FTB Tax Holds on ABC Licenses During Escrow
How tax liens can block a liquor license transfer and what escrow companies do about it
Key Point: The California Franchise Tax Board can place a hold on an ABC license that prevents transfer until tax liability is resolved. Escrow companies must verify no hold exists before closing.
01. How FTB Places a Hold
The Franchise Tax Board monitors ABC’s daily reports of pending license transfers. If the current license holder owes state income tax, the FTB can place a hold on the license. This hold prevents ABC from approving the transfer until the tax debt is paid or resolved. The hold can appear at any point during the escrow period, even after the application has been filed. At Secured Trust Escrow, we verify FTB status at multiple points during the transfer process.
02. What the Escrow Company Does
An experienced escrow company checks FTB status before opening the account and again before disbursement. If a hold appears during escrow, the escrow officer notifies both parties immediately. The escrow instructions should address how to handle a mid-escrow hold. Typically, the parties agree to either pay the tax liability from the escrow funds or wait for the seller to resolve the debt independently. The escrow company cannot release funds to the seller while a hold is active.
03. Protecting the Buyer
Buyers are protected because the escrow company will not release funds until ABC approves the transfer. If a hold blocks approval, the money stays in escrow. The buyer does not lose their deposit. The escrow instructions should specify a deadline by which the seller must resolve the hold. If the seller cannot clear the hold by the deadline, the buyer typically has the right to cancel the purchase and receive their funds back.
04. Why This Matters in Los Angeles
Los Angeles has one of the highest concentrations of ABC license transfers in California. Restaurant sales, bar acquisitions, and hotel transactions happen daily. Many of these involve sellers who have operated for years and may have unresolved tax issues. A buyer who does not verify FTB status before entering escrow risks months of delay. An escrow company that understands this landscape can save the transaction.
ABC License Escrow with Tax Verification
Secured Trust Escrow verifies FTB and other agency holds before and during every ABC license transfer.
About the Author: This guide was prepared by the escrow officers at Secured Trust Escrow, a California DFPI-licensed escrow company with experience in business holding escrow, relocation escrow, liquor license transfers, and mergers and acquisitions throughout Los Angeles, Torrance, and surrounding areas.
Legal and Regulatory Disclaimer: This article provides educational information about escrow services. It does not constitute legal, tax, or investment advice. Escrow transactions involve complex legal and financial consequences that vary by transaction type and individual circumstances. Parties should consult with qualified attorneys and tax professionals regarding their particular transactions. California regulations and market conditions change periodically. Last reviewed: July 2026.
