Bulk Sale Transfer
California Bulk Transfer Law
The bulk transfer law is designed to prevent a merchant from defrauding his or her creditors by selling the assets of a business and neglecting to pay any amounts owed the creditors. The law requires notice so that creditors may take whatever legal steps are necessary to protect their interests. For a description of the required notices to creditors and the manner of giving them, consult Sections 6104 to 6107 of the Uniform Commercial Code.
Businesses subject to this law are those whose principal activity is the sale of merchandise, including those that manufacture what they sell. Expressly included are the businesses of a baker, restaurant owner, garage owner, or cleaner and dyer. Unless otherwise limited by law, all bulk transfers of goods within California are subject to this law.
Notice to Tax Collector of Pending Bulk Transfer
When a bulk transfer is made, the tax collector must receive a Notice to Creditors, by certified or registered mail, at least ten days prior to the time the transfer is consummated. The notice is sent by the transferee (buyer) of the goods if the transfer is between private parties, or by the "auctioneer," as defined in California Uniform Commercial Code section 6108, if the transfer is to be by sale at auction.
Contents of Notice
The notice must state:
- That a bulk transfer is about to be made;
- The name and business address of the transferor and, except in the case of a sale at auction, the transferee, and all other business names and addresses used by the transferor within the past three years so far as is known to the transferee;
- The location and general description of the property to be transferred; and
- The place and the date on or after which the bulk transfer is to be consummated.
NOTE: If the Notice of Bulk Transfer is delivered during the period from January 1 to May 7, inclusive, the notice shall be accompanied by a completed business property statement with respect to property involved in the bulk sale, pursuant to Revenue and Taxation Code section 441 (Cal. U. Com. Code Section 6105(3)).
Determination of Unpaid Tax and Filing of Claim
Upon receipt of the notice of pending bulk transfer, the tax collector's office will determine if there are any delinquent or due and payable unsecured property taxes against the property to be transferred. If taxes are due or delinquent, the office will file a claim for the amount of the county's lien with the person named in the notice to receive such claims or, in the absence of such a person, to the person required to send the notice. The office will estimate an amount for the current year if the assessor has not enrolled the assessment. The office will include estimated amounts for any tax liability that may accrue if escrow extends beyond January 1. The tax collector's office will file the demand with the transfer agent within 12 working days of the original notice date.