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Business Taxes Law Guide—Revision 2024
Cigarette and Tobacco Products Tax Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 13. Cigarette Tax
Chapter 8. Administration
Article 2. The California Taxpayers' Bill of Rights1
Section 30459.15
Text of Section Operative October 1, 2013
30459.15. Offers in compromise. (a) Beginning on January 1, 2007, the director of the department, or their delegates, may compromise any final tax liability.
(b) For purposes of this section, “a final tax liability” means any final tax liability arising under Part 13 (commencing with Section 30001), or related interest, additions to tax, penalties, or other amounts assessed under this part.
(c) Offers in compromise shall be considered only for liabilities that were generated by the following:
(1) A business that has been discontinued or transferred, where the taxpayer making the offer no longer has a controlling interest or association with the transferred business or has a controlling interest or association with a similar type of business as the transferred or discontinued business.
(2) A taxpayer that has purchased untaxed cigarettes or tobacco products from out-of-state vendors for the taxpayer’s own use or consumption.
(3) Notwithstanding paragraph (1) or (2), a qualified final tax liability may be compromised regardless of whether the business has been discontinued or transferred or whether the taxpayer has a controlling interest or association with a similar type of business as the transferred or discontinued business. All other provisions of this section that apply to a final tax liability shall also apply to a qualified final tax liability, and a compromise shall not be made under this subdivision unless all other requirements of this section are met. For purposes of this subdivision, a “qualified final tax liability” means either of the following:
(A) That part of a final tax liability, including related interest, additions to tax, penalties, or other amounts assessed under this part, arising from a transaction or transactions in which the department finds no evidence that the taxpayer collected cigarette or tobacco products tax reimbursement from the purchaser or other person and which was determined against the taxpayer under Article 2 (commencing with Section 30201), Article 3 (commencing with Section 30221), or Article 5 (commencing with Section 30261) of Chapter 4.
(B) That part of a final tax liability for cigarette or tobacco products tax, including related interest, additions to tax, penalties, or other amounts assessed under this part, determined under Article 2 (commencing with Section 30201), Article 3 (commencing with Section 30221), and Article 5 (commencing with Section 30261) of Chapter 4 against a taxpayer who is a consumer that is not required to hold a license under Article 1 (commencing with Section 30140) of Chapter 3.
(4) A qualified final tax liability may not be compromised with any of the following:
(A) A taxpayer who previously received a compromise under paragraph (3) for a liability, or a part thereof, arising from a transaction or transactions that are substantially similar to the transaction or transactions attributable to the liability for which the taxpayer is making the offer.
(B) A business that was transferred by a taxpayer who previously received a compromise under paragraph (3) and who has a controlling interest or association with the transferred business, when the liability for which the offer is made is attributable to a transaction or transactions substantially similar to the transaction or transactions for which the taxpayer’s liability was previously compromised.
(C) A business in which a taxpayer who previously received a compromise under paragraph (3) has a controlling interest or association with a similar type of business for which the taxpayer received the compromise, when the liability of the business making the offer arose from a transaction or transactions substantially similar to the transaction or transactions for which the taxpayer’s liability was previously compromised.
(d) The department may, in its discretion, enter into a written agreement that permits the taxpayer to pay the compromise in installments for a period not exceeding one year. The agreement may provide that such installments shall be paid by electronic funds transfers or any other means to facilitate the payment of each installment.
(e) A taxpayer that has received a compromise under paragraph (3) of subdivision (c) may be required to enter into any collateral agreement that is deemed necessary for the protection of the interests of the state. A collateral agreement may include a provision that allows the department to reestablish the liability, or any portion thereof, if the taxpayer has sufficient annual income during the succeeding five-year period. The department shall establish criteria for determining “sufficient annual income” for purposes of this subdivision.
(f) A taxpayer that has received a compromise under paragraph (3) of subdivision (c) shall file and pay by the due date all subsequently required cigarette and tobacco products tax reports or returns for a five-year period from the date the liability is compromised, or until the taxpayer is no longer required to file cigarette and tobacco products tax reports or returns, whichever period is earlier.
(g) Offers in compromise shall not be considered under the following conditions:
(1) The taxpayer has been convicted of felony tax evasion under this part during the liability period.
(2) The taxpayer has filed a statement under paragraph (3) of subdivision (h) and continues to purchase untaxed cigarettes or tobacco products from out-of-state vendors for the taxpayer’s own use or consumption.
(h) For amounts to be compromised under this section, the following conditions shall exist:
(1) The taxpayer shall establish that:
(A) The amount offered in payment is the most that can be expected to be paid or collected from the taxpayer’s present assets or income.
(B) The taxpayer does not have reasonable prospects of acquiring increased income or assets that would enable the taxpayer to satisfy a greater amount of the liability than the amount offered, within a reasonable period of time.
(2) The department shall have determined that acceptance of the compromise is in the best interest of the state.
(3) For liabilities generated in the manner described in paragraph (2) of subdivision (c), the taxpayer shall file with the department a statement, under penalty of perjury, that the taxpayer will no longer purchase untaxed cigarettes or tobacco products from out-of-state vendors for the taxpayer’s own use or consumption.
(i) A determination by the department that it would not be in the best interest of the state to accept an offer in compromise in satisfaction of a final tax liability shall not be subject to administrative appeal or judicial review.
(j) (1) Offers for liabilities with a fraud or evasion penalty shall require a minimum offer of the unpaid tax and fraud or evasion penalty.
(2) The minimum offer may be waived if it can be shown that the taxpayer making the offer was not the person responsible for perpetrating the fraud or evasion. This authorization to waive only applies to partnership accounts where the intent to commit fraud or evasion can be clearly attributed to a partner of the taxpayer.
(k) When an offer in compromise is either accepted or rejected, or the terms and conditions of a compromise agreement are fulfilled, the department shall notify the taxpayer in writing. In the event an offer is rejected, the amount posted will either be applied to the liability or refunded, at the discretion of the taxpayer.
(l) When more than one taxpayer is liable for the debt, such as with spouses or partnerships or other business combinations, including, but not limited to, taxpayers who are liable through dual determination or successor’s liability, the acceptance of an offer in compromise from one liable taxpayer shall reduce the amount of the liability of the other taxpayers by the amount of the accepted offer.
(m) Whenever a compromise of tax or penalties or total tax and penalties in excess of five hundred dollars ($500) is approved, there shall be placed on file for at least one year in the office of the director of the department a public record with respect to that compromise. The public record shall include all of the following information:
(1) The name of the taxpayer.
(2) The amount of unpaid tax and related penalties, additions to tax, interest, or other amounts involved.
(3) The amount offered.
(4) A summary of the reason why the compromise is in the best interest of the state.
The public record shall not include any information that relates to any trade secrets, patent, process, style of work, apparatus, business secret, or organizational structure, that if disclosed, would adversely affect the taxpayer or violate the confidentiality provisions of Section 30455. A list shall not be prepared and releases shall not be distributed by the department in connection with these statements.
(n) A compromise made under this section may be rescinded, all compromised liabilities may be reestablished, without regard to any statute of limitations that otherwise may be applicable, and no portion of the amount offered in compromise refunded, if either of the following occurs:
(1) The department determines that a person did any of the following acts regarding the making of the offer:
(A) Concealed from the department property belonging to the estate of a taxpayer or other person liable for the tax.
(B) Received, withheld, destroyed, mutilated, or falsified a book, document, or record, or made a false statement, relating to the estate or financial condition of the taxpayer or other person liable for the tax.
(2) The taxpayer fails to comply with any of the terms and conditions relative to the offer.
(o) A person who, in connection with an offer or compromise under this section, or offer of that compromise to enter into that agreement, willfully does either of the following shall be guilty of a felony and, upon conviction, shall be fined not more than fifty thousand dollars ($50,000) or imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code, or both, together with the costs of investigation and prosecution:
(1) Conceals from an officer or employee of this state property belonging to the estate of a taxpayer or other person liable in respect of the tax.
(2) Receives, withholds, destroys, mutilates, or falsifies a book, document, or record, or makes a false statement, relating to the estate or financial condition of the taxpayer or other person liable in respect of the tax.
(p) For purposes of this section, “person” means the taxpayer, a member of the taxpayer’s family, a corporation, agent, fiduciary, or representative of, or another individual or entity acting on behalf of, the taxpayer, or another corporation or entity owned or controlled by the taxpayer, directly or indirectly, or that owns or controls the taxpayer, directly or indirectly.
(q) This section shall remain in effect only until January 1, 2028, and as of that date is repealed.
History—Added by Stats. 2006, Ch. 364 (AB 3076), in effect January 1, 2007. Stats. 2008, Ch. 222 (AB 2047), in effect January 1, 2009, added paragraphs (3) and (4) to subdivision (c); added subdivisions (d)-(g); redesignated former subdivisions (d)-(m) to be (h)-(q); substituted "(i)" for "(e)" after "paragraph (3) of subdivision" in subdivision (h)(2); and added subdivision (r). Stats. 2011, Ch. 15 (AB 109), in effect April 4, 2011, operative October 1, 2011, substituted "pursuant to subdivision (h) of Section 1170 of the Penal Code" for "in the state prison" after "($50,000) or imprisoned" in subdivision (p). Stats. 2012, Ch. 285 (SB 1548), substituted "a" or "an" for "any" throughout the section; substituted "the taxpayer's" for "their" after "out-of-state vendors for" in paragraph (2), substituted "a" for "no" after "final tax liability, and" and added "not" after "compromise shall" in the second sentence of paragraph (3), deleted "or cigarette or tobacco products tax reimbursement" in subparagraph (3)(A), and substituted "(3)" for "(2)" through paragraph (4), of subdivision (c); substituted "(3)" for "(2)" in subdivisions (f) and (g); substituted "the taxpayer's" for "their" in paragraph (2) of subdivision (h); substituted "A" for "No" before "list shall", added "not" after "list shall", deleted "no" after "be prepared and" and added "shall not be" after "and releases" in the second sentence of the second paragraph of paragraph (4) of subdivision (n); deleted "any" after "Concealed from the board" in subparagraph (1)(A) of subdivision (o); deleted "any" after "employee of this state" in paragraph (1) of subdivision (p); substituted "another" for "any other" throughout subdivision (q); and substituted "2018" for "2013" throughout subdivision (r). Stats. 2017, Ch. 272 (AB 525), in effect January 1, 2018, substituted "2023" for "2018" after "until January 1" and deleted ", unless a later enacted statute, that is enacted before January 1, 2018, deletes or extends that date" after "date is repealed" in subdivision (r). Stats. 2022, Ch. 474 (SB 1496), in effect January 1, 2023, substituted "department" for "board" throughout; redesignated former subparagraph (a)(1) as subdivision (a); substituted "director" for "executive director and chief counsel" after "January 1, 2007, the", deleted "where the reduction of tax is seven thousand five hundred dollars ($7,500) or less" after "any final tax liability", and deleted paragraphs (2) and (3) in subdivision (a); substituted "that" for "which" after "a written agreement" in subdivision (d); deleted former subdivision (e); relettered former subdivisions (f) – (r) as subdivisions (e) – (q), respectively; substituted "(h)" for "(i)" after "(3) of subdivision" in paragraph (2) of subdivision (g); substituted "the taxpayer" for "he or she" after penalty and perjury, that" and substituted "the taxpayer’s" for "his or her" after "out-of-state vendors for" in paragraph (3) of subdivision (h); deleted "executive" after "the office of the" in subdivision (m); substituted "2028" for "2023" after "January 1," in subdivision (q).
Note.—SEC 1 of Stats 2011, Ch. 15 (AB 109), in effect April 4, 2011, states: "This act is titled and may be cited as the 2011 Realignment Legislation addressing public safety."
Note.—SEC 636 of Stats 2011, Ch. 15 (AB 109) in effect April 4, 2011, states: "This act will become operative no earlier than July 1, 2011, and only upon creation of a community corrections grant program to assist in implementing this act and upon an appropriation to fund the grant program."
Note.—The Community Corrections Grant Program referred to in SEC 636 of Stats. 2011, Ch. 15 (AB 109), as amended by SEC 68 of Stats. 2011, Ch. 39 (AB 117), was created by SEC 3 of Stats. 2011, Ch. 40 (AB 118), operative October 1, 2011.
Text of Section Operative January 1, 2023
30459.15. Offers in compromise. (a) The director of the department, or their delegates, may compromise any final tax liability.
(b) For purposes of this section, "a final tax liability" means any final tax liability arising under Part 13 (commencing with Section 30001), or related interest, additions to tax, penalties, or other amounts assessed under this part.
(c) Offers in compromise shall be considered only for liabilities that were generated by the following:
(1) A business that has been discontinued or transferred, where the taxpayer making the offer no longer has a controlling interest or association with the transferred business or has a controlling interest or association with a similar type of business as the transferred or discontinued business.
(2) A taxpayer that has purchased untaxed cigarettes or tobacco products from out-of-state vendors for the taxpayer's own use or consumption.
(d) Offers in compromise shall not be considered under the following conditions:
(1) The taxpayer has been convicted of felony tax evasion under this part during the liability period.
(2) The taxpayer has filed a statement under paragraph (3) of subdivision (e) and continues to purchase untaxed cigarettes or tobacco products from out-of-state vendors for the taxpayer's own use or consumption.
(e) For amounts to be compromised under this section, the following conditions shall exist:
(1) The taxpayer shall establish that:
(A) The amount offered in payment is the most that can be expected to be paid or collected from the taxpayer's present assets or income.
(B) The taxpayer does not have reasonable prospects of acquiring increased income or assets that would enable the taxpayer to satisfy a greater amount of the liability than the amount offered, within a reasonable period of time.
(2) The department shall have determined that acceptance of the compromise is in the best interest of the state.
(3) For liabilities generated in the manner described in paragraph (2) of subdivision (c), the taxpayer shall file with the department a statement, under penalty of perjury, that the taxpayer will no longer purchase untaxed cigarettes or tobacco products from out-of-state vendors for the taxpayer's own use or consumption.
(f) A determination by the department that it would not be in the best interest of the state to accept an offer in compromise in satisfaction of a final tax liability shall not be subject to administrative appeal or judicial review.
(g) (1) Offers for liabilities with a fraud or evasion penalty shall require a minimum offer of the unpaid tax and fraud or evasion penalty.
(2) The minimum offer may be waived if it can be shown that the taxpayer making the offer was not the person responsible for perpetrating the fraud or evasion. This authorization to waive only applies to partnership accounts where the intent to commit fraud or evasion can be clearly attributed to a partner of the taxpayer.
(h) When an offer in compromise is either accepted or rejected, or the terms and conditions of a compromise agreement are fulfilled, the department shall notify the taxpayer in writing. In the event an offer is rejected, the amount posted will either be applied to the liability or refunded, at the discretion of the taxpayer.
(i) When more than one taxpayer is liable for the debt, such as with spouses or partnerships or other business combinations, including, but not limited to, taxpayers who are liable through dual determination or successor's liability, the acceptance of an offer in compromise from one liable taxpayer shall reduce the amount of the liability of the other taxpayers by the amount of the accepted offer.
(j) Whenever a compromise of tax or penalties or total tax and penalties in excess of five hundred dollars ($500) is approved, there shall be placed on file for at least one year in the office of the director of the department a public record with respect to that compromise. The public record shall include all of the following information:
(1) The name of the taxpayer.
(2) The amount of unpaid tax and related penalties, additions to tax, interest, or other amounts involved.
(3) The amount offered.
(4) A summary of the reason why the compromise is in the best interest of the state.
The public record shall not include any information that relates to any trade secrets, patent, process, style of work, apparatus, business secret, or organizational structure, that if disclosed, would adversely affect the taxpayer or violate the confidentiality provisions of Section 30455. A list shall not be prepared and releases shall not be distributed by the department in connection with these statements.
(k) A compromise made under this section may be rescinded, all compromised liabilities may be reestablished, without regard to any statute of limitations that otherwise may be applicable, and no portion of the amount offered in compromise refunded, if either of the following occurs:
(1) The department determines that a person did any of the following acts regarding the making of the offer:
(A) Concealed from the department any property belonging to the estate of a taxpayer or other person liable for the tax.
(B) Received, withheld, destroyed, mutilated, or falsified a book, document, or record or made a false statement, relating to the estate or financial condition of the taxpayer or other person liable for the tax.
(2) The taxpayer fails to comply with any of the terms and conditions relative to the offer.
(l) A person who, in connection with an offer or compromise under this section, or offer of that compromise to enter into that agreement, willfully does either of the following shall be guilty of a felony and, upon conviction, shall be fined not more than fifty thousand dollars ($50,000) or imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code, or both, together with the costs of investigation and prosecution:
(1) Conceals from an officer or employee of this state property belonging to the estate of a taxpayer or other person liable in respect of the tax.
(2) Receives, withholds, destroys, mutilates, or falsifies a book, document, or record, or makes a false statement, relating to the estate or financial condition of the taxpayer or other person liable in respect of the tax.
(m) For purposes of this section, "person" means the taxpayer, a member of the taxpayer's family, a corporation, agent, fiduciary, or representative of, or another individual or entity acting on behalf of, the taxpayer, or another corporation or entity owned or controlled by the taxpayer, directly or indirectly, or that owns or controls the taxpayer, directly or indirectly.
(n) This section shall become operative on January 1, 2028.
History—Added by Stats. 2008, Ch. 222 (AB 2047), in effect January 1, 2009, operative January 1, 2013. Stats. 2011, Ch. 15 (AB 109), in effect April 4, 2011, operative October 1, 2011, substituted "pursuant to subdivision (h) of Section 1170 of the Penal Code" for "in the state prison" after "($50,000) or imprisoned" in subdivision (l). Stats. 2012, Ch. 285 (SB 1548), substituted "a" or "an" for "any" throughout the section; substituted "the taxpayer's" for "their" after "out-of-state vendors for" in paragraph (2) in subdivisions (c) and (d); substituted "A" for "No" before "list shall", added "not" after "list shall", deleted "no" after "be prepared and" and added "shall not be" after "and releases" in the second sentence of the second paragraph of paragraph (4) of subdivision (j); deleted "any" after "Concealed from the board" in subparagraph (1)(A) of subdivision (k); deleted "any" after "employee of this state" in paragraph (1) of subdivision (l); substituted "another" for "any other" throughout subdivision (m); and substituted "2018" for "2013" throughout subdivision (n). Stats. 2017, Ch. 272 (AB 525), in effect January 1, 2018, substituted "2023" for "2018" after "January 1," in subdivision (n). Stats. 2022, Ch. 474 (SB 1496), in effect January 1, 2023, substituted "department" for "board" throughout; redesignated former subparagraph (a)(1) as subdivision (a); substituted "director" for "executive director and chief counsel" after "The" and deleted "where the reduction of tax is seven thousand five hundred dollars ($7,500) or less" after "any final tax liability", and deleted paragraphs (2) and (3) in subdivision (a); substituted "the taxpayer" for "he or she" after "penalty of perjury, that" and substituted "the taxpayer’s" for "his or her" after "out-of-state vendors for" in paragraph (3) of subdivision (e); deleted "executive" after "office of the" in subdivision (j); substituted "2028" for "2023" after "January 1," in subdivision (n).
Note.—SEC 1 of Stats 2011, Ch. 15 (AB 109), in effect April 4, 2011, states: "This act is titled and may be cited as the 2011 Realignment Legislation addressing public safety."
Note.—SEC 636 of Stats 2011, Ch. 15 (AB 109) in effect April 4, 2011, states: "This act will become operative no earlier than July 1, 2011, and only upon creation of a community corrections grant program to assist in implementing this act and upon an appropriation to fund the grant program."
Note.—The Community Corrections Grant Program referred to in SEC 636 of Stats. 2011, Ch. 15 (AB 109), as amended by SEC 68 of Stats. 2011, Ch. 39 (AB 117), was created by SEC 3 of Stats. 2011, Ch. 40 (AB 118), operative October 1, 2011.
1Article 2 was added by Stats. 1992, Ch. 438, in effect January 1, 1993.