Did a pet store owe sales tax on the full selling price of consigned pets, or only on its commission after deducting animal-care expenses?

Plain-English summary

A pet store sold pets at retail, including animals consigned by their owners.

Associate tax counsel said sales tax was measured by the store's full gross receipts. The store could not deduct the cost of the pets, materials, labor or services, losses, animal-keeping expenses, or other costs.

Under historical Ruling 39, a person possessing tangible personal property for sale to consumers was treated as the retailer. The store therefore had to report the entire receipt from each consigned-pet sale, not merely its commission.

Common questions

Could the store deduct the cost of keeping a pet until sale?

No. The letter included that expense among the nondeductible costs.

Was tax measured only by the consignment commission?

No. Counsel said commission-only reporting understated the taxable gross receipts.

Why was the store treated as the retailer?

It possessed the pets for the purpose of retail sale to consumers.

Citations and references

• California Sales and Use Tax Ruling 39 (historical, 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/185-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/185-0180.pdf

Original ruling text

185.0180

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

June 13, 1950

--- --- ----- --- ----- --- --Gentlemen:
This is in reply to your letter of May 25 with respect to the application of the State sales tax to your sales of pets. You are advised that the State sales tax will apply to your retail sale of pets, measured by your gross receipts from such sales. “Gross receipts” are defined in the Sales and Use Tax Law, in part, to mean the total amount of the sales price of the retail sale of retailers, without deduction on account of the cost of the property sold, the cost of materials used, labor or service cost, losses, or any other expense. Accordingly, you may not take a deduction in your sales and use tax return for the cost or expense of keeping a pet until it is sold. As indicated by Sales and Use Tax Ruling 39, copy enclosed, persons having possession of tangible personal property for the purpose of sale, are regarded as the retailers of the property to consumers, and tax applies to the receipts from such sales. Therefore, you are required to report and pay the tax with respect to your sales of pets which are consigned to you for sale by their owners. If you have been paying the tax measured by the amount of your commission on consignment sales, it would appear that you have erroneously computed the tax. We suggest that you consult a member of the staff of our district office, 215 Central Building, San Bernardino, California, as to recomputation of the tax. Very truly yours,

R. H. Hamlin
Associate Tax Counsel

RGH:HB
cc:

W. C. Shay