Rev. & Tax. Code, § 38501

The department, whenever it deems it necessary to ensure compliance with this part, may require any person subject thereto, to place with it such security as the department may determine. Any security in the form of cash, government bonds, or insured deposits in banks or savings and loan institutions shall be held by the department in trust to be used solely in the manner provided by this section and Section 38565. The amount of the security shall be fixed by the department but, except as noted below, shall not be greater than twice the estimated average liability of persons filing returns for quarterly periods or three times the estimated average liability of persons required to file returns for monthly periods, determined in such manner as the department deems proper, or ten thousand dollars ($10,000), whichever amount is the lesser. The limitations herein provided apply regardless of the type of security placed with the department. The amount of the security may be increased or decreased by the department subject to the limitations herein provided. The department may sell the security at public auction if it becomes necessary to do so in order to recover any tax or any amount required to be collected, interest, or penalty due. Notice of the sale may be served upon the person who placed the security in the manner prescribed for service of a notice of a deficiency determination. Security in the form of a bearer bond issued by the United States or the State of California which has a prevailing market price may, however, be sold by the department at private sale at a price not lower than the prevailing market price thereof. Upon any sale any surplus above the amounts due shall be returned to the person who placed the security.