Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
170.0000 COLLECTION OF TAX BY BOARD
(a) IN GENERAL
170.0193 Statute of Limitation—Unregistered Co-owner of Vehicle. Two parties, A and B, entered into an agreement to invest in a classic vehicle for $28,000 with the intention of maintaining it, selling it in the future, and sharing the profit. Only one of the purchasers, B, registered the vehicle with the Department of Motor Vehicles (DMV). B falsely reported a purchase price of $2,000 to the DMV and paid use tax on the reported $2,000 purchase price. Since the three-year statute of limitations had already expired since the use tax was paid DMV, the question arises whether the Board can issue a Notice of Determination against the unregistered co-owner, A, based on the eight-year statute of limitations applying with respect to A.
Based on the agreement, both A and B were engaged in a joint venture for which there was a business purpose. The Board has previously taken the position that in circumstances where a taxpayer may be operating as a joint venture unbeknownst to the Board, the newly discovered joint venture would get the benefit of the joint venture having filed returns, even if the Board is unaware that a taxpayer may be operating as a joint venture. These principles were based on the rationale that the newly discovered joint venture would take the detriments and benefits flowing from his or her joint venture status. These principles would apply whether the return was filed in the name of the joint venture or a sole proprietor.
Based on these principles, A would get the benefit of B's filing of the registration, i.e., the return. The three-year statute of limitations has expired with respect to A, as with B. Thus, A cannot be held liable for the use tax measured by
the $28,000 purchase price. In other words, absent the Board's finding of fraud in the underreporting of tax, the Board is barred by the statute of limitations from issuing the Notice of Determination against A. 1/29/97.