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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Court Decisions
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Schnyder et al. v. State Board of Equalization … (2002)
Buyers of Business Liable as Successors Even Though They Complied with Bulk Sales Law
The buyers of a grocery business in a bulk sale sued the Board for a tax refund after the Board determined that the buyers were personally liable, pursuant to the successor liability statutes (Rev. and Tax. Code, §§ 6811 and 6812), as successors for the sales and use taxes owed by the sellers of the business. The trial court granted summary judgment in favor of the Board.
The Court of Appeal affirmed. The court held that the buyers did not comply with the withholding requirement of section 6811, and thus were personally liable under section 6812, for the sales and use taxes owed by the sellers of the business. The buyers deposited the purchase funds with an escrow agent and then filed an interpleader action with the purchase funds, in order to allow the business's creditors, including the Board, to resolve the amounts owed. However, the buyers failed to withhold the purchase funds as required by section 6811. The court also held that the buyers could not avoid personal liability for their failure to comply with the withholding requirement, notwithstanding that the buyers filed the interpleader action with the purchase funds in order to allow the business's multiple creditors to resolve the amounts owed. The provisions of the bulk sales law (Cal. U. Com. Code, § 6101 et seq.) do not take priority over the successor liability statutes. The court further held that the Board was not collaterally estopped from imposing successor liability on the buyers of a grocery business in a bulk sale, notwithstanding that the Board's stipulation in federal court disclaimed any interest it might have had in the interpleaded funds. Schnyder et al. v. State Board of Equalization (2002) 101 Cal.App.4th 538.