When did California's 1979 law begin applying sales and use tax to banks with different fiscal years?

Plain-English summary

AB 66 made banks subject to California sales and use tax for income years beginning on or after January 1, 1980. That meant the start date depended on each bank's fiscal year; the letter's example said a bank whose income year began July 1, 1980 became subject on that date.

From the first day of the applicable income year, a bank that qualified as a retailer owed sales tax on its nonexempt California retail sales. For sales tax, the taxable event was the sale in California.

Use tax depended on when the bank first stored, used, or otherwise consumed the property in California. The letter treated property as outside the transition if, before the bank's tax start date, it was shipped directly and consigned from an out-of-state supplier in interstate commerce with title passing upon delivery to the carrier. Property the bank had already received, stored, used, or consumed before its start date also was not subject under this transition.

Common questions

Did every bank begin paying on January 1, 1980?

No. The trigger was the first bank income year beginning on or after that date, so a fiscal-year bank could begin later.

What date controlled use tax on property in transit?

The first California storage or use generally controlled, subject to the letter's stated transition treatment for qualifying out-of-state shipments begun before the bank's start date.

Citations and references

• 1979 California Statutes chapter 1150 (AB 66), amending California Revenue and Taxation Code section 23182 (bank sales-and-use-tax transition, as cited)
• California Revenue and Taxation Code section 23042 (income year, as cited)
• California Revenue and Taxation Code sections 6006, 6015, 6019, and 6051 (sale, retailer, and sales tax, as cited)
• California Revenue and Taxation Code section 6201 (use tax and first California use, as cited)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/135-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/135-0130.pdf

Original ruling text

135.0130
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
916-445-3723
December 5, 1979
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Attention:

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Gentlemen:
In your letter of November 20, 1979, you ask that we advise you of the transition rules concerning the application of sales and use tax to banks under Revenue and Taxation Code Section 23182 (all section references are to that code) as amended by AB 66 (Chapter 1150, Statutes 1979). Under AB 66 sales and use taxes are imposed upon banks with respect to all income years, as defined in Revenue and Taxation Code Section 23042, beginning on and after January 1, 1980. If its income year begins July 1, 1980, it is subject to sales and use taxes July 1, 1980. Section 6051 imposes the sales tax upon the gross receipts from the sale of tangible personal property in this state. Commencing with the first day of the bank’s fiscal year beginning on and after January 1, 1980, retail sales by banks that are retailers (as defined in Sections 6015 and 6019) are subject to the sales tax unless otherwise exempt. For purposes of the sales tax the taxable event is the sale (as defined in Section 6006) in this state. Section 6201 imposes the use tax on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer. The taxable event is the first storage or use of the property in California. If that occurs after the bank becomes subject to use tax, then the use tax applies. In some instances, such as when the property is in transit to the bank, it may be difficult or impossible to determine when that first use in California occurs and whether the use is before or after the bank becomes subject to the use tax. For this reason we shall consider the use tax does not apply if, prior to the time the bank becomes subject to use tax, the property is shipped from an out-of-state supplier directly to and consigned to the bank in interstate commerce with title to the property passing to the bank upon delivery by the supplier to the carrier at the out-of-

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December 5, 1979
135.0130

state point. Also the sue tax does not apply if the property is received by and stored, used, or otherwise consumed by the bank prior to the time the bank becomes subject to the use tax. If you have any further questions, please feel free to call me. Very truly yours, Gary J. Jugum Tax Counsel