Did regularly selling at California trade shows require an out-of-state retailer to collect use tax on its California mail-order sales?

Plain-English summary

An out-of-state partnership sold cross-stitch products at five to nine California trade shows each year. It paid sales tax on show sales but did not collect tax on mail-order sales to California residents.

The appeals recommendation concluded that regularly entering California to sell at the shows supplied sufficient physical presence to make the partnership a retailer engaged in business in the state under the law then in effect. It therefore had to collect use tax on its California mail-order sales.

The partnership's lack of knowledge did not excuse interest. Section 6482 required interest from the tax due date until payment, and staff found no applicable exception.

Common questions

Did the retailer need a permanent California office?

No. Its regular trade-show selling activity was sufficient under the historical analysis.

Did the collection duty cover mail orders unrelated to a particular show sale?

Yes, on the facts reviewed.

Was ignorance of the duty enough to remove interest?

No.

Was this a precedential Board decision?

No. It was a staff Decision and Recommendation in a specific petition.

Citations and references

• California Revenue and Taxation Code section 6203(b) — retailer engaged in business definition applied
• California Revenue and Taxation Code section 6482 — mandatory interest discussed
• Quill Corp. v. North Dakota (1992) 504 U.S. 298 — historical physical-presence rule cited in the source as 112 S. Ct. 1904
• National Geographic Society v. State Board of Equalization (1977) 430 U.S. 551 — representative presence cited
• General Trading Co. v. State Tax Commission (1944) 322 U.S. 335 — traveling-salesperson collection duty 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/175-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/175-0012.pdf

Original ruling text

STATE OF CALIFORNIA

175.0012

BOARD OF EQUALIZATION
BUSINESS TAXES APPEALS REVIEW SECTION

In the Matter of the Petition
for Redetermination Under the
Sales And Use Tax Law of:
P--- T--- & F--- F--Petitioners

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DECISION AND RECOMMENDATION

No. SS -- XX-XXXXXX-010

The Appeals conference in the above-referenced matter was held by Staff Counsel Michele F. Hicks on October 18, 1995 in Sacramento, California.

Appearing for Petitioners:

N--- S--Production Engineer

Appearing for the
Sales and Use Tax Department

Jack Warner
District Principal Auditor

Type of Business:

Manufacturer, distributor and
retailer of cross stitch
equipment, tools and
accessories

Protested Item

Item

State, Local
and County

A. Unreported Mail Order Sales

$77,761

P--- T--- & F--- F--SS -- XX-XXXXXX-010

-2-

October 25, 1995
175.0012

Petitioners’ Contentions
1.
Petitioners do not have sufficient contact with the State of California to require collection of the use tax on mail order sales. 2.

Petitioners should not have to pay interest on the assessment. Summary

During the audit period, petitioners operated as a partnership, dba “T---’s T---”, which manufactured, distributed, and retailed cross stitch equipment, tools, and accessories. Petitioners’ business is located in Washington. “During the audit period, petitioners attended five to nine trade shows per year in California where they sold their goods. Petitioners reported and paid sales tax on the sales made at these trade shows. Petitioners also sold goods to California residents by mail order and did not collect tax. The audit staff assessed tax on these sales. Petitioners agree that tax is due on sales made in California at the trade shows, but contend that they should not have to collect tax on their mail order sales to California residents. Analysis and Conclusions Revenue and Taxation Code Section 6203 provides that every “retailer” engaged in business in this state” who sells tangible personal property for storage, use, or other consumption in this state, shall collect use tax from the purchaser. Section 6203(b) defines a “retailer engaged in business in this state” as: “Any retailer having any representative, agent, salesperson, canvasser, independent contractor, or solicitor operating in this state under the authority of the retailer or its subsidiary for the purpose of selling, delivering, installing, assembling, or the taking of orders for any tangible personal property.” (Underlined words added to statute in Stats. 1992, Ch. 902, operative January 1, 1993.) In order for a retailer to be considered engaged in business in this state, the retailer must have a least a minimal physical presence in this state. (Quill Corp. v. North Dakota (1992) 112 S. Ct. 1904.) Even if a company does not maintain any place of business in California, it is a retailer doing business in California if it sends salespeople or other representatives to this state to promote or sell it s products. (National Geographic Society v. State Board of Equalization (1977) 430 U.S. 551; General Trading Co. v. State Tax Commission (1943) 322 U.S. 335.)

P--- T--- & F--- F--SS -- XX-XXXXXX-010

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October 25, 1995
175.0012

In the present case, petitioners regularly came to trade shows in California to sell their products. This is sufficient presence in California to make them a “retailer engaged in business in California.” Therefore, they must collect the tax on their mail order sales to California residents. Petitioners contend that they did not know they were liable for the tax on their mail order sales and, therefore, they should not have to pay interest accrued prior to the Notice of Determination. Revenue and Taxation Code Section 6482 states that the amount of the determination “shall bear interest” from the date the tax becomes due until it is paid. There is no provision which excuses petitioners from payment of interest under the circumstances of this case. Recommendation We recommend that this matter be redetermined without adjustment.

MICHELE F. HICKS, STAFF COUNSEL

October 25, 1995
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Date