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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 1. Sales and Use Taxes
Chapter 5. Determinations
Article 1.5. Prepayment of Sales Tax on Motor Vehicle Fuel Distributions *
Section 6480.7
6480.7. Security. (a) The board may require any supplier or wholesaler subject to this article to place with the board any security that the board determines is necessary to ensure compliance with this article. The amount of the security shall be fixed by the board but shall not be greater than three times the estimated average liability of suppliers or wholesalers required to file returns for monthly periods, determined in any manner that the board deems proper, or five hundred thousand dollars ($500,000), whichever amount is less. These amounts apply regardless of the type of security placed with the board. The amount of the security may be increased or decreased by the board subject to the maximum amounts. The security required pursuant to this section is in addition to the bond or bonds required pursuant to Section 7486.
(b) The board may sell the security at public auction if it becomes necessary to so do in order to recover any tax or any amount required to be collected or penalty due. Notice of the sale may be served upon the person who placed the security personally or by mail. If service is by mail, service shall be made in the manner prescribed for service of a notice of a deficiency determination and shall be addressed to the person at his or her address as it appears in the records of the board. However, security in the form of a bearer bond issued by the United States or the State of California which has a prevailing market price may be sold by the board at a private sale at a price not lower than the prevailing market price thereof. Upon any sale, any surplus above the amounts due shall be returned to the supplier or wholesaler who placed the security.
History—Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002, substituted "supplier or wholesaler" for "distributor or broker" after "may require any" in the first sentence, and substituted "suppliers or wholesalers" for "distributors or brokers" after "average liability of" in the second sentence of subdivision (a); and substituted "supplier or wholesaler" for "distributor or broker" after "returned to the" in the fifth sentence of subdivision (b).
Bankruptcy.—Property held by the Board as security prior to the taxpayer's filing of a petition for reorganization pursuant to Chapter 11 of the bankruptcy law belongs to the bankruptcy estate and is not immune from the claims of general creditors. The Board violated the automatic stay in bankruptcy by cashing the certificate of deposit taken as security from the taxpayer. In re Sluggo's Chicago Style, Inc. (9th Cir., 1990) 912 F.2d 1073.
* Article 1.5 was added by Stats. 1986, Ch. 214, Operative on July 1, 1986.