Were California sales to an Oregon-chartered credit union exempt like sales to a federal credit union?

Plain-English summary

Sales to federal credit unions were exempt because federal credit unions were instrumentalities of the federal government under section 6381 and Regulation 1614(a)(4). That federal exemption did not extend by analogy to credit unions chartered by another state.

The letter also clarified a separate point about Revenue and Taxation Code section 6005. Other states themselves were not included in the definition of “person,” which could affect whether an entity making a sale was a seller or retailer. But the purchaser's status as a “person” was irrelevant to whether a California retailer's sale was taxable.

Because the seller delivered property in California to customers of the Oregon-chartered credit unions, the sales were treated as California sales and were taxable absent a specific exemption.

Common questions

Were state-chartered credit unions treated as state governments?

No. The opinion did not treat them as instrumentalities entitled to the federal credit-union exemption.

Why did the definition of “person” not exempt the purchase?

That definition mattered to whether the party making a sale was a seller or retailer, not whether the buyer was exempt.

Citations and references

• California Revenue and Taxation Code sections 6005, 6007, 6014, 6015, and 6051 (person, seller, retailer, and retail sale, as cited)
• California Revenue and Taxation Code section 6381 (federal instrumentality exemption, as cited)
• California Sales and Use Tax Regulation 1614(a)(4) (federal credit unions and other instrumentalities, 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/135-0322.pdf

Original ruling text

135.0322
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
Telephone: (916) 324-2655
FAX: (916) 323-3387

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

December 14, 1994

GRAY DAVIS
Controller, Sacramento

BURTON W. OLIVER
Executive Director

Ms. REDACTED TEXT
No Permit
Dear Ms. REDACTED TEXT:

This is in response to your letter dated October 20, 1994, in which you state that your understanding is that sales to federal credit unions are tax exempt and that sales to state-chartered credit unions are not tax exempt. Further, you have been advised by an Oregon chartered credit union that they are under the same tax exemption status as that provided to the federal credit unions. You called the Board of Equalization district office and state that you were advised that other states are not included in the definition of a “person,” but the gentlemen to whom you talked was unclear as to whether sales to sister state-chartered credit unions are classified as a part of the state government and therefore tax exempt. Section 6051 of the Revenue and Taxation Code imposes the sales tax on retailers for the privilege of selling tangible personal property at retail. The measure of tax is based on gross receipts from the retail sales in this state of tangible personal property. Revenue and Taxation Code section 6015 provides in pertinent part that a retailer includes every seller who makes any retail sale or sales of tangible personal property. Section 6014 provides that the term “seller” includes every person engaged in the business of selling tangible personal property of a kind the gross receipts from the retail sale of which are required to be included in the measure of sales tax. Section 6007, in part, provides that retail sale means a sale for any purpose other than resale in the regular course of business in the form of tangible personal property. Revenue and Taxation Code section 6005 defines person to include: “any individual, firm, co-partnership, joint venture, association, social club, fraternal organization, corporation, estate, trust, business trust, receiver, assignee for the benefit of creditors, trustee, trustee in bankruptcy, syndicate, the United States, this State, any county, city and county, municipality, district, or other political subdivision of the state, or any other group or combination acting as a unit.” Sales to the Federal government and its instrumentalities are exempt from sales tax. Rev. & Tax. Code § 6381. Federal credit unions are instrumentalities of the Federal government, along with other federally-chartered financial institutions, such as federal land banks, federal reserve

Ms. REDACTED TEXT

-2-

December 14, 1994
135.0322

banks, and federal home loan banks. Sales and Use Tax Regulation 1614(a)(4). Therefore, your understanding that sales to federal credit unions are exempt is correct. However, the use of the federal exemption for sales to state-chartered credit unions is not provided for under the law and that exemption cannot be extended by analogy to include state-chartered credit unions. The term “person” does not include other states. To that extent, the information you received is correct. However, the sales tax applies when a retailer makes a retail sale that is not exempt. If the party making the sale is not a person under section 6005, it will also not be a seller under section 6014 or a retailer under section 6015. That is, if the party making the sale is not a person under section 6005, it will not be a retailer under section 6015, and sales tax will not apply. Whether the purchaser is a person under section 6005 is irrelevant to the analysis. Assuming your sales occur in California, absent an exemption they are taxable. Sales are not taxable if they are sales of tangible personal property which are made out of state and such personal property will not be used in California. Thus, your sales to Oregon chartered credit unions are taxable provided they are made in this state. Our understanding is that sales in question are made in California (the property delivered by you to the purchaser's customers in California). Such sales are subject to sales tax. The answers contained herein are general in nature. If you have questions concerning a particular contract or sale, please feel free to write again. If we receive detailed information about a contract or sale, we can give more specific advice. Yours very truly,

Anthony I. Picciano
Staff Counsel
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Oakland District Administrator