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Business Taxes Law Guide – Revision 2024
 

California Department of Tax and Fee Administration

Title 18. Public Revenues
Division 5. California Department of Tax and Fee Administration

Chapter 1. Appeals

Article 5. Petition for Redistribution of Local or District Tax

Rule 35056

35056. Petition for Redistribution of Local or District Tax.

Reference: Section 15570.54, Government Code; Sections 7209, 7223, 7269 and 7270, Revenue and Taxation Code.

(a) General. Notwithstanding any other provision in this chapter, the provisions of this regulation are applicable to a petition for redistribution of local or district tax.

(b) Definitions. The following definitions supplement those in regulation 35002.

(1) "Allocation Group" means the Allocation Group of BTFD.

(2) "Consultant" is any person selected by a jurisdiction to act on its behalf before CDTFA in connection with a petition for redistribution of local or district tax.

(A) CDTFA will recognize as a jurisdiction's consultant any person who is at least 18 years of age for whom the jurisdiction provides its written authorization for that person to act as its consultant.

(B) A jurisdiction's authorized consultant is permitted to receive confidential taxpayer information related to the appeal, but only if the consultant meets the requirements of Revenue and Taxation Code section 7056, or receives a waiver from the taxpayer whose tax is in dispute in the appeal.

(3) "Date of knowledge" means the date the Allocation Group receives a valid petition, unless an earlier date is operationally documented by CDTFA staff, in which case that earlier date is the date of knowledge. Where a suspected incorrect distribution that is reasonably covered by the petition is confirmed based on additional facts or evidence supplied by the petitioner or otherwise learned as a direct result of investigating the petition, that incorrect distribution is covered by the petition and the date of knowledge is the date the Allocation Group received the petition.

(4) "District tax" means a transaction and use tax adopted pursuant to Revenue and Taxation Code section 7251, et seq., or pursuant to Revenue and Taxation Code section 7285, et seq., and administered by CDTFA.

(5) "Jurisdiction" means any city, county, city and county, or special district or other jurisdiction which has adopted a local or district tax.

(6) "Local Revenue Branch" means the Local Revenue Branch of the Financial Management Bureau of CDTFA.

(7) "Local tax" means a local sales and use tax adopted pursuant to Revenue and Taxation Code section 7200, et seq., and administered by CDTFA.

(8) "Notified jurisdiction" is a jurisdiction that has been notified as being substantially affected by a decision on a petition.

(9) "Party" means the jurisdiction filing a petition for redistribution, any notified jurisdiction, and the assigned section.

(10) "Petition" means a request made by a jurisdiction for investigation of suspected incorrect distribution of local or district tax submitted in writing to the Allocation Group. The petition must contain sufficient factual data to support the probability that local or district tax have been incorrectly distributed. Sufficient factual data should include, for each business location being questioned:

(A) Taxpayer name, including owner name and fictitious business name or dba (doing business as) designation.

(B) Taxpayer's seller's permit number or a notation stating "No Seller's Permit Number."

(C) Complete business address of the taxpayer.

(D) Complete description of taxpayer's business activity or activities.

(E) Specific reasons and evidence why the taxpayer’s allocation is questioned. If the petition alleges that an incorrect distribution occurred because a sale location is unregistered, evidence that the questioned location is a selling location or that it is a place of business as defined by regulation 1802. If the petition alleges that an incorrect distribution occurred because the tax for a sale shipped from an out-of-state location was actually sales tax and not use tax, evidence that there was participation in the sale by an in-state office of the retailer and that title to the goods passed to the purchaser inside California.

(F) Name, title, and telephone number of the contact person.

(G) The tax reporting periods involved.

(11) "Petition" also means a jurisdiction’s written objection to a notification from the Local Revenue Branch that local or district tax previously distributed to the jurisdiction was incorrectly allocated and distributed and will be redistributed. The petition must be submitted to the Allocation Group within 30 days of the date of mailing of the notification or within a period of extension described in this subdivision. The petition must include a copy of the notification and specify the reason the jurisdiction disputes it. If a jurisdiction does not submit such a petition within 30 days of the date of mailing of the notification or within a period of extension described in this subdivision, the notification of the Local Revenue Branch is final as to the jurisdiction so notified.

(A) A jurisdiction receiving a notification that local or district tax previously distributed to it will be redistributed may request that the Local Revenue Branch grant it a 30-day extension to submit a petition to dispute the notification. Such request must provide a reasonable explanation for the jurisdiction’s inability to submit its petition within 30 days and must be received by the Local Revenue Branch within 30 days of the date of mailing of the notification. Within five days of its receipt of a jurisdiction’s request for extension, the Local Revenue Branch will mail a letter to the jurisdiction notifying it whether the request is granted or denied.

(B) If a jurisdiction submits a request for extension that is received by the Local Revenue Branch within 30 days of its issuance of the notification to the jurisdiction and that request is denied, the time for the jurisdiction to submit a petition is extended to 10 days after the mailing of the letter notifying the jurisdiction that its extension request is denied. If the Local Revenue Branch grants the request for extension, the time for the jurisdiction to submit a petition is extended to the 60th day after the date of mailing of the notification of incorrect distribution.

(12) "Petitioner" means a jurisdiction that has filed a timely and valid petition. " Petitioner" also means, where appropriate, a jurisdiction's authorized consultant.

(13) "Substantially affected jurisdiction" means a jurisdiction that is substantially affected by a decision on a petition, which is when the decision would result in a decrease in the amount of that jurisdiction's total allocation of 5 percent or more of its average quarterly distribution (generally determined with reference to the prior four calendar quarters) or of $50,000 or more, and, for local tax, includes where the decrease is solely as the result of a reallocation from the statewide or applicable countywide pools.

(c) Review by the Allocation Group or the Local Revenue Branch.

(1) The Allocation Group will promptly acknowledge a submission intended as a petition. If the submission does not contain the elements identified in subdivision (b)(10), the original submission will be returned to the submitting jurisdiction. The jurisdiction will have 30 days from the date of the correspondence from the Allocation Group requesting the missing information to make a supplemental submission. If the supplemental submission contains the necessary elements identified in subdivision (b)(10), then the date of receipt of the original submission will be regarded as the date of knowledge. If a submission is not perfected within this 30-day period, it will not qualify as a valid petition.

(2) A petition will be reviewed by the assigned section, which will be either the Allocation Group or the Local Revenue Branch based on the following guidelines:

(A) Where a petition is filed as defined by subdivision (b)(10), the petition will be reviewed by the Allocation Group if there is no petition filed as defined by subdivision (b)(11) in connection with tax paid by the same taxpayer;

(B) Where a petition is filed as defined by subdivision (b)(11), the petition will be reviewed by the Local Revenue Branch if there is no petition filed as defined by subdivision (b)(10) in connection with tax paid by the same taxpayer; and

(C) Where petitions are filed as defined by subdivision (b)(10) and as defined by subdivision (b)(11) in connection with tax paid by the same taxpayer, all petitions will be reviewed by the Allocation Group, unless the petition or petitions filed under subdivision (b)(10) were filed after the Local Revenue Branch had commenced significant review of the petition filed under subdivision (b)(11), in which case the Local Revenue Branch will review all petitions.

(3) Based on its review of the petition and all available evidence, including evidence provided by petitioner and evidence provided by CDTFA staff as part of its investigation of the petition, the assigned section will issue a written decision that includes a clear explanation of the basis for the decision to grant the petition, deny the petition, or grant the petition in part and deny it in part, and states the date of knowledge. If the date of knowledge stated in the decision is different from the date the petition was received, the decision will also include the basis for the date of knowledge. The assigned section will grant the petition only if, and only to the extent, that it finds a preponderance of the evidence shows that there was an incorrect allocation of local or district tax. If the assigned section finds that the preponderance of evidence does not show an incorrect allocation of local or district tax, the assigned section must deny the petition.

(4) If the assigned section does not issue a written decision within six months of the date it received a valid petition, the petitioner may request that the assigned section issue its decision without regard to the status of its investigation. Within 90 days of receiving such a request, the assigned section will issue its decision based on the information in its possession.

(5) If the decision of the assigned section is that the petition should be denied, in whole or in part, the petitioner may submit a written objection to the decision under subdivision (c)(7).

(6) If the decision of the assigned section is that there was an incorrect allocation, including where the assigned section grants in whole or in part a petition as defined by subdivision (b)(11), it will also mail a copy of its decision to any jurisdiction that is substantially affected by its decision. Any such notified jurisdiction may submit a written objection to the decision under subdivision (c)(7).

(7) The petitioner or any notified jurisdiction may appeal the decision of the assigned section by submitting a written objection to the assigned section within 30 days of the date of mailing of the assigned section's decision, or within a period of extension authorized by subdivision (c)(11). An objection must state the basis for the objection and include all additional information in the objecting jurisdiction’s possession that supports its position. If no such timely objection is submitted, the decision of the assigned section is final as to all jurisdictions.

(8) If the petitioner or a notified jurisdiction submits a timely written objection to the decision, the assigned section will reconsider its decision based on the objection and issue a written supplemental decision to grant the petition, deny the petition, or to grant the petition in part and deny it in part, including the basis for that decision. A copy of the supplemental decision will be mailed to the petitioner, to any notified jurisdiction, and to any other jurisdiction that is substantially affected by the supplemental decision.

(9) If the assigned section does not issue a supplemental decision within three months of the date it receives a written timely objection to its decision, the petitioner or any notified jurisdiction may request that the assigned section issue its supplemental decision without regard to the status of its investigation. Within 60 days of receiving such a request, the assigned section will issue its supplemental decision based on the information in its possession.

(10) The petitioner or any notified jurisdiction may appeal the supplemental decision of the assigned section by submitting a written request for review by the Appeals Bureau, as provided in subdivision (d)(1), within 30 days of the date of mailing of that supplemental decision, or within a period of extension authorized by subdivision (c)(11). If no such timely request for review is submitted, the supplemental decision of the assigned section is final as to all jurisdictions.

(11) The petitioner or any notified jurisdiction may request a 30-day extension to submit a written objection under subdivision (c)(7) or to submit a written request for review under subdivision (c)(10). Such request must provide a reasonable explanation for the jurisdiction's inability to submit its objection or request within 30 days, must be copied to all other jurisdictions to whom the assigned section mailed a copy of its decision or supplemental decision (to the extent known by the requesting jurisdiction), and must be received by the assigned section within 30 days of the date of mailing of the assigned section’s decision or supplemental decision. Within five days of receipt of a jurisdiction’s request for extension, the assigned section will mail a letter to the petitioner and to all notified jurisdictions notifying them whether the request is granted or denied. If a request for an extension is submitted within 30 days of the date of mailing of the assigned section's decision or supplemental decision and that request is denied, the time for the petitioner and any notified jurisdiction to file a written objection to the decision or written request for review of the supplemental decision of the assigned section is extended to 10 days after the date of the mailing of the letter notifying the petitioner and any notified jurisdictions that the request for extension is denied. If the request is granted, the time for the petitioner and any notified jurisdiction to submit a written objection to the decision or written request for review by the Appeals Bureau of the supplemental decision of the assigned section is extended to the 60th day after the date of mailing of the decision or supplemental decision.

(12) If a timely request for review by the Appeals Bureau is submitted, petitioner or any notified jurisdiction may continue to discuss the dispute with the assigned section. If, as a result of such discussions or otherwise, the assigned section decides its supplemental decision was incorrect or that further investigation should be pursued, it shall so notify the Appeals Bureau, the petitioner, and all notified jurisdictions.

(A) If, no later than 30 days prior to the date scheduled for the appeals conference, the assigned section mails notice to the Appeals Bureau that it will pursue further investigation of the appeal, the Appeals Bureau will suspend its review and the appeal will be returned to the assigned section. The assigned section will thereafter issue a second supplemental decision, or will return the appeal to the Appeals Bureau along with a report of the assigned section’s further investigation, if appropriate, for the review and decision of the Appeals Bureau.

(B) If the assigned section mails notice to the Appeals Bureau that it will pursue further investigation of the appeal, but does so less than 30 days before the date scheduled for the appeals conference, the Appeals Bureau will decide whether the appeal should be returned to the assigned section or remain with the Appeals Bureau, and will notify the parties accordingly. If the appeal is returned to the assigned section, the assigned section will thereafter issue a second supplemental decision or will return the appeal to the Appeals Bureau along with a report of its further investigation, if appropriate, for the review and decision of the Appeals Bureau.

(C) Where the assigned section issues a second supplemental decision, it will mail a copy of that decision to the petitioner, any notified jurisdiction, and any other jurisdiction that is substantially affected by the second supplemental decision, any of whom may appeal the second supplemental decision by submitting a written request for review by the Appeals Bureau as provided in subdivision (d)(1) within 30 days of the date of mailing of that supplemental decision, or within a period of extension authorized by subdivision (c)(11). If no such timely request for review is submitted, the second supplemental decision is final as to all jurisdictions.

(d) Review by the Appeals Bureau.

(1) The petitioner or any notified jurisdiction may appeal the supplemental decision of the assigned section by submitting to the assigned section, within 30 days of the date of mailing of the supplemental decision or within a period of extension authorized by subdivision (c)(11), a written request for review by the Appeals Bureau. A request for review by the Appeals Bureau must state the basis for the requesting jurisdiction’s disagreement with the supplemental decision and include all additional information in its possession that supports its position.

(2) If a timely request for review by the Appeals Bureau is submitted, the assigned section will, within 30 days of receipt of the request, forward the appeal to the Appeals Bureau for the scheduling of an appeals conference.

(3) Prior to scheduling the appeals conference, the Appeals Bureau will contact the parties and any other jurisdiction that would be substantially affected if the petition were granted to determine an acceptable date and time to hold the appeals conference. At least 45 days prior to the scheduled date for the appeals conference, the Appeals Bureau will mail a notice of appeals conference to each party.

(A) The notice of appeals conference will identify the appeal, state the time and date of the appeals conference, and include the address in Sacramento at which the conference will be held. A response to notice of appeals conference form will be included with the notice of appeals conference.

(B) Each party should complete and return the response form within 15 days of the date the notice of appeals conference was mailed.

(C) If any party would like to record the appeals conference, that party must check the appropriate box on the response to notice of appeals conference form and agree to provide, and provide, a copy of the recording or transcript to the Appeals Bureau and to the other parties to the appeal. The recording and the providing of copies is at the party's own expense. If the Appeals Bureau will record the appeals conference, it will notify the parties prior to the appeals conference, and will provide each party a copy of the recording or transcript.

(D) The appeals conference will be rescheduled or postponed only if the Appeals Bureau determines that there is reasonable cause, including unavailability of the scheduled conference holder due to illness or change in employment.

(4) No later than 15 days before the scheduled date of the appeals conference, each party should make its written submission to the Appeals Bureau including the arguments and evidence in support of that party's position, and provide a copy of that submission to each other party.

(5) The provisions of regulations 35064, 35065, and 35066 are applicable to the conduct of the appeals conference, content and issuance of the decision of the Appeals Bureau, and the appeal of that decision, except that:

(A) A copy of the decision or supplemental decision will be mailed to the petitioner, to the assigned section, to each notified jurisdiction, and to any other jurisdiction that will be substantially affected by the Appeals Bureau decision or supplemental decision.

(B) The petitioner, any notified jurisdiction, and the assigned section can submit a request for reconsideration of a decision or supplemental decision if the request is submitted within 60 days after the date the Appeals Bureau issues its decision or supplemental decision.

(C) The petitioner and any notified jurisdiction may request review of the decision or supplemental decision by the Office of Tax Appeals, if the request is submitted to the Office of Tax Appeals within 60 days after the date the Appeals Bureau issues its decision or supplemental decision.

(D) If, within 60 days of the date of mailing of the decision or supplemental decision, no request for reconsideration is submitted to the Appeals Bureau and no appeal is submitted to the Office of Tax Appeals, the Appeals Bureau decision or supplemental decision is final as to all jurisdictions.

(e) Limitation Period for a Redistribution. A redistribution shall not include amounts originally distributed earlier than two quarterly periods prior to the quarter of the date of knowledge.

History—New article 5 (regulation 35056) and regulation filed March 19, 2018, as an emergency; effective and operative March 19, 2018. Article and regulation refiled September 17, 2018, as an emergency; effective and operative September 17, 2018. Article and regulation refiled December 17, 2018, as an emergency; effective and operative December 17, 2018. Certificate of Compliance transmitted to OAL on February 20, 2019 and filed March 19, 2019. (The regulation incorporates provisions from regulations 1807 and 1828 in division 2.)

Note.—Authority cited: Sections 15570.40 and 15606, Government Code; Sections 7051, 7202, 7203, 7261 and 7262, Revenue and Taxation Code.