BILL ANALYSIS Ó
SB 12
Page 1
SENATE THIRD READING
SB 12 (Corbett)
As Amended August 7, 2012
Majority vote
SENATE VOTE :34-0
JUDICIARY 7-0 REVENUE & TAXATION 5-1
-----------------------------------------------------------------
|Ayes:|Feuer, Atkins, Dickinson, |Ayes:|Perea, Beall, Cedillo, |
| |Huber, Monning, | |Fuentes, Gordon |
| |Wieckowski, | | |
| |Bonnie Lowenthal | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Harkey |
| | | | |
-----------------------------------------------------------------
SUMMARY : Revises and recasts selected provisions of the
California Bulk Sales law (Division 6 of the Commercial Code),
including limiting the application of escrow requirements,
primarily to transactions by wholesalers licensed under existing
alcohol and tobacco control laws. Specifically, this bill :
1)Defines "licensee" as a person who holds a wholesaler's
license under the Alcohol Beverage Control Act (Division 9 of
the Business and Professions Code), or who is licensed as a
wholesaler or distributor of cigarettes and tobacco products
under the Cigarette and Tobacco Products Licensing Act
(Chapter 3 of Division 8.6 of the Business and Professions
Code).
2)Recasts existing escrow and liability provisions in the Bulk
Sales law so that they apply to every bulk sale, as defined,
that includes inventory or equipment purchased or obtained
from a licensee.
3)Specifies procedures for disputed claims, and claims involving
escrow, including cases in which the cash deposited or agreed
to be deposited is not sufficient to cover claims filed with
the escrow agent. Limits these claims, as defined, to
specified persons having a right to payment from the seller,
including taxing entities, secured creditors, licensees (as
SB 12
Page 2
defined above), and employees having wage claims.
4)Establishes that these provisions shall apply to a bulk sale
if the date of the bulk sale agreement is on or after January
1, 2013.
EXISTING LAW , Division 6 of the Commercial Code (also known as
Uniform Commercial Code--Bulk Sales Act), governs bulk sales
transactions in the state. Among other things, the Bulk Sales
Act:
1)Applies to bulk sales transactions, except as otherwise
provided, if: a) the seller's principal business is the sale
of inventory from stock, including those who manufacture what
they sell, or that of a restaurant owner; and b) on the date
of the bulk sale agreement, the seller is located in this
state, or if not, the seller's executive office is in this
state.
2)Requires a buyer to an applicable bulk sale transaction to
provide a notice of the bulk sale that specifies, among other
things: a) the name and business address of both the seller
and the buyer; b) the location and general description of the
assets; c) the place and the anticipated date of the bulk
sale; and, d) whether or not the bulk sale is subject to
provisions relating to sales of $2 million or less, as
specified.
3)Requires buyers, at least 12 business days before the bulk
sale date, to provide notice of the bulk sale by doing all of
the following:
a) Record the notice in the county recorder's office where
the assets are located and, if different, in the county in
which the seller is located;
b) Publish the notice at least once in a newspaper of
general circulation published in the judicial district
where the assets are located or, if different, in the
judicial district, in which the seller is located; and,
c) Deliver or send the notice by registered or certified
mail to the county tax collector in the county or counties
in which the tangible assets are located.
SB 12
Page 3
4)Provides that a buyer who fails to comply with provisions of
the Bulk Sales Act is liable for damages in the amount of the
claim, reduced by any amount that the claimant would not have
realized if the buyer had complied, subject to the good faith
exception and other specified limitations.
FISCAL EFFECT : None
COMMENTS : According to the author, California's bulk sales law
has largely outlived its usefulness for many creditors for whom
it was intended to protect, particularly in light of more modern
legal protections for creditors since enacted at the state and
federal levels. Proponents of the bill contend that, on
balance, the Bulk Sales law's purported benefits to creditors do
not appear to justify the obligations the law imposes on buyers.
As introduced, this bill, sponsored by the California
Commission on Uniform State Laws (Uniform Law Commission), would
have repealed the Bulk Sales law in its entirety. Instead,
after negotiations with multiple stakeholders, the bill now
revises certain sections of the Bulk Sales law to modestly
narrow its scope, particularly with respect to the applicability
of escrow and liability provisions.
As amended, the bill no longer relaxes notice requirements under
the Bulk Sales law; all current notice requirements will
continue to apply to all bulk sales transactions, including
recordation in the county recorder's office, publication in a
newspaper of general circulation, and notice by delivery or mail
to the county tax collector.
As amended, the bill preserves existing escrow and liability
provisions of the Bulk Sales law but limits their application to
distributors and wholesalers who are licensed either under the
Alcohol Beverage Control Act or the Cigarette and Tobacco
Products Licensing Act, rather than continuing to apply them to
all bulk sales transactions. By its own terms, this bill would
apply to a narrower set of bulk sale transactions than under
current law, and primarily in the sector of alcohol and tobacco
suppliers and retailers, where somewhat unique tax liabilities
and concerns about tax collection arguably justify a more
cautious approach rather than repeal.
According to the California Beer and Beverage Distributors
SB 12
Page 4
(CBBD) and the California Distributors Association (CDA), its
member distributors rely heavily on the protections of escrow
and notice under the current bulk sales law, which help them
secure their claims for accounts receivable from alcohol
retailers that they supply with inventory. CBBD notes that with
respect to distributors of alcohol products who are also
regulated by the Alcoholic Beverage Control Act, existing law
requires them to extend 30 days or more of credit to retail
licensees that inventory alcoholic beverages for resale,
generating accounts receivable that can range into the thousands
or tens of thousands of dollars. In addition, the distributors
note that, unlike some products, both alcohol and tobacco
products have excise taxes that must be paid prior to retail,
leaving the distributor liable for those taxes if the seller
absconds without paying. In response to these concerns, the
author has amended the bill to no longer repeal the Bulk Sales
law and allow licensed distributors to continue to avail
themselves under the escrow and notice provisions, as specified.
Finally, the bill provides that this act shall apply
prospectively to bulk sales where the date of the bulk sale
agreement is on or after January 1, 2013. Existing provisions
distinguishing between transactions occurring before or after
January 1, 1991 (the last time the Bulk Sales Act was amended)
are no longer necessary and are repealed by this bill.
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334
FN: 0004483