Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales And Use Tax Law

CHAPTER 7. OVERPAYMENTS AND REFUNDS


CHAPTER 7. OVERPAYMENTS AND REFUNDS

Article 1. Claim for Refund

6901. Credits and refunds. If the board determines that any amount, penalty, or interest has been paid more than once or has been erroneously or illegally collected or computed, the board shall set forth that fact in the records of the board and shall certify the amount collected in excess of the amount legally due and the person from whom it was collected or by whom paid. The excess amount collected or paid shall be credited by the board on any amounts then due and payable from the person from whom the excess amount was collected or by whom it was paid under this part, and the balance shall be refunded to the person, or his or her successors, administrators, or executors if a determination by the board is made in any of the following cases:

(a) An amount of tax, interest, or penalty was not required to be paid.

(b) Any amount of prepayment of sales tax, interest, or penalty paid pursuant to Article 1.5 (commencing with Section 6480) of Chapter 5 was not required to be paid.

(c) Any amount that is approved as a settlement pursuant to Section 7093.5.

Any overpayment of the use tax by a purchaser to a retailer who is required to collect the tax and who gives the purchaser a receipt therefor pursuant to Article 1 (commencing with Section 6201) of Chapter 3 shall be credited or refunded by the state to the purchaser. Any proposed determination by the board pursuant to this section with respect to an amount in excess of fifty thousand dollars ($50,000) shall be available as a public record for at least 10 days prior to the effective date of that determination.

History.—Stats. 1945, p. 1001, operative July 1, 1945, added "and payable" to first paragraph. Stats. 1949, p. 1166, operative July 1, 1949, added second paragraph. Stats. 1959, p. 4377, in effect September 18, 1959, substituted "one hundred dollars ($100)" for "twenty-five dollars ($25)." Stats. 1963, p. 3105, in effect September 20, 1963, added "by the board" and "from whom the excess amount was collected or by whom it was paid" in the second sentence of the first paragraph, and substituted "two hundred fifty dollars ($250)" for "one hundred dollars ($100)" in the second paragraph. Stats. 1965, p. 2052, in effect September 17, 1965, substituted "one thousand dollars ($1,000)" for "two hundred fifty dollars ($250)". Stats. 1977, Ch. 921, operative January 1, 1978, substituted "five thousand dollars ($5,000)" for "one thousand dollars ($1,000)". Stats. 1985, Ch. 591, effective January 1, 1986, substituted "fifteen" for "five" before "thousand" and "($15,000)" for "($5,000)" after "dollars" in the second paragraph. Stats. 1987, Ch. 210, effective July 23, 1987, added "or her" after "his" in first and second paragraphs, deleted first phrase of second paragraph, "In the case, however, of a determination by the board that an amount not exceeding fifteen thousand dollars ($15,000) was not required to be paid under this part", added "however" after "board" in second paragraph and added balance of sentence after "executors" and paragraphs (a) and (b). In third paragraph, deleted "Chapter 3 of this part" and substituted "(commencing with Section 6201) of Chapter 3". Stats. 1988, Ch. 1029, in effect January 1, 1989, substituted "fifty thousand dollars ($50,000)" for "fifteen thousand dollars ($15,000)" following "not exceeding" in subdivision (a). Stats. 1992, Ch. 708, in effect September 15, 1992, added subdivision (c). Stats. 1994, Ch. 726, in effect September 22, 1994, deleted "to the State Board of Control" after "and shall certify" in the first sentence; substituted "The" for "If approved by the State Board of Control the" at the beginning of the second sentence; added "if a determination . . . the following cases:" in the first paragraph; deleted the second paragraph which read: "The board, however, without obtaining approval of the State Board of Control may credit the amount on any amounts then due and payable under this part from the person by whom the amount was paid and may refund the balance to the person or his or her successors, administrators, or executors, if a determination by the board is made in either of the following cases:"; deleted "not exceeding fifty thousand dollars ($50,000)" after "or penalty" in subdivision (a); and added "Any proposed determination . . . of that determination." to the end of subdivision (c).

Unintentional overpayment.—Where a retail taxpayer erroneously collects and pays excessive sales taxes, the board is not required to make refunds directly to the retailer's customers, but may instead require as a condition of refund that the retailer repay such excess to its customers. Decorative Carpets, Inc. v. State Board of Equalization (1962) 58 Cal.2d 252.

Prior claim for refund by each member of class not required in class action suit for refund.—Where the complaint alleged that the named plaintiffs had filed a claim with the Board in behalf of themselves and all others similarly situated, and also alleged the existence of a well defined community of interest in questions of law and fact between the named plaintiffs and the other members of the class, it is not necessary that the complaint also allege that the unnamed plaintiffs had filed claims for refund as required by law. Santa Barbara Optical Co., Inc. v. State Board of Equalization (1975) 47 Cal.App.3d 244 [disapproved to the extent inconsistent with Woosley v. State of California (1992) 3 Cal.4th 758].

Joinder of Board in suit for refund by consumer against retailers.—Where a consumer brings a class action for refund of sales tax reimbursement against retailers who have failed or refused to apply for tax refunds to which they are entitled, the consumer may join the Board as a party in the suit. Javor v. State Board of Equalization (1974) 12 Cal.3d 790.

Note.—See Section 34 which authorizes, under certain conditions, payment directly to local governments of amounts paid to a state agency which can be identified as intended as payment of a locally administered tax.

Credit for Bad Debts in Bankruptcy Reorganization.—See Section 6055.

Refund of Excess Tax Reimbursement for Repayment to Consumer.—The board may not offset amounts owed to it by retailer against refunds of excess sales tax reimbursement required as the result of a class action by consumers against the retailers and the board. Javor v. State Board of Equalization (1977) 73 Cal.App.3d 939 [disapproved to the extent inconsistent with Woosley v. State of California (1992) 3 Cal.4th 758].

Class action permitted only to the extent authorized by the Legislature.—Class actions for refunds of sales tax were not authorized by the Legislature prior to amendment to section 6904 adopted in 1987, and this amendment authorized a class action only where each member of the class expressly authorizes and signs the claim (disapproving previous appellate decisions inconsistent with this decision). Woosley v. State of California (1992) 3 Cal.4th 758.

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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6901.5. Credits and refunds; excess tax. When an amount represented by a person to a customer as constituting reimbursement for taxes due under this part is computed upon an amount that is not taxable or is in excess of the taxable amount and is actually paid by the customer to the person, the amount so paid shall be returned by the person to the customer upon notification by the Board of Equalization or by the customer that such excess has been ascertained. In the event of his or her failure or refusal to do so, the amount so paid, if knowingly or mistakenly computed by the person upon an amount that is not taxable or is in excess of the taxable amount, shall be remitted by that person to this state. Notwithstanding subdivision (b) of Section 6904, those amounts remitted to the state shall be credited by the board on any amounts due and payable under this part on the same transaction from the person by whom it was paid to this state and the balance, if any, shall constitute an obligation due from the person to this state.

History.—Added by Stats. 1982, Ch. 708, in effect September 7, 1982. Stats. 1987, Ch. 38, effective January 1, 1988, deleted "However" and substituted "Notwithstanding subdivision (b) of Section 6904".

6902. Claim; limitation period. (a) (1) For persons required to file returns on other than an annual basis, except as provided in subdivision (b) no refund shall be approved by the board after three years from the last day of the month following the close of the quarterly period for which the overpayment was made, or, with respect to determinations made under Article 2 (commencing with Section 6481), Article 3 (commencing with Section 6511) or Article 4 (commencing with Section 6536) of Chapter 5 of this part, after six months from the date the determinations become final, or after six months from the date of overpayment, whichever period expires the later, unless a claim therefor is filed with the board within that period.

(2) For persons required to file returns on an annual basis, except as provided in subdivision (b) no refund shall be approved by the board after three years from the last day of the calendar month following the one-year period for which the overpayment was made, or with respect to determinations made under Article 2 (commencing with Section 6481), Article 3 (commencing with Section 6511), or Article 4 (commencing with Section 6536) of Chapter 5, after six months from the date the determinations become final, or after six months from the date of overpayment, whichever period expires the later, unless a claim therefor is filed with the board within that period. No credit shall be approved by the board after the expiration of that period unless a claim for credit is filed with the board within that period, or unless the credit relates to a period for which a waiver is given pursuant to Section 6488.

(b) A refund may be approved by the board for any period for which a waiver is given under Section 6488 if a claim therefor is filed with the board before the expiration of the period agreed upon.

History.—Stats. 1945, p. 1002, operative July 1, 1945, substituted "six month" for "60 days," and added provision permitting allowance of credit relating to period for which a waiver is given. Stats. 1947, p. 1558, operative July 1, 1947, substituted "last day of the month following" for "fifteenth day after." Stats. 1949, p. 1342, operative July 1, 1949, reworded the first sentence to permit the board to approve a refund within the limitation period without a claim therefor being filed and substituted "approved by the board" for "allowed" in the last sentence. Stats. 1965, p. 4440, in effect September 17, 1965, revised first line, added "(a)" and "4" in first paragraph, and added (b). Stats. 1977, Ch. 921, operative January 1, 1978, limited paragraph (a) to other than annual basis taxpayers, added a new paragraph for annual basis taxpayers, and added code sections in references to Articles 2, 3, and 4 of Chapter 5. Stats. 1992, Ch. 902, in effect September 25, 1992, operative January 1, 1993, added "(1)" after "(a)", substituted "persons required to file" for "taxpayers filing", added "Article" before "3" and "4", and substituted "that" for "such" after "board within" in paragraph (1) of subdivision (a); added paragraph number (2) after subdivision (a), substituted "persons required" for "taxpayers filing", added "Article" before "3" and "4", deleted "of this part" after "Chapter 5", and substituted "that" for "such" twice after "board within" and after "expiration of" in paragraph (2) of subdivision (a).

Claim not timely.—Where (1) the board issued a notice of determination to a taxpayer that the amounts paid with its returns were less than the amounts due, (2) the taxpayer filed a petition for redetermination, and (3) the board ultimately concluded that the taxpayer had made overpayments with its returns rather than underpayments, the board's ultimate conclusion was not a determination made under Article 2 or 3 of Chapter 5 and hence a refund claim filed within six months of the board's action was not a claim for a refund with respect to a determination under Article 2 or 3 of Chapter 5. Holland Furnace Co. v. State Board of Equalization (1960) 177 Cal.App.2d 672.

No Refund of Voluntary Payment of Estimated Tax Liability.—Taxpayer sought a refund of amounts voluntarily paid to the Board of Equalization in advance payment of estimated tax liability. Taxpayer made the payments during an extension of time within which a notice of deficiency determination might be mailed to taxpayer. The extension period expired, however, before the Board actually issued a deficiency notice. Taxpayer contended that the Board could not retain the amounts paid because the deficiency notice was not issued within the statutory period of limitations. The court, in holding that taxpayer was not entitled to a refund, noted that the record showed that at the time the payment was made taxpayer's tax delinquency was in excess of the sum paid. The court observed that taxpayer's liability to pay the deficiency was a continuing liability and was not created by the issuance of the deficiency notice and that in issuing a deficiency determination the Board had merely determined that, after the payment in question, there still remained a balance due which taxpayer had failed to pay. The court pointed out that the Board had recognized the bar of the statute of limitations as to any amounts due over and above the amount paid. Owens-Corning Fiberglas Corp. v. State Board of Equalization (1974) 39 Cal.App.3d 532.

Suit by Consumer Against Retailer for Refund of Excess Tax Reimbursement.—The statute of limitations did not bar the refund of excess sales tax reimbursement to retailers where the California Supreme Court had previously held that the board was a proper party to a class action by a consumer against the retailers, since (1) the refunds were required under the doctrine of the law of the case, (2) the action was commenced before the statute of limitations expired and (3) timely claims by some of the retailers inured to the benefit of the entire class of defendant retailers. Javor v. State Board of Equalization (1977) 73 Cal.App.3d 939 [disapproved to the extent inconsistent with Woosley v. State of California (1992) 3 Cal.4th 758].

Purchaser Lacks Standing to Sue for Refund.—A purchaser may not bring an action against the State Board of Equalization seeking recovery of sales taxes which it assertedly overpaid to its vendors because the purchaser is not the taxpayer. State Board of Equalization v. Superior Court (Petroleum Contractors, Inc.) (1980) 111 Cal.App.3d 568.

Refund.—The court upheld the Board's position that a claim for recovery of a partial payment must be filed within six months of the date of such partial payment. Chahine v. State Board of Equalization (1990) 222 Cal.App.3d 485.

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6902.2. Refund; offset of personal income or bank and corporation tax liability. (a) (1) In lieu of claiming the credit allowed by Section 17053.49 or 23649, a person who has paid sales tax reimbursement to a retailer or use tax on a purchase or purchases of property for which a credit may be allowed pursuant to those sections, may file a claim for refund equal to the credit amount that would otherwise be allowed pursuant to those sections. Any claim so filed shall be submitted to the board on a form prescribed by the board, shall be filed no earlier than the date a claim could have been made for a tax credit or carryover of a credit under Section 17053.49 or 23649, whichever is applicable, and shall be for an amount not in excess of the amount of the credit that could have been used to reduce the "net tax," (as defined in Section 17039), or the "tax," as defined in Section 23036. Any credit carried over pursuant to Section 17053.49 or Section 23649 may not be refunded under this section until the credit carried over could be applied to reduce the "net tax" (as defined in Section 17039) or the "tax" (as defined in Section 23036), as applicable. Under no circumstances may any claim for refund exceed the "net tax," as defined by Section 17039, or the "tax," as defined by Section 23036, after the allowance of any credits authorized by Section 17039 or 23036. A claim for refund shall, unless the sale or use of the property is otherwise exempt under this part, be accompanied by proof of payment of the tax to a retailer, including, but not limited to, a copy of an invoice or purchase contract that indicates the following:

(A) The date on which the purchase occurred.

(B) A description of the property purchased.

(C) The price paid for the property.

(D) The amount of tax paid with respect to the purchase.

(2) In the case of a person who has self-reported use tax to the board, the claim for refund shall also indicate the amount of use tax paid and the period for which that tax was remitted.

(3) Any person who claims a refund under this section shall make an irrevocable election to waive the equivalent amount of credit allowed under Section 17053.49 or 23649. Any refund claimed under this section shall be in lieu of claiming any credit under Section 17053.49 or 23649. Any person electing to file a claim for refund pursuant to this section shall provide a copy of the personal or bank and corporation tax return on which the tax liability was assessed for which the in-lieu refund is being claimed under this section.

(b) No interest shall be paid on any refund made pursuant to this section.

(c) Notwithstanding Section 6961, the board may recover any refund or part thereof that is erroneously made pursuant to this section. In recovering any erroneous refund made pursuant to this section, the board, in its discretion, may issue a deficiency determination in accordance with Article 2 (commencing with Section 6481) or Article 4 (commencing with Section 6536) of Chapter 5. Except in the case of fraud, that determination shall be made within three years from the last day of the month following the quarterly period in which the board approved the refund.

(d) The board shall provide an annual listing to the Franchise Tax Board, in a form and manner agreed upon by the board and the Franchise Tax Board, of the persons who during the year have claimed a refund of sales or use tax under this section and the amount of the refund issued to each person.

(e) Any refund approved by the board pursuant to this section shall be payable from the General Fund.

History.—Added by Stats. 1994, Ch. 547, in effect September 12, 1994. Stats. 2003, Ch. 606 (SB 1064), in effect January 1, 2004, substituted "reduce the net . . . or 23036" for "offset personal income or bank or corporation tax liability" after "have been used to" in the second sentence of paragraph (1) of subdivision (a).

Note.—Section 2 of Stats. 2003, Ch. 606 (SB 1064) specifies that the amendments made to subdivision (a) of Section 6902.2 of the Revenue and Taxation Code by Section 1 of that act are declaratory of existing law, but are effective for any claims for refund filed with the State Board of Equalization on or after August 7, 2003.

6902.3. Overpayments from levies or liens. Notwithstanding Section 6902, a refund of an overpayment of any tax, penalty, or interest collected by the board by means of levy, through the use of liens, or by other enforcement procedures, shall be approved if a claim for refund is filed within three years of the date of overpayment.

History.—Added by Stats. 1996, Ch. 1087, in effect January 1, 1997. Stats. 2006, Ch. 538 (SB 1852), in effect January 1, 2007, deleted "of" after "Notwithstanding."

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6902.4. Waiver of limitations; financially disabled persons.

(a) The limitation period specified in Section 6902 shall be suspended during any period of a person's life that the person is financially disabled.

(b) (1) For purposes of subdivision (a), a person is financially disabled if the person is unable to manage his or her financial affairs by reason of medically determinable physical or mental impairment of the person that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months. A person shall not be considered to have an impairment unless proof of the existence thereof is furnished in the form and manner as the board may require.

(2) A person shall not be treated as financially disabled during any period that the person's spouse or any other person is authorized to act on behalf of the person in financial matters.

(c) This section applies to periods of disability commencing before, on, or after the effective date of the act adding this section, but does not apply to any claim for refund that, without regard to this section, is barred by operation or rule of law, including res judicata, as of the effective date of the act adding this section.

History.—Added by Stats. 1999, Ch. 929, (AB 1638), in effect January 1, 2000.

6902.5. Motion picture tax credit. (a) For the purposes of this section:

(1) "Qualified taxpayer" means a person who is a qualified taxpayer within the meaning of paragraph (17) of subdivision (b) of Section 17053.85 or 23685.

(2) "Affiliate" means a qualified taxpayer's affiliated corporation that has been assigned any portion of the credit amount by the qualified taxpayer pursuant to subdivision (c) of Section 23685.

(3) "Credit amount" means an amount equal to the tax credit amount that would otherwise be allowed to a qualified taxpayer pursuant to Section 17053.85 or 23685 but for the election made pursuant to this section.

(4) "Production period" means the production period as defined in paragraph (12) of subdivision (b) of Section 17053.85 or 23685.

(5) (A) "Qualified sales and use taxes" means any state sales and use taxes imposed by Part 1 (commencing with Section 6001), on the operative date of the act adding this section.

(B) Notwithstanding subparagraph (A), "qualified sales and use taxes" does not mean taxes imposed by Section 6051.2, 6051.5, 6201.2, 6201.5, Part 1.5 (commencing with Section 7200), Part 1.6 (commencing with Section 7251), or Section 35 of Article XIII of the California Constitution.

(b) (1) A qualified taxpayer may, in lieu of claiming the credit allowed by Section 17053.85 or 23685, make an irrevocable election to apply the credit amount against qualified sales and use taxes imposed on the qualified taxpayer in accordance with this section.

(2) An affiliate may, in lieu of claiming the assigned portion of the credit allowed by Section 23685, make an irrevocable election to apply the assigned portion of the credit amount against qualified sales and use taxes imposed on the affiliate in accordance with this section.

(c) (1) A qualified taxpayer or affiliate shall submit to the board an irrevocable election, in a form as prescribed by the board, which shall include, but not be limited to, the following information:

(A) Representation that the claimant is a qualified taxpayer or an affiliate.

(B) Statement of the dates on which the production period began and ended.

(C) The credit amount, and if an affiliate, the portion of the credit amount assigned to it and documentation supporting the assignment of that portion of the credit amount.

(D) The amount of qualified sales and use taxes the claimant remitted to the board during the period commencing on the first day of the calendar quarter commencing immediately before the beginning of the production period, and ending on the date the claimant was required to file its most recent sales and use tax return with the board.

(E) A copy of the credit certificate issued pursuant to subparagraph (C) of paragraph (2) of subdivision (g) of Section 17053.85 or 23685.

(2) The election shall be filed on or before the date on which the qualified taxpayer or affiliate would first be allowed to claim a credit pursuant to Section 17053.85 or 23685 on its tax return.

(d) (1) The claimant may elect to obtain a refund of qualified sales and use taxes paid during the period described in subparagraph (D) of paragraph (1) of subdivision (c). If the claimant elects to obtain a refund of qualified sales and use taxes, the claimant shall file a claim for refund with the irrevocable election described in subdivision (c). The refund amount shall not exceed, for a qualified taxpayer, the credit amount, or for an affiliate, the portion of the credit amount assigned to it.

(2) No interest shall be paid on any amount refunded or credited pursuant to paragraph (1).

(e) If the claimant does not elect to obtain a refund or in the case where the credit amount, or assigned portion, exceeds the amount of its claim for refund for the qualified sales and use taxes, the claimant may, for the reporting periods in the five years following the last reporting period as described in subparagraph (D) of paragraph (1) of subdivision (c), offset any remaining credit amount, or assigned portion, against the qualified sales and use taxes imposed during those reporting periods.

(f) Section 6961 shall apply to any refund, or part thereof, that is erroneously made and any credit, or part thereof, that is erroneously allowed pursuant to this section.

(g) The board shall provide an annual listing to the Franchise Tax Board, in a form and manner agreed upon by the board and the Franchise Tax Board, of the qualified taxpayers, or affiliates that have been assigned a portion of the credit allowed under Section 23685 pursuant to subdivision (c) of Section 23685, who, during the year, have made an irrevocable election pursuant to this section and the credit amount, or portion of the credit amount, claimed by each qualified taxpayer or affiliate.

(h) The board may prescribe rules and regulations for the administration of this section.

History.—Added by Stats. 2009, Ch. 17XXX (SB 15XXX), in effect February 20, 2009.

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6903. Condition; sales tax reimbursement. (a) No credit or refund of any amount paid pursuant to Chapter 3 (commencing with Section 6201) shall be allowed to any person on the ground that the storage, use, or other consumption of the property is exempted under Section 6401 unless the person establishes to the satisfaction of the board that his or her vendor has paid the sales tax to the state with respect to the sale of the property.

(b) For purposes of this section, "amount paid pursuant to Chapter 3 (commencing with Section 6201)" does not include any payment or payments made pursuant to a determination made by the board under Articles 2 (commencing with Section 6481) and 3 (commencing with Section 6511) of Chapter 5.

History.—Stats. 1949, p. 1343, operative July 1, 1949, substituted "the person who paid the amount" for "in addition to the overpayment for which the claim is filed the claimant also." Stats. 1978, Ch. 1211, effective January 1, 1979, added "to any person" following "allowed", deleted "who paid the amount reimburses" and substituted "establishes to the satisfaction of the board that" following "unless the person", deleted "for the amount of" and substituted "had paid" following "vendor" deleted "imposed upon his vendor" and substituted "to the state" following "sales tax" and deleted "and paid by the vendor to the State." following "sale of the property". Stats. 1982, Ch. 454, in effect January 1, 1983, substituted "(commencing with Section 6201)" for "of this part" after "Chapter 3" and added "or her" after "his." Stats. 1989, Ch. 768, in effect January 1, 1990, added "(a)" before first paragraph and added subdivision (b).

6904. Form and content of claim. (a) Every claim shall be in writing and shall state the specific grounds upon which the claim is founded.

(b) A claim filed for or on behalf of a class of taxpayers shall do all of the following:

(1) Be accompanied by written authorization from each taxpayer sought to be included in the class.

(2) Be signed by each taxpayer or taxpayer's authorized representative.

(3) State the specific grounds on which the claim is founded.

History.—Stats. 1987, Ch. 38, effective January 1, 1988, added "(a)" before first paragraph and added subdivision (b).

Class action permitted only to the extent authorized by the Legislature.—Class actions for refunds of sales tax were not authorized by the Legislature prior to amendment to section 6904 adopted in 1987, and this amendment authorized a class action only where each member of the class expressly authorizes and signs the claim (disapproving previous appellate decisions inconsistent with this decision). Woosley v. State of California (1992) 3 Cal.4th 758.

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6905. Effect of failure to file claim. Failure to file a claim within the time prescribed in this article constitutes a waiver of any demand against the State on account of overpayment.

6906. Notice of action on claim. Within 30 days after disallowing any claim in whole or in part the board shall serve notice of its action on the claimant in the manner prescribed for service of notice of a deficiency determination.

Sufficiency of service of notice on corporation.—Where a corporation's claim for refund shows the address of the corporation's principal office, the names of the corporation's own counsel with their address at the corporation's principal office, and the name of the corporation's outside counsel with a different address, a notice of a denial of a claim for refund mailed only to the corporation's principal office is sufficient. Pacific Gas and Electric Co. v. State Board of Equalization (1955) 134 Cal.App.2d 149, appeal dismissed (1956) 350 U.S. 979.

6907. Interest. Interest shall be paid upon any overpayment of any amount of tax at the modified adjusted rate per month established pursuant to Section 6591.5, from the first day of the calendar month following the month during which the overpayment was made. In addition, a refund or credit shall be made of any interest imposed upon the person making the overpayment with respect to the amount being refunded or credited.

The interest shall be paid:

(a) In the case of a refund, to the last day of the calendar month following the date upon which the person making the overpayment, if he or she has not already filed a claim, is notified by the board that a claim may be filed or the date upon which the claim is approved by the board, whichever date is the earlier.

(b) In the case of a credit, to the same date as that to which interest is computed on the tax or amount against which the credit is applied.

History.—Stats. 1945, p. 1726, operative July 1, 1945, added "if he has not already filed a claim," to (a). Stats. 1947, p. 1558, operative July 1, 1947, substituted "last" for "fifteenth" in first paragraph. Stats. 1949, p. 1343, operative July 1, 1949, substituted "person making the overpayment" for "claimant" in the first paragraph and in (a); substituted "last" for "fifteenth" and "approved by the board" for "certified to the State Board of Control" in (a). Stats. 1949, p. 1167, approved by the Governor prior to p. 1343, would also have amended this section. 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 . . . month" before "from" in the first sentence. Stats. 1983, Ch. 10 (1X), in effect February 17, 1983, added "and by the method" after "rate" in the first paragraph. Stats. 1984, Ch. 1020, effective January 1, 1985, operative July 1, 1985, added "modified" before "adjusted," deleted "annual" before "rate," substituted "per month" for "and by the method" before "established," substituted "Section 6591.5" for "Section 19269." Stats. 1991, Ch. 85, in effect June 30, 1991, operative July 1, 1991, substituted "at a rate equal to the average of the bond equivalent rates of the 13-week treasury bills auctioned during the period for which interest is paid." for "at the modified adjusted rate per month established pursuant to Section 6591.5,", added "Interest shall be paid" before "From the", and substituted "From" for "from" after "shall be paid" in the first paragraph. Stats. 1991, Ch. 236, effective July 29, 1991, substituted "at the modified adjusted rate per month established pursuant to Section 6591.5," for "at a rate equal to the average of the bond equivalent rates of the 13-week treasury bills auctioned during the period for which interest is paid."; deleted "Interest shall be paid" before "From the"; substituted "from" for "From" after "Section 6591.5"; substituted "first" for "last" after "from the"; substituted "month during" for "quarterly period for"; and substituted ". In addition, a" for "; but no" after "overpayment was made" in the first paragraph.

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6908. Disallowance of interest; waiver. (a) If the board determines that any overpayment has been made intentionally or by reason of carelessness, it shall not allow any interest thereon.

(b) If any person who has filed a claim for refund requests the board to defer action on the claim, the board, as a condition to deferring action, may require the claimant to waive interest for the period during which the person requests the board to defer action on the claim.

History.—Stats. 1968, p. 1200, in effect November 13, 1968, added subdivision letters and the text of (b).

6909. Smog impact fee refund. (a) The Controller shall transfer the amount of six hundred sixty-five million two hundred sixty-one thousand dollars ($665,261,000) from the General Fund to the Smog Impact Fee Refund Account, which is hereby created in the Special Deposit Fund.

(b) Notwithstanding Section 13340 of the Government Code, the moneys in the Smog Impact Fee Refund Account in the Special Deposit Fund are hereby continuously appropriated, without regard to fiscal years, to the Department of Motor Vehicles for the purpose of making refunds to persons who paid the smog impact fee formerly required by Chapter 3.3 (commencing with Section 6261) upon registering a vehicle in California. Each refund shall also include the amount of any penalties incurred by the payer with respect to the fee, and shall also include interest as specified in Sections 1673.2 and 1673.4 of the Vehicle Code. In addition, the appropriate level of court costs, fees, and expenses in the settlement of the case of Jordan v. Department of Motor Vehicles (1999) 75 Cal.App.4th 449, shall be determined through binding arbitration, and all of those fees, costs, or expenses shall be paid with funds from the account.

History.—Added by Stats. 2000, Ch. 32 (SB 215), in effect June 8, 2000.

Arbitration award limited to $18.194 million.—Section 6909 (b) implicitly contained a cap of $18.194 million in attorneys' fees and costs. At the time this section was enacted, the state had appealed a trial court judgment for this amount but the plaintiffs had not. Any arbitration award greater than this amount would be an unconstitutional gift of public funds. Jordan et al. v. Department of Motor Vehicles et al. (2002) 100 Cal. App.4th 431.

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Article 2. Suit for Refund


6931. Enjoining collection forbidden. No injunction or writ of mandate or other legal or equitable process shall issue in any suit, action, or

proceeding in any court against this State or against any officer of the State o prevent or enjoin the collection under this part of any tax or any amount of tax required to be collected.

Suit for refund of partial payment.—Section 6931 does not bar a suit for refund where only a portion of the assessed tax is paid even though the decision in such suit may indirectly result in prohibiting the collection of the remainder. The court will not, however, issue its process to restrain collection of the balance of the tax. In the absence of statutory provisions allowing installment payments, such partial payments need not be accepted. Schaffer v. State Board of Equalization (1952) 109 Cal.App.2d 574. Disapproved in State Board of Equalization v. Superior Court (O'Hara & Kendall Aviation, Inc.) (1985) 39 Cal 3d 633.

Petition for declaratory relief does not lie.—A petition asking the Probate Court to construe the Retail Sales Tax Act is, in effect, a petition for declaratory relief. A declaratory judgment construing the act as requested would have the same effect as an injunction and is clearly contrary to the statutory prohibition against the issuance of such a writ. Estate of Schneider (1944) 62 Cal.App.2d 463.

Tax recovery denied when suit founded on illegality of business.—Although operators of tango games are not engaged in selling tangible personal property, they are not entitled to recover sales taxes paid under protest on their receipts from such games. Tango games constitute gambling devices, the operation of which is a violation of Section 330 of the Penal Code, and a court of law will not enforce a demand connected with an illegal transaction. Schur v. Johnson (1934) 2 Cal.App.2d 680; Asher v. Johnson (1938) 26 Cal.App.2d 403.

Adequacy of remedy.—The provisions of this article afford a "plain, speedy, and efficient remedy" within the meaning of Section 24 (1) of the United States Judicial Code, as amended, August 21, 1937 (28 U. S. C. A., Section 41 (1)). Consequently, the United States district courts do not have jurisdiction of suits to enjoin the enforcement of the use tax. Nevada-California Electric Corp. v. Corbett (1938) 22 F.Supp. 951. And see Corbett v. Printers and Publishers Corp., Ltd. (1942) 127 F.2d 195, refusing to enjoin collection of the sales tax.

A taxpayer is not entitled to injunctive relief to restrain the cancellation of its seller's permit for nonpayment of the tax assessed against it even though that tax is illegal, inasmuch as it had an adequate remedy at law. Helms Bakeries v. State Board of Equalization (1942) 53 Cal.App.2d 417.

Review of board's decision by prohibition and certiorari.—A writ of prohibition is exercised only to prevent official action of a judicial nature. Thus, a letter sent by the State Board of Equalization to a person engaged in the business of manufacturing ice stating that the board would consider ice companies as retailers and the independent distributors operating therefrom as their agents and would not issue individual retailers' permits to independent distributors, but would issue a single permit to the ice companies under which such companies would report and pay the tax on all business done by the independent distributors, would not call for the interposition of such a writ. Teed v. State Board of Equalization (1936) 12 Cal.App.2d 162.

A writ of certiorari will lie only to review the exercise of judicial functions and, in the absence of constitutional authority, the Legislature can not confer judicial power upon state-wide boards or commissions. Therefore, such a writ provided for by Section 33 of the Retail Sales Tax Act will not lie to review a ruling of the State Board of Equalization. Standard Oil Co. of California v. State Board of Equalization (1936) 6 Cal.2d 557.

An officer of a dissolved corporation may not obtain a declaratory judgment to determine, on the ground that any judgment against the corporation would be void, that he is under no fiduciary duty to petition for redetermination by the State Board of Equalization of sales tax determined against the corporation, and thereby obtain an adjudication against the board barring it from collecting the tax. Casey v. Bonelli (1949) 93 Cal.App.2d 253.

Propriety of declaratory relief questionable after transaction is entered into.—While a taxpayer may test the validity of a tax regulation by an action for declaratory relief before he has acted so that he may govern his conduct accordingly, it is very doubtful that such an action is appropriate after a taxpayer has entered into a transaction which the taxing authorities claim is taxable since Section 6931 prohibiting the granting of an injunction or writ of mandamus to prevent the collection of tax would thereby appear to be circumvented. The rule that a claimant must exhaust administrative remedies before initiating a judicial action applies to tax proceedings. Honeywell, Inc. v. State Board of Equalization (1975) 48 Cal.App.3d 907.

Eleventh Amendment bars federal suit.—U.S. Constitution, Eleventh Amendment bars taxpayer's suit in federal court to enjoin and declare as unenforceable the assessment of a state tax, regardless of taxpayer's claim that the assessment violated the immunity of the United States from state taxation. V. O. Motors, Inc. v. California State Board of Equalization (1982) 691 F.2d 871.

Tax Injunction Act.—Unless taxpayer does not have a plain, speedy, and efficient remedy in state courts, federal Tax Injunction Act bars federal court jurisdiction; taxpayer's demonstrated inability to pay tax assessments does not avoid jurisdictional bar of the Act. Redding Ford v. State Board of Equalization (1983) 722 F.2d 496, cert. den._U.S._

Partial payment insufficient for refund action.—Cal. Const. Art XIII, Sec. 32 barred the taxpayer from maintaining an action for refund of a partial payment before the full amount of the disputed tax was paid. Inconsistent prior decisions, Snoozie Shavings, Inc. v. State Board of Equalization (1979) 97 Cal.App.3d 771, and Schaffer v. State Board of Equalization (1952) 109 Cal.App.2d 574, are disapproved. State Board of Equalization v. Superior Court (O'Hara & Kendall Aviation, Inc.) (1985) 39 Cal.3d 633.

Tax Injunction Act.—Taxpayer and its shareholders, who were under federal criminal investigation, sought an injunction against the holding of a hearing on a petition for redetermination. The hearing and administrative proceedings on a petition for redetermination are an integral part of California's sales tax and collection scheme, and the state has provided taxpayers an adequate remedy. The Tax Injunction Act therefore divests the federal court of jurisdiction. Jerron West, Inc. v. California State Board of Equalization (9th Cir. 1997) 129 F.3d 1334.

Interest Due is not Part of the Tax.—Interest which accrues on a delinquent tax is not part of the tax within the meaning of California Constitution Article XIII, Section 32, or Revenue and Taxation Code section 6931, so that payment of accrued interest on the tax deficiency is not a prerequisite to either an administrative claim for refund or a subsequent court action for refund of taxes. Agnew v. State Board of Equalization (1999) 21 Cal.4th 310.

Eleventh Amendment does not bar federal suit by Indian Tribe.—Suit in federal court for declaratory relief by Indian Tribe permitted under the doctrine of Ex Parte Young. Agua Caliente Band of Cahuilla Indians v. Hardin (9th Cir. 2000) 223 F.3d 1041.

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6932. Necessity of refund claim. No suit or proceeding shall be maintained in any court for the recovery of any amount alleged to have been erroneously or illegally determined or collected unless a claim for refund or credit has been duly filed pursuant to Article 1 (commencing with Section 6901).

History.—Added by Stats. 1941, Ch. 36. Stats. 1984, Ch. 144, effective January 1, 1985, substituted "(commencing with Section 6901)" for "of this chapter."

Prior claim for refund by each member of class not required in class action suit for refund.—Where the complaint alleged that the named plaintiffs had filed a claim with the Board in behalf of themselves and all others similarly situated, and also alleged the existence of a well defined community of interest in questions of law and fact between the named plaintiffs and the other members of the class, it is not necessary that the complaint also allege that the unnamed plaintiffs had filed claims for refund as required by law. Santa Barbara Optical Co., Inc. v. State Board of Equalization (1975) 47 Cal.App.3d 244 [disapproved to the extent inconsistent with Woosley v. State of California (1992) 3 Cal.4th 758].

Administrative Remedies Must be Exhausted Prior to Any Suit for Refund.—Pending completion of the administrative remedies available to taxpayer a trial court lacked jurisdiction to hear a purchaser's complaint for refund of sales taxes assertedly overpaid to its vendors. State Board of Equalization v. Superior Court (Petroleum Contractors, Inc.) (1980) 111 Cal.App.3d 568.

Failure to Exhaust Administrative Remedies is a Jurisdictional Bar.—Failure by taxpayer to exhaust administrative remedies by presenting factual documentation of his claim for refund to the board barred further action by trial court. Barnes v. State Board of Equalization (1981) 118 Cal.App.3d 994.

Failure to cooperate in tests with Board.—Taxpayer's claim that he cannot identify "new clothing" was barred for failure to exhaust administrative remedies where taxpayer failed to produce records or participate in tests to determine tax due. Duffy v. State Board of Equalization (1984) 152 Cal.App.3d 1156.

Suit Limited to Issues Stated in Claim.—In a suit for refund, plaintiff is barred from raising issues not stated in its claim for refund. Atari, Inc. v. State Board of Equalization (1985) 170 Cal.App.3d 665.

6933. Action for refund; limitation. Within 90 days after the mailing of the notice of the board's action upon a claim filed pursuant to Article 1 (commencing with Section 6901), the claimant may bring an action against the board on the grounds set forth in the claim in a court of competent jurisdiction in any city or city and county of this State in which the Attorney General has an office for the recovery of the whole or any part of the amount with respect to which the claim has been disallowed.

Failure to bring action within the time specified constitutes a waiver of any demand against the State on account of alleged overpayments.

History.—Stats. 1957, p. 2021, in effect September 11, 1957, substituted "any city or city and county of this State in which the Attorney General has an office" for "the County of Sacramento." Stats. 1984, Ch. 144, effective January 1, 1985, substituted "(commencing with Section 6901)" for "of this chapter."

Refund action must be filed in county where Attorney General has an office with legal staff.—Where the taxpayer filed its action seeking a tax refund in a county where the Attorney General had an office of the Bureau of Narcotics Enforcement, but not a legal office, the Board properly moved for the venue of the action to be changed to a county where the Attorney General has a legal office. State Board of Equalization v. Superior Court (barnesandnoble.com llc) (2006) 138 Cal.App.4th 951.

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6934. When refund claim not acted upon. If the board fails to mail notice of action on a claim within six months after the claim is filed, the claimant may, prior to the mailing of notice by the board of its action on the claim, consider the claim disallowed and bring an action against the board on the grounds set forth in the claim for the recovery of the whole or any part of the amount claimed as an overpayment.

Exhaustion of administrative remedies.—Where the Board fails to act on a claim for refund within six months after the claim is filed, the claimant has the right to elect to treat such failure to act as a denial of the claim in order to institute an action, alleging therein that it has exhausted its administrative remedies. Honeywell, Inc. v. State Board of Equalization (1975) 48 Cal.App.3d 897.

6935. Disposition of amount of judgment. If judgment is rendered for the plaintiff, the amount of the judgment shall first be credited on any sales or use tax or amount of use tax due and payable from the plaintiff. The balance of the judgment shall be refunded to the plaintiff.

History.—Stats 1945, p. 1726, operative July 1, 1945, reworded section to permit crediting of judgment for refund of use tax upon either sales or use tax due from the plaintiff.

Refund of Excess Tax Reimbursement for Repayment to Consumer.—The board may not offset amounts owed to it by retailers against refunds of excess sales tax reimbursement required as the result of a class action by consumers against the retailers and the board. Javor v. State Board of Equalization (1977) 73 Cal.App.3d 939 [disapproved to the extent inconsistent with Woosley v. State of California (1992) 3 Cal.4th 758].

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6936. Interest. In any judgment, interest shall be allowed at the modified adjusted rate per annum established for overpayments pursuant to Section 6591.5 upon the amount found to have been illegally collected from the date of payment of the amount to the date of allowance of credit on account of the judgment or to a date preceding the date of the refund warrant by not more than 30 days, the date to be determined by the board.

History.—Stats. 1975, Ch. 661, operative to interest accruing on or after January 1, 1976, substituted "12 percent" for "6 percent." Stats. 1982, Ch. 5, First Extra Session, in effect May 27, 1982, substituted "adjusted . . . 19269" for "rate . . . annum" before "upon." 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 annum" for "and by the method," substituted "Section 6591.5" for "Section 19269." Stats. 1991, Ch. 85, in effect June 30, 1991, operative July 1, 1991, substituted "a rate equal to the average of the bond equivalent rates of the 13-week treasury bills auctioned during the period for which interest is paid. Interest shall be paid" for "the modified adjusted rate per annum established pursuant to Section 6591.5" after "allowed at". Stats. 1991, Ch. 236, in effect July 29, 1991, substituted "the modified adjusted rate per annum established for overpayments pursuant to Section 6591.5" for "a rate equal to the average of the bond equivalent rates of the 13-week treasury bills auctioned during the period for which interest is paid. Interest shall be paid" after ''allowed at".

6937. Judgment for assignee forbidden. A judgment shall not be rendered in favor of the plaintiff in any action brought against the board to recover any amount paid when the action is brought by or in the name of an assignee of the person paying the amount or by any person other than the person who paid the amount.

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Article 3. Recovery of Erroneous Refunds


6961. Erroneous refunds; actions. (a) The Controller may recover any refund or part thereof that is erroneously made and any credit or part thereof that is erroneously allowed in an action brought in a court of competent jurisdiction in the County of Sacramento in the name of the people of the State of California.

(b) As an alternative to subdivision (a), the board may recover any refund or part thereof that is erroneously made and any credit or part thereof that is erroneously allowed. In recovering any erroneous refunds or credits, the board, in its discretion, may issue a deficiency determination in accordance with Article 2 (commencing with Section 6481) or Article 4 (commencing with Section 6536) of Chapter 5. Except in the case of fraud, the determination shall be made within three years from the last day of the month following the quarterly period in which the board made its certification to the Controller that the amount collected was in excess of the amount legally due.

History.—Stats. 1994, Ch. 903, in effect January 1, 1995, added subdivision letter designation (a) before first paragraph, substituted "that" for "which" after "thereof" twice in the first paragraph, and added subdivision (b).

6962. Place of trial. The action shall be tried in the County of Sacramento unless the court with the consent of the Attorney General orders a change of place of trial.

6963. Rules of procedure, etc. The Attorney General shall prosecute the action, and the provisions of the Code of Civil Procedure relating to service of summons, pleadings, proofs, trials, and appeals are applicable to the proceedings.

6964. Interest on erroneous refunds. (a) Notwithstanding any other provision of this part, if the board finds that neither the person liable for payment of tax nor any party related to that person has in any way caused an erroneous refund for which an action for recovery is provided under Section 6961, no interest shall be imposed on the amount of that erroneous refund until 30 days after the date on which the board mails a notice of determination for repayment of the erroneous refund to the person. The act of filing a claim for refund shall not be considered as causing the erroneous refund.

(b) This section is operative for any action for recovery under Section 6961 on or after July 1, 1999.

History.—Added by Stats. 1998, Ch. 612, in effect January 1, 1999.

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Article 4. Cancellations


6981. Cancellation of determinations. If any amount has been illegally determined either by the person filing the return or by the board, the board shall set forth that fact in its records, certify the amount determined to be in excess of the amount legally due and the person against whom the determination was made, and authorize the cancellation of the amount upon the records of the board. Any proposed determination by the board pursuant to this section with respect to an amount in excess of fifty thousand dollars ($50,000) shall be available as a public record for at least 10 days prior to the effective date of that determination.

History.—Stats. 1947, p. 2029, operative July 1, 1947, added "either by the person filing a return or by the board,". Stats. 1949, p. 1167, operative July 1, 1949, reworded section to permit the board to cancel a determination in an amount not exceeding $25.00 without authorization of the State Board of Control. Stats. 1959, p. 4378, in effect September 18, 1959, substituted "one hundred dollars ($100)" for "twenty-five dollars ($25)" in the first and third sentences, substituted the wording following "certify" in the first sentence for "this fact to the State Board of Control and the latter shall authorize the cancellation of the amount upon the records of the board." and added the second sentence. Stats. 1963, p. 3106, in effect September 20, 1963, added "set forth that fact in its records and" to the first sentence, and substituted "two hundred fifty dollars ($250)" for "one hundred dollars ($100)" in the first and last sentence. Stats. 1965, p. 2052, in effect September 17, 1965, substituted "one thousand dollars ($1,000)" for "two hundred fifty dollars ($250)" in the first and last sentences. Stats. 1977, Ch. 921, operative January 1, 1978, substituted "five thousand dollars ($5,000)" for "one thousand dollars ($1,000)" in the first and last sentences. Stats. 1985, Ch. 591, effective January 1, 1986, substituted "fifteen" for "five" before "thousand" and substituted "($15,000)" for "($5,000)" after "dollars." Stats. 1988, Ch. 1029, in effect January 1, 1989, substituted "fifty thousand dollars ($50,000)" for "fifteen thousand dollars ($15,000)" following "in excess of" in the first sentence and following "not exceeding" in the last sentence. Stats. 1994, Ch. 726, in effect September 22, 1994, deleted "in excess of fifty thousand dollars ($50,000)" after "If any amount"; substituted ", certify" for "and certify to the State Board of Control" after "in its records"; substituted ", and" for ". If the State Board of Control approves, it shall" after "determination was made"; and substituted "Any proposed determination . . . of that determination" for "If an amount not exceeding fifty thousand dollars ($50,000) has been illegally determined either by the person filing a return or by the board, the board without certifying this fact to the State Board of Control shall authorize the cancellation of the amount upon the records of the board."


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