Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2015
Sales and Use Tax Annotations
170.0000 COLLECTION OF TAX BY BOARD
(a) IN GENERAL
170.0083 Security Interest in Deposit Account. On May 1, 1995, a partnership signed an agreement with a bank which granted the bank a security interest in its "Deposit Accounts." The agreement provided in part that:
"Grantor shall not pledge, mortgage, encumber or otherwise permit the collateral to be subject to any lien, security interest, encumbrance or charges, other than the security interest provided in this Agreement, without prior consent to Lender."
Included within a description of an "event of default" is a forfeiture proceeding by a governmental agency. The agreement also provided that in the event of default the entire indebtedness is immediately due and payable and the bank had full power to sell, lease, transfer or otherwise deal with the collateral or proceeds thereof.
The bank account included amounts collected as sales tax reimbursement. The Board filed a levy on the account. However, rather than paying the levy from amounts in the account, the bank applied all amounts in the account to the loan.
In California, the seller has no obligation to collect sales tax reimbursement from its customers. Whether the purchaser is obligated to reimburse the seller for the tax depends solely upon the terms of the agreement of sale. Under these circumstance, amounts collected as sales tax reimbursement and then deposited in an account are no different than other funds obtained under contracts and then deposited in the account. Thus, the fact that the account may have had some sales tax reimbursement included in the account does not impair the bank's right to the money under its perfected security agreement. 3/18/97.