Should California issue a seller's permit or a use-tax registration certificate to an out-of-state business with no in-state location or inventory?

Plain-English summary

An out-of-state bank leased equipment to California customers but apparently had no California place of business or stock of goods. Legal staff believed a Certificate of Registration—Use Tax was the appropriate document for such a business, rather than a seller's permit tied to operating a place of business.

Compliance staff sometimes issued seller's permits because out-of-state businesses requested them to satisfy the historical resale-certificate form in Regulation 1668. The memorandum said voluntarily accepting that permit caused no apparent harm and did not recommend restricting the existing administrative practice.

The author also noted that sales tax could apply to an out-of-state retailer without a California place of business—and therefore without a permit requirement—when it sold the kind of property it ordinarily sold and that property already was located in California.

Common questions

Which document did legal staff prefer?

A use-tax registration certificate.

Did the memo prohibit issuing a seller's permit?

No.

Could sales tax apply even without a California place of business?

Yes, in the California-inventory example the memo gave.

Citations and references

• California Code of Regulations, title 18, section 1668 — historical resale-certificate wording discussed

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/175-0153.pdf

Original ruling text

State of California

Board of Equalization

175.0153

Memorandum
To:

Out-of-State Compliance (ABG)

From:

Headquarters – Legal (PRD)

Subject:

REDACTED TEXT

Date:

May 6, 1976

Presumably the out-of-state bank’s leases or general equipment to ordinary California lessees will be subject to a use tax imposed upon the lessee and measured by rental payments if the bank has acquired the equipment ex-tax. Insofar as it leases mobile transportation equipment to California lessees, no tax is collectable. But whether or not the use tax is collectable by the bank the bank appears to have no in-state place or business. I maintain that a certificate of registration-use tax is appropriate for a business with no in-state place of business (or stock of goods) and that it is inappropriate to issue a seller’s permit for an out-of-state business place. How can California permit a person to operate a business place in another jurisdiction and require him to conspicuously display that permit there? Your staff has regarded that view as inapposite because some out-of-state businesses specifically request seller’s permits in the desire to comply in the simplest possible manner with the requirements of the wording of the resale certificate form set forth in Regulation 1668, which refers to sales in California rather than places of business in California. Admittedly, if the staff issues and the out-of-state business voluntarily accepts a seller’s permit, no harmful consequences are apparent to me. So while I recommend a certificate of registration-use tax for the REDACTED TEXT in this situation, I cannot recommend that your accustomed administrative procedures be necessarily limited to the issuance of a certificate in this situation. Insofar as sales tax might be applicable to out-of-state businesses, I maintain also that the sales tax can apply to a person who has no in-state place of business and is consequently not required to have a seller’s permit. For instance, sales tax applies to a retailer who has no place of business in California but who sells property which is the same kind of property he ordinarily sells and which property is already situate in California.

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