CDTFA Seller's Permit Revocation: The Notice, the Hearing, and How to Keep the Business Open

What a seller’s permit revocation notice is and why you received one

A revocation notice is the written warning that section 6070 of the Revenue and Taxation Code requires before the CDTFA revokes or suspends a seller’s permit for not complying with the sales tax law, and it arrives for one of three reasons: returns have not been filed, a final balance has not been paid, or a payment plan was broken. It is served in person or by mail to the address on the account, so a business that moved without updating its address may never read it. The permit is also what lets you buy inventory for resale without paying tax to the supplier, so a revocation reaches suppliers too: a resale certificate is only good with a valid permit, and a supplier who checks the CDTFA’s online permit verification will start charging you tax. The balance does not go away with the permit, and the CDTFA collects it with a lien and levies while the business is unable to sell.

The deadline on a revocation notice and what happens if nothing is done

The deadline is the hearing date on the notice, at least 10 days from service, and if nothing is done the hearing goes forward without you, the permit is revoked, and every sale after that is a misdemeanor under section 6071 of the Revenue and Taxation Code, for the business and for each officer of a corporation that keeps selling. The hearing is informal, at the district office or by phone, and the question is narrow: has the delinquency been cured or put under a plan. After a revocation, getting a new permit usually includes a security deposit. The balance keeps growing: interest runs monthly, a 10 percent penalty attaches to a late return or payment, and a collection cost recovery fee follows an unpaid demand. And section 6829 lets the CDTFA assess a closed corporation’s or limited liability company’s unpaid sales tax against the people who ran its tax affairs and willfully failed to pay, so closing the doors does not close the file.

What to do in the first 30 days

The first 30 days are for curing the delinquency the notice names before the hearing, and if the hearing has already happened, for assembling the reinstatement package before the business loses a month of sales. In order:

1. Read the notice for the reason: unfiled returns are cured by filing them, even without payment; an unpaid balance by payment or an accepted plan; a broken plan by catching up the missed payments.
2. File every missing return before the hearing, including a zero return for any period with no sales; this is the one ground for revocation that costs nothing to remove.
3. Call the district office on the notice and ask what arrangement it will accept; for a business still trading, the answer is often a down payment and a short plan.
4. Go to the hearing with proof: filed returns, payment confirmations, the signed plan, and bank statements that support it.
5. If the permit is already revoked, stop retail sales that day and send the reinstatement package in one submission.
6. Hold off on moving the business to a relative or a new entity until you have read the successor liability paragraph.

Your options for a threatened or revoked permit

A permit revocation is resolved one of five ways, depending on whether the permit is still active, the size of the balance, and whether the business is worth keeping open.

• File and pay. Filing the missing returns and paying the balance before the hearing ends the matter, and the permit stays.
• Installment payment agreement. Monthly payments on a final balance, with current returns filed and paid on time while the plan runs; the district sets the down payment and the length. A plan does not release a lien already recorded.
• Security deposit. Under section 6701 the CDTFA can require security before it issues or reinstates a permit, in cash, a surety bond or a certificate of deposit, and it is generally returned after about three years of on-time filing and payment.
• Offer in compromise. A settlement of a final balance for less than what is owed, generally for a business that has stopped operating and in narrower cases for one still open; it takes months and does not reinstate a permit.
• Sell or transfer the business. This is the trap. Under the successor liability rules in the Revenue and Taxation Code, a buyer of a business or its stock of goods has to withhold enough of the price to cover the seller’s unpaid sales tax until the CDTFA issues a tax clearance, and a buyer who does not withhold is personally liable for that tax up to the purchase price. Handing the store to a spouse or a child does not escape this.

What Brotman Law does with a seller’s permit revocation

For a revocation our work in the first thirty days is to keep the permit active or get it back, and to do that without signing the business up for a plan it cannot pay. The first step is the CDTFA power of attorney, form CDTFA-392, so the district office deals with us. With it on file we pull the account: every open period, what is filed, what is final, and any lien or levy already recorded. Where the balance came out of an audit, we check whether it is final or still open to a petition, which is work for our CDTFA audit attorney page. We file the missing returns, build the payment proposal from three months of bank statements and the current sales run rate, and take it to the district office before the hearing, asking that the revocation be held while the plan performs. If security is demanded, we argue the amount from the account history and substitute a bond for cash. If the permit is already revoked, we send the reinstatement package as a single submission. A lien, a levy or a responsible person inquiry already in the file goes into the same engagement.

Do you need a lawyer for a seller’s permit revocation?

Not always: if the permit is still active, the balance is under roughly $50,000, there is no lien or levy, and no one is looking at you personally, the missing returns and the CDTFA’s own payment plan will usually keep the permit, and this page has told you how. Our monthly engagement fits when the permit is already revoked or the hearing is days away, when the balance is larger, when the CDTFA is demanding security the business cannot post, when a lien, levy or keeper is in play, when a sale or transfer is planned, or when an owner or officer could be held personally liable. We would rather say so on the free 15-minute call than sign you up for work you do not need.

How the monthly flat fee works for a seller’s permit revocation

Many matters like this one run as a monthly flat-fee engagement: one number, agreed up front, that covers agency contact, deadlines, document responses and strategy until the matter resolves. It does not include an offer in compromise, a petition on the audit behind the balance, or a criminal referral, each of which is scoped and priced on its own. The engagement ends when the permit is active, the returns are current and the balance is paid or on a plan that is holding.

Documents to gather

Seven items answer nearly every question a revocation notice raises.

• The revocation notice, every page, with the envelope.
• Every CDTFA letter from the past year, including any lien notice or payment plan.
• The returns filed for the past three years and a list of the periods with nothing filed.
• Proof of every payment to the CDTFA: online confirmations, canceled checks, plan payments.
• Three months of business bank statements and the merchant statements.
• The entity documents and the names of whoever signs for the business.
• If a sale or transfer is planned, the draft agreement and the buyer’s information.

Can I keep selling while a seller’s permit revocation is pending?

Yes, until the permit is actually revoked; a notice of hearing does not suspend it. After that, every sale is a misdemeanor under section 6071, and the CDTFA can see them through your merchant statements.

How do I get a revoked seller’s permit reinstated?

File every missing return, pay the balance or enter a plan the district accepts, post any security demanded, and ask the district office for reinstatement in writing. Section 6070 lets the CDTFA refuse a new permit until it is satisfied the former holder will comply, so a complete package moves faster than a partial one.

How much security can the CDTFA require to reinstate a permit?

Up to twice your estimated average quarterly liability, capped by section 6701 at $10,000 for most accounts and $50,000 for accounts with a history of delinquency. The amount can be argued down from the account history.

Can I open the business under a family member’s name to get a new permit?

You can apply, but it rarely solves the problem. The CDTFA looks at who really runs a business at the same location before it issues a permit, and a relative who takes over the inventory steps into successor liability for the old balance up to what was paid for it.

Does a payment plan stop a seller’s permit revocation?

Usually yes, because a plan the district accepts before the hearing cures the delinquency, and the permit stays active while the plan is paid. Missing a payment, or filing a new return late while the plan runs, puts the account in default and brings the next notice.

Is selling without a seller’s permit really a crime in California?

Yes, under section 6071 selling without a permit, or after one has been suspended or revoked, is a misdemeanor, and each officer of a corporation that does so is guilty of it as well. A referral is not the CDTFA’s first move, but the exposure is personal.

Related pages

The other pages in the CDTFA collections series:

• California tax collection attorney, the parent page
• The complete guide to California CDTFA collections
• CDTFA collections: liens, levies and till taps
• CDTFA responsible person liability
• CDTFA Notice of Determination and the 30-day petition
• CDTFA audit engagement letter
• CDTFA audit records request
• CDTFA audit findings and the exit conference