California Attorney General Opinion No. 79-427

1 79-427 TO BE PUBLISHED IN THE OFFICIAL REPORTS OFFICE OF THE ATTORNEY GENERAL State of California GEORGE DEUKMEJIAN Attorney General _________________________ OPINION of GEORGE DEUKMEJIAN Attorney General Warren J. Abbott Assistant Attorney General : : : : : : : : : : : No. 79-427 June 28, 1979 SUBJECT: LIABILITY OF BEER WHOLESALER—Beer wholesalers who continue selling alcoholic beverages to a licensed retailer after the wholesaler has been notified that such retailer’s sales tax permit has been suspended could be civilly liable for the sales tax due on the beverages so sold. The sale alone is insufficient to incur a criminal liability. The Honorable Frank Vicencia, Assemblyman for the Fifty-fourth District, has requested an opinion on the following question: Is there any civil or criminal liability placed upon a beer wholesaler who continues selling alcoholic beverages to a licensed retailer after the wholesaler has been notified that such retailer’s sales tax permit has been suspended? CONCLUSION A beer wholesaler who continues selling alcoholic beverages to a licensed retailer after the wholesaler has been notified that such retailer’s sales tax permit has been suspended could be civilly liable for the sales tax due on the beverages so sold to the retailer. The sale alone, however, is insufficient to incur a criminal liability, but if the wholesaler aids and abets the subsequent resale of such merchandise by the retailer, the 2 79-427 wholesaler would be guilty of selling without a sales tax permit, a misdemeanor. ANALYSIS We are informed that upon occasion the State Board of Equalization (Board) will notify a beer wholesaler that the sales tax permit of a retailer has been suspended for failure to pay sales tax. The staff of the Board advises that such notices are sent only to those wholesalers who the Board knows sell to the suspended retailer. Thus, not all wholesalers who sell to the particular retailer may receive such notice or otherwise learn of the suspension of the sales tax permit. The question presented relates to whether a wholesaler who does receive such a notice incurs any civil or criminal liability if he continues to sell to such a retailer. 1. Civil Liability The legislature has imposed a tax on the privilege of selling tangible personal property at retail. (Rev. & Tax. Code, § 6051.)1 This would include beer, it not otherwise being exempt. (§ 6016.) Sale at retail is defined in section 6007 to mean a sale for any purpose other than resale in the regular course of business in the form of tangible personal property.” The tax is imposed as a percentage of the gross receipts of the property sold in this state. (§ 6051.) In addition, every person desiring to engage in or conduct business as a seller must obtain a sales tax permit from the State Board of Equalization. (§§ 6066– 6067.) Thus, the retailer in the factual situation presented who sells beer at retail is subject to the sales tax and must obtain a permit from the Board. Failure to comply with any provisions of the Sales and Use Tax Law (§ 6000 et seq.) or any of the Board’s rules and regulations relating to the sales tax is ground for suspending or revoking a sales tax permit. (§ 6070.) The Sales and Use Tax Law contains procedures for the filing of returns and the times of payments to the Board. (§§ 6451–6592.) The failure to comply with these payment provisions would, under section 6070, be grounds for suspending or revoking the sales tax permit. In the factual situation presented we assume the beer retailer’s sales tax permit has been suspended or revoked for failure to make timely payments to the Board of the sales tax as required by the Sales and Use Tax law.2 1 All section references are to the Revenue and Taxation Code unless otherwise indicated. 2 The retailer must also, under the Alcoholic Beverage Control Act, have a license which authorizes the sale of the beer to consumers only and not for resale. (Bus. & Prof. Code, §§ 23300, 23393.) In addition, a beet wholesaler must be licensed (Bus. & Prof. Code, § 23300) and may only sell to a person holding a license authorizing the sale of the alcoholic beverage sold by the wholesaler (Bus. & Prof. Code, § 23378). We express no opinion on the question of whether the 3 79-427 As indicated, any seller, including wholesalers, must obtain a sales tax permit from the Board. (§§ 6066, 6067.) Seller is defined in section 6014 to include “. . . every person engaged in the business of selling tangible personal property of a kind the gross receipts from the retail sale of which are required to be included in the measure of the sales tax.” Since the retail sale of beer is a sale the gross receipts from which are required to be included in the measure of the sales tax the sale of beer by the wholesaler in question would require that wholesaler also apply for and obtain a sales tax permit. The Sales and Use Tax law provides in section 6091: “For the purpose of the proper administration of this part and to prevent evasion of the sales tax it shall be presumed that all gross receipts are subject to the tax until the contrary is established. The burden of proving that a sale of tangible personal property is not a sale at retail is upon the person who makes the sale unless he takes from the purchaser a certificate to the effect that the property is purchased for resale.” Thus, the wholesaler has the burden of proving that his sales of beer are not a sale at retail subject to the sales tax. One method of overcoming this burden is to receive from the purchaser (the beer retailer) a resale certificate. Section 6092 provides: “The certificate relieves the seller from liability for the sales tax only if taken in good faith from a person who is engaged in the business of selling tangible personal property and who holds the permit provided for in Article 2 (commencing with Section 6066) of this chapter.” (Emphasis added.) Pursuant to authorization in section 6093, the Board by regulation has adopted a form of resale certificate. (Cal. Admin. Code, tit. 18, § 1668.) In the situation presented, however, the beer wholesaler knows that the retailer does not have a valid sales tax permit, it having been suspended or revoked. He therefore cannot take a resale certificate “in good faith” from that retailer, and thus would not be entitled to make use of the certificate to be relieved of sales tax liability. Unless, then, he otherwise sustains his burden of overcoming the presumption that his gross receipts are taxable, he would be liable to the Board for the sales tax on his sales to that retailer while that retailer’s permit was suspended or revoked. Title 18, California Administrative Code, section suspension or revocation of the sales tax permit of a beer retailer by the Board of Equalization would constitute grounds under California Constitution article XX, section 22, or Business and Professions Code section 24200 for the suspension or revocation of the retailer’s beer license by the Department of Alcoholic Beverage Control. 4 79-427 1668(c) sets forth the type of evidence that might be sufficient to overcome this presumption.3 (See also Board of Equalization, Business Taxes Law Guide, Vol. 2, § 475.0020.) We conclude, however, that if the wholesaler has knowledge that the retailer does not have a valid sales tax permit and does not produce satisfactory evidence sustaining his burden that his gross receipts from such retailer are not taxable, the beer wholesaler is liable for the sales tax on any sales to the retailer. Whether the Board would proceed against the wholesaler is, of course, within the discretion of the Board. 2. Criminal Liability Section 6071 provides: “A person who engages in business as a seller in this state without a permit or permits or after a permit has been suspended or revoked, is guilty of a misdemeanor.” Thus, if the beer retailer in question actually sells any of the beer purchased from the wholesaler or anyone else during the time when the sales tax permit of the retailer has been suspended or revoked, the retailer is guilty of a misdemeanor. The wholesaler, however, so long as his permit remains valid is not guilty of a violation of section 6071 on his own account merely by a sale to the retailer whose permit has been suspended or revoked. Although no facts have been presented to suggest its applicability, Penal Code section 314 provides that one who aids and abets the commission of a crime is a principal. 3 Title 18 California Administrative Code, section 6868 (c) states: “A sale for resale is not subject to sales tax. However, a resale certificate which is not timely taken is not retroactive and will not relieve the seller of the liability for the tax. Consequently, if the seller does not timely obtain a resale certificate, the seller will be relieved of liability for the tax only if the seller presents satisfactory evidence that the specific property sold: “(1) Was in fact resold by the purchaser and was not used by the purchaser for any purpose other than retention, demonstration, or display while holding it for sale in the regular course of business, or “(2) Is being held for resale by the purchaser and has not been used by the purchaser for any purpose other than retention, demonstration, or display while holding it for sale in the regular course of business, or “(3) Has been used or consumed by the purchaser and the purchaser has paid the use tax directly to this State.” 4 “Penal Code section 31 states: “All persons concerned in the commission of a crime, whether it be felony or misdemeanor, and whether they directly commit the act constituting the offense, or aid 5 79-427 As such, he would be guilty of a crime. (People v. Durham (1969) 70 Cal. 2d 171, 181; Pinell v. Superior Court (1965) 232 Cal. App. 2d 284, 287.) Aiding and abetting involves instigating, encouraging, permitting or aiding, with guilty knowledge of the wrongful purpose of the perpetrator. (People v. Markus (1978) 82 Cal. App. 3d 477, 481.) One may he guilty of a crime by aiding and abetting an unlicensed person engaged in the activity for which a license is required. (Cf. People v. Schornig (1925) 74 Cal. App. 109, 113; People v. Albrexstondare (1925) 71 Cal. App. 339, 345; People v. Leach (1930) 106 Cal. App. 442, 452, app. dis. 283 U.S. 808.) Knowledge that a crime is being committed or likely to be committed alone, however, is usually not sufficient to constitute aiding and abetting (People v. Weliser (1948) 84 Cal. App. 2d 126, 130; 42 Ops. Atty. Gen. 80, 82 (1963). But see United States v. Falcone (2nd Cir. 1940) 109 F.2d 579, aff’d (1940) 311 U.S. 205; Direct Sales Co. v. U.S. (1943) 319 U.S. 703.) Thus, if a beer wholesaler has knowledge that the retailer holds no valid sales tax permit and instigates or encourages the retailer to sell at retail, the wholesaler would be aiding and abetting the commission of a crime, a violation of section 6071, and he could be charged with engaging in business as a seller without a permit. The sale to the retailer with knowledge of the lack of a valid sales tax permit, however, would nor, alone, constitute such aiding and abetting. ***** and abet in its commission, or, not being present, have advised and encouraged its commission, and all persons counseling, advising, or encouraging children under the age of fourteen years, lunatics or idiots, to commit any crime, or who, by fraud, contrivance, or force, occasion the drunkenness of another for the purpose of causing him to commit any crime, or who, by threats, menaces, command, or coercion, compel another to commit any crime, are principals in any crime so committed.”