6591.5" for "Section 19269." Stats. 1996, Ch. 1087, in effect January 1, 1997, added subdivision letter designation (a) before first paragraph, and added subdivisions (b) and (c).

Penalties and interest in bankruptcy reorganization.—Pre- and post-petition penalties and post-petition interest which were not provided for under the Bankruptcy Act plan of arrangement were collectible from the reorganized debtor. The post-petition interest was not chargeable to the estate when the receiver's delay was the result of his reasonable business judgment. Gough Industries v. Rothman (1971) 446 F.2d 536; Cert. den. (1972) 405 U.S. 916.

6591.5. Interest rates. (a) (1) For interest required to be paid to the state, "modified adjusted rate per annum" means the adjusted annual rate established pursuant to subdivision (c), plus three percentage points.

(2) For interest required to be paid by the state upon overpayments of tax, "modified adjusted rate per annum" means the adjusted annual rate established pursuant to subdivision (d).

(b) "Modified adjusted rate per month, or fraction thereof" means the modified adjusted rate per annum divided by 12.

(c) The rate established for interest to be paid upon underpayments of tax shall be determined in accordance with the provisions of Section 6621 of the Internal Revenue Code which establish the underpayment rate, except that the determination specified in Section 6621(b) of the Internal Revenue Code shall be modified to be determined semiannually as follows:

(1) The rate for January shall apply for the following July 1 to December 31, inclusive.

(2) The rate for July shall apply for the following January 1 to June 30, inclusive.

(d) (1) Except as provided in paragraph (2), the rate established for interest to be paid by the state upon overpayments of tax shall be equal to the bond equivalent rate of 13-week treasury bills auctioned, rounded to the nearest full percent (or if a multiple of one-half of 1 percent, the rate shall be increased to the next highest full percent), as follows:

(A) The bond equivalent rate of 13-week treasury bills established at the first auction held during the month of January shall apply for the following July 1 to December 31, inclusive.

(B) The bond equivalent rate of 13-week treasury bills established at the first auction held during the month of July shall apply for the following January 1 to June 30, inclusive.

(2) For the period July 1, 1991, through June 30, 1992, the rate to be paid by the state upon overpayments of tax shall be equal to the bond equivalent rate of 13-week treasury bills established at the auction held on July 1, 1991, rounded to the nearest full percent (or if a multiple of one-half of 1 percent, the rate shall be increased to the next highest full percent).

(e) Referencing this method of computation, in computing the amount of any interest required to be paid by the state or by the taxpayer, or any other amount determined by reference to that amount of interest, that interest and that amount shall be computed as simple interest, not compound interest.

History.—Added by Stats. 1984, Ch. 1020, effective January 1, 1985, operative July 1, 1985. Stats. 1990, Ch. 1528, in effect January 1, 1991, substituted "subdivision (c)" for "Section 19269" in subdivision (a) and added subdivisions (c) and (d). Stats. 1991, Ch. 236, in effect July 29, 1991, added "(1) For interest required to be paid to the state" before "modified"; added paragraph (2) of subdivision (a); substituted "for interest to be paid upon underpayments of tax" for "under this section" after "rate established" and substituted "which established . . . as follows:" for "except that:" in subdivision (c); substituted paragraphs (1) and (2) for the former paragraphs (1), (2) and subparagraphs (A) and (B) of subdivision (c) which provided that "(1) the overpayment rate specified in Section 6621(a)(1) of the Internal Revenue Code shall be modified to be equal to the underpayment rate determined under Section 6621(a)(2) of the Internal Revenue Code. (2) The determination specified in Section 6621(b) shall be modified to be determined semiannually as follows: (A) The rate for January shall apply for the following July 1 to December 31, inclusive. (B) The rate for July shall apply for the following January 1 to June 30, inclusive."; and relettered former subdivision (d) as subdivision (e).

Interest on nondischargeable tax debts. Post-petition interest on a tax debt which was not dischargeable under Chapter 11 was also not dischargeable, and the debtor was personally liable for such interest. In re Artisan Woodworkers (Ward v. Board of Equalization) (9th Cir. 2000) 204 F.3d 888.

6591.6. Electronic payments: one day late. (a) If the board finds, taking into account all facts and circumstances, that it is inequitable to compute interest at the modified adjusted rate per month or fraction thereof, as defined in subdivision (b) of Section 6591.5, interest shall be computed at the modified adjusted daily rate from the date on which the tax or prepayment was due until the date of payment, if all of the following occur:

(1) The payment of tax or the prepayment was made one business day after the date the tax or prepayment was due.

(2) The person was granted relief from all penalties that applied to that payment of tax or prepayment.

(3) The person files a request for an oral hearing before the board.

(b) For purposes of this section, "modified adjusted daily rate" means the modified adjusted rate per annum as defined in subdivision (a) of Section 6591.5 determined on a daily basis by dividing the modified adjusted rate per annum by 365.

(c) For purposes of this section, "board" means the members of the State Board of Equalization meeting as a public body.

(d) For purposes of this section, "business day" means any day other than a Saturday, Sunday, or any day designated as a state holiday.

(e) This section shall not apply to any payment made pursuant to a deficiency determination, a determination where no return has been filed, or a jeopardy determination issued by the board.

(f) This section shall only apply to electronic payments or prepayments of taxes.

(g) This section shall be operative only until January 1, 2016.

History.—Added by Stats. 2010, Ch. 316 (SB 1028), in effect January 1, 2011.

Note.—Section 1 of Stats. 2010, Ch. 316 (SB 1028) provided, "It is the intent of the Legislature that California's penalty and interest provisions foster and maintain the current high level of compliance, provide appropriate costs and sanctions for noncompliance, and provide a reasonable and administrable degree of latitude for individual taxpayer circumstances and errors. It is the intent of the Legislature in enacting this act, that the State Board of Equalization strictly and narrowly apply its provisions on a case-by-case basis and only in special circumstances."

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6592. Excusable delay. (a) If the board finds that a person's failure to make a timely return or payment is due to reasonable cause and circumstances beyond the person's control, and occurred notwithstanding the exercise of ordinary care and the absence of willful neglect, the person shall be relieved of the penalties provided by Sections 6476, 6477, 6479.3, 6480.4, 6480.8, 6511, 6565, 6591, 7051.2, 7073 and 7074.

(b) Except as provided in subdivision (c) any person seeking to be relieved of the penalty shall file with the board a statement under penalty of perjury setting forth the facts upon which he or she bases his or her claim for relief.

(c) The board shall establish criteria that provides for efficient resolution of requests for relief pursuant to this section.

History.—Added by Stats. 1963, p. 2845, in effect September 20, 1963. Stats. 1967, p. 2398, in effect November 8, 1967, added sections "6476, 6477." Stats. 1984, Ch. 1707, effective January 1, 1985, added "6565," after "6611." Stats. 1985, Ch. 1343, effective January 1, 1986, added "and 7051.2" at the end of first paragraph. Stats. 1986, Ch. 214, effective June 27, 1986, added reference to Sections 6480.4 and 6480.8. Stats. 1991, Ch. 473, in effect January 1, 1992, substituted "shall" for "may" after "the person", substituted "penalties" for "penalty" after "relieved of the", and added "and subdivisions (d) and (e) of Section 6479.3" after "7051.2". Stats. 1999, Ch. 865, (SB 1302), in effect January 1, 2000, added "6479.3" after "6477", and deleted "and subdivisions (d) and (e) of Section 6479.3" after "and 7051.2" in the first paragraph. Stats. 2000, Ch. 1052 (AB 2898), in effect January 1, 2001, added subdivision letter designation (a) before first paragraph; created new subdivision (b) with former second paragraph, and substituted "Except as . . . (c) any" for "Any" therein; and added subdivision (c). Stats. 2004, Ch. 226 (SB 1100), deleted "and" after "6565, 6591" and added "7073 and 7074" after "7051.2" in subdivision (a).

6592.5. Interest on prepayment when relief from penalty granted. Any person who is granted relief from the penalty imposed by Section 6476 or 6477 shall pay, in addition to any prepayment, interest at the "modified adjusted rate per month, or fraction thereof" established pursuant to subdivision (b) of Section 6591.5, from the date on which the prepayment would have been due until the date of payment.

History.—Added by Stats. 1993, Ch. 1109, in effect January 1, 1994.

6593. Disaster. If the board finds that a person's failure to make a timely return or payment was due to a disaster, and occurred notwithstanding the exercise of ordinary care and the absence of willful neglect, the person may be relieved of the interest provided by Sections 6459, 6480.4, 6480.8, 6513, 6591, and 6592.5.

Any person seeking to be relieved of the interest shall file with the board a statement under penalty of perjury setting forth the facts upon which he or she bases his or her claim for relief.

History.—Added by Stats. 1980, Ch. 994, effective September 21, 1980. Stats. 1981, Ch. 947, in effect January 1, 1982, deleted "natural" before "disaster" in the first paragraph. Stats. 1986, Ch. 214, effective June 27, 1986, added reference to Sections 6480.4 and 6480.8. Stats. 1993, Ch. 1109, in effect January 1, 1994, deleted "and" before "6591" and added ", and 6592.5" following "6591" in the first paragraph, added "or she" following "he" and added "or her" following "his" in the second paragraph.

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6593.5. Relief of interest. (a) The board, in its discretion, may relieve all or any part of the interest imposed on a person by this part under the following circumstances:

(1) Where the failure to pay tax is due in whole or in part to an unreasonable error or delay by an employee of the board acting in his or her official capacity.

(2) Where failure to pay use tax on a vehicle or vessel registered with the Department of Motor Vehicles was the direct result of an error by the Department of Motor Vehicles in calculating the use tax.

(b) For purposes of this section, an error or delay shall be deemed to have occurred only if no significant aspect of the error or delay is attributable to an act of, or a failure to act by, the taxpayer.

(c) Any person seeking relief under this section shall file with the board a statement under penalty of perjury setting forth the facts on which the claim for relief is based and any other information which the board may require.

(d) The board may grant relief only for interest imposed on tax liabilities that arise during taxable periods commencing on or after July 1, 1999.

History.—Added by Stats. 1998, Ch. 612, in effect January 1, 1999. Stats. 2001, Ch. 251 (AB 1123), in effect January 1, 2002, substituted "this part" for "Sections 6480.4, 6480.8, 6513, 6591, and 6592.5" after "a person by" in subdivision (a).

6594. Leases to the United States government. Notwithstanding any other provision of this part, no interest or penalties shall be assessed against any person for failure to make payments of any taxes on leases of personal property to the United States government while the board is enjoined from collecting such taxes by order of the United States District Court for the Central District of California in the case of United States of America v. California State Board of Equalization, No. CV 79-03359-R, provided that payment of any applicable taxes is made within 60 days after the board is no longer enjoined from collecting such taxes.

History.—Added by Stats. 1980, Ch. 1194, operative January 1, 1981. Stats. 1981, Ch. 714, in effect January 1, 1982, renumbered Section "6593" as Section "6594."

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6595. Penalty interest rates. [Repealed by Stats. 1985, Ch. 20, effective March 20, 1985, operative July 1, 1985.]

6596. Excusable delay; reliance on advice. (a) If the board finds that a person's failure to make a timely return or payment is due to the person's reasonable reliance on written advice from the board, the person may be relieved of the taxes imposed by Sections 6051 and 6201 and any penalty or interest added thereto.

(b) For the purpose of this section, a person's failure to make a timely return or payment shall be considered to be due to reasonable reliance on written advice from the board, only if the board finds that all of the following conditions are satisfied:

(1) The person requested in writing that the board advise him or her whether a particular activity or transaction is subject to tax under this part. The specific facts and circumstances of the activity or transaction shall be fully described in the request.

(2) The board responded in writing to the person regarding the written request for advice, stating whether or not the described activity or transaction is subject to tax, or stating the conditions under which the activity or transaction is subject to tax.

(3) In reasonable reliance on the board's written advice, the person did not do either of the following:

(A) Charge or collect from his or her customers amounts designated as sales tax reimbursement or use tax for the described activity or transaction.

(B) Pay a use tax on the storage, use, or other consumption in this state of tangible personal property.

(4) The liability for taxes applied to a particular activity or transaction which occurred before either of the following:

(A) Before the board rescinded or modified the advice so given, by sending written notice to the person of the rescinded or modified advice.

(B) Before a change in statutory or constitutional law, a change in the board's regulations, or a final decision of a court, which renders the board's earlier written advice no longer valid.

(c) Any person seeking relief under this section shall file with the board:

(1) A copy of the person's written request to the board and a copy of the board's written advice.

(2) A statement under penalty of perjury setting forth the facts on which the claim for relief is based.

(3) Any other information which the board may require.

(d) Only the person making the written request shall be entitled to rely on the board's written advice to that person.

History.—Added by Stats. 1984, Ch. 1728, effective January 1, 1985. Stats. 1991, Ch. 402, in effect January 1, 1992, added "do either of the following:" after "person did not", substituted "(A) Charge" for "charge" after "following:", and added subparagraph (B), to paragraph (3) of subdivision (b).

Note.—Sec. 4, Stats. 1984, Ch. 1728 provided it is the intent of the Legislature that the State Board of Equalization shall explore and use every available means of regularly informing California businesses of the provisions of Section 6596 of the Revenue and Taxation Code.

Sec. 5, Stats. 1984, Ch. 1728 Provides "The State Board of Equalization shall request each city which licenses businesses within its jurisdiction to add a notice to its business licenses applications. The requested notice shall state in substance that sales or use taxes may apply to the applicant's business activities, and that the applicant may seek written advice from the State Board of Equalization regarding the application of sales or use taxes to his or her business activities.

The board shall also make reasonable efforts to work with counties and other state agencies to determinate information about taxpayer's obligations under the Sales and Use Tax Law."

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6597. Penalty; tax reimbursement collected and not timely remitted.

(a) (1) Any person who knowingly collects sales tax reimbursement, as defined in Section 1656.1 of the Civil Code, or who knowingly collects use tax pursuant to Chapter 3 (commencing with Section 6201), and who fails to timely remit that sales tax reimbursement or use tax to the board, shall be liable for a penalty of 40 percent of the amount not timely remitted.

(2) (A) This subdivision shall not apply to any person whose liability for the unremitted sales tax reimbursement or use tax described in paragraph (1) averages one thousand dollars ($1,000) or less per month or does not exceed 5 percent of the total amount of tax liability for which the tax reimbursement was collected for the period in which tax was due, whichever is greater.

(B) If a person's failure to make a timely remittance of sales tax reimbursement or use tax is due to a reasonable cause or circumstances beyond the person's control, and occurred notwithstanding the exercise of ordinary care and the absence of willful neglect, the person shall be relieved of the penalty imposed by this subdivision.

(b) For purposes of this section:

(1) "Reasonable cause or circumstances beyond the person's control" includes, but is not limited to, any of the following:

(A) The occurrence of a death or serious illness of the person or the person's next of kin that caused the person's failure to make a timely remittance.

(B) The occurrence of an emergency, as defined in Section 8558 of the Government Code that caused the person's failure to make a timely remittance.

(C) A natural disaster or other catastrophe directly affecting the business operations of the person that caused the person's failure to make a timely remittance.

(D) The board failed to send returns or other information to the correct address of record, that caused the person's failure to make a timely remittance.

(E) The person's failure to make a timely remittance occurred only once over a three-year period, or once during the period in which the person was engaged in business, whichever time period is shorter.

(F) The person voluntarily corrected errors in remitting sales tax reimbursement or use tax collected that were made in previous reporting periods and remitted payment of the liability owed as a result of those errors prior to being contacted by the board regarding possible errors or discrepancies.

(2) "Sales tax reimbursement" shall also include any sales tax that is advertised, held out, or stated to the public or to any customer, directly or indirectly, that the tax or any part thereof will be assumed or absorbed by the retailer.

(c) This section shall apply to any determination made by the board pursuant to Article 2 (commencing with Section 6481), Article 3 (commencing with Section 6511), and Article 4 (commencing with Section 6536).

History.—Added by Stats. 2006, Ch. 252 (SB 1449), in effect January 1, 2007.


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