Did an insurer's in-lieu tax exemption extend to independent insurance agents and adjusters buying business property?

Plain-English summary

Counsel concluded that the California Constitution's insurer in-lieu tax did not create a second layer of use-tax protection for private or individual insurance adjusters or agents. Independent agents and adjusters therefore remained subject to use tax on tangible personal property they bought for their own businesses.

The memorandum distinguished property used by an insurance company's employee while performing employee duties. On those facts, the insurer protection could apply.

The source is brief and relies on a March 4, 1958 letter for the underlying reasoning; that earlier letter is not reproduced in the official PDF.

Common questions

Did working in the insurance industry create the exemption?

No. The memorandum turned on whether the user was an independent business or an insurer's employee performing employment duties.

Does the PDF reproduce the 1958 analysis?

No. It identifies the earlier letter but does not include it.

Citations and references

• Former California Constitution article XIII, section 14-4/5 (insurer in-lieu tax, as cited)
• March 4, 1958 tax-counsel letter (referenced but not reproduced)

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/135-0140.pdf

Original ruling text

135.0140
State of California

Board of Equalization

Memorandum
To:

Out-of-State – Auditing (JDD)

From:

Tax Counsel (JHM)

Subject:

Banks and Insurance Companies

Date:

June 21, 1967

Your letter of December 1, 1966 to Tax Counsel Richard H. Ochsner, has been referred to me for consideration and reply. After further consideration, we have concluded that the reasoning set forth in my letter dated March 4, 1958 to [C] should be followed. In other words, it is our position that Article XIII, § 14-4/5 of the California Constitution does not grant a second level exemption from use tax to private or individual adjusters or insurance agents. However, the exemption does apply if tangible personal property is used by an employee of an insurance company in the performance of his duties as an employee. JHM:mm [lb]