Did a California warehouse holding only exempt food inventory for resale make an out-of-state seller collect use tax on separate candy sales?

Plain-English summary

An out-of-state seller kept maple syrup in a Los Angeles warehouse. All sales from that inventory were for resale, and the memo described the stored products as exempt food. Candy sales to California consumers were shipped in interstate commerce from Vermont.

Staff nevertheless treated the company as a retailer with a California place of business. Under its historical section 6203 position, the local place of business did not need a connection to the transactions creating the use-tax collection duty.

The seller therefore had to register and collect use tax on candy sales to California consumers. The memo noted that a seller's permit could not be required merely because the California inventory consisted of exempt goods sold for resale.

Common questions

Did exempt food inventory create a California place of business?

Yes, under the memo.

Did the warehouse sales themselves need to be retail sales?

No. They were sales for resale.

Did the warehouse need to participate in the candy sales?

No.

Citations and references

• California Revenue and Taxation Code section 6203 — historical rule that the in-state business location need not relate to the consumer sale

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/175-0060.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Out-of-State – Compliance (DLF)

From:

Tax Counsel (PM)

Subject:

175.0060

May 19, 1965

This is in reply to your memo of April 30 concerning the question of whether the above company is required to register with the Board. Briefly, the company is engaged in the business of selling maple syrup, maple sugar and candy. It maintains an inventory of syrups in a Los Angeles warehouse, all sales from such inventory being sales for resale. Apparently all sales of candy are made in interstate commerce from Vermont. Under these circumstances, it is our opinion that the company is required to register with the Board and collect the use tax on sales of candy to California consumers. It has been our position that Section 6203 does not require a connection between the local place of business and the transactions which give rise to the liability for use tax. Accordingly, we do not believe it is material that only exempt food products are stored in the California warehouse (though a seller’s permit could not be required), or that the inventory items maintained in the warehouse are sold for resale. The company is nevertheless a “retailer” of candy with a place of business in this state.

PM:o’b

[1b]