Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 170.0308


170.0308 General Lien. An attorney representing a taxpayer stated that the bank has a general lien on all of the depositor's property in its possession pursuant to Civil Code section 3054(a). Further, with respect to money, the relationship between a bank and a depositor is a debtor or creditor relationship, and the money belongs to the bank. The attorney also stated that if the bank owed money to the debtor, that obligation was subject to an equitable set off and since the money in the deposit account was the property of the bank and not the property of the taxpayer-depositor, the bank is not required to pay its money to satisfy the customer's tax liability.

Since Government Code section 7170(a) provides that the state tax lien attaches to all property and right to property and then carves out an exception for deposit accounts subject to security interest, a state tax lien must have priority over a bank's later assertion to a right of equitable set off in an account not subject to a security interest. See Bradbury v. Kaiser (1991) 3 Cal.App.4th, 5 Cal.Rptr.2d 325. The adoption of the Uniform Commercial Code in California and other states has modified the "banker's lien" provided in section 3054 of the Civil Code so that only deposits in which the bank has a security interest will be subject to the right of set off. See National Acceptance Company of America v. Virginia Capital Bank (1980) 491F Supp. 1269. It is believed that Commercial Code sections 9301 and 9302 and Code of Civil Procedure section 701.040 deprives the bank of a right to a "banker's lien" for the funds in dispute. If the bank can show that the taxpayer has signed an agreement in which a security interest was granted to the bank in funds in the taxpayer's accounts levied upon and that security agreement was executed prior to the levy, the bank has a right to equitable set off of the amount due it on the matured loan default. If the bank has no such security interest, it has no right to set off any funds levied upon. 6/4/93.