Does tagging merchandise with a buyer's name and holding it for later pickup transfer possession for California sales-tax purposes?

Plain-English summary

A customer signed a binding conditional-sale contract after credit and payment terms were settled. The retailer then tagged the specific merchandise with the customer's name and held it until the customer requested delivery or came to pick it up.

The Board concluded that this did not transfer possession to the customer. Tagging and reserving the goods amounted to "identification" under the Uniform Commercial Code, but identification was not the same as delivering possession.

The letter also rejected constructive possession: the seller had not transferred the goods to the buyer or to anyone else on the buyer's behalf.

What this means for you

Retailers holding sold goods for pickup

A binding contract and customer-specific tag do not necessarily mean possession has transferred. Actual delivery—or facts establishing constructive possession—still matters.

Installment and conditional-sale sellers

Separate contract formation, identification of goods, and transfer of possession in your records. They can occur at different times and have different tax consequences.

Accountants and tax professionals

Do not infer delivery merely because title is retained under a conditional-sale contract or inventory is earmarked for a customer. Analyze who physically or constructively possesses the property.

Common questions

Q: Did the binding contract itself transfer possession?
A: No. The Board accepted that the contract bound the parties but still found no transfer of possession.

Q: What did tagging the goods accomplish?
A: It identified the specific goods to the contract under the Uniform Commercial Code.

Q: Why was there no constructive possession?
A: The seller had not transferred possession to anyone; the goods remained held by the retailer for later delivery or pickup.

Q: Does this decide when title passed?
A: No. The letter focuses on possession and says the contracts contained title-retention clauses making them conditional sales contracts.

Citations and references

• Uniform Commercial Code identification-of-goods concept (the letter gives no section number)
• Written contracts for two retail installment accounts and Mr. Putnam's referral — contracts and separate referral record not reproduced in the official PDF

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 200.0220
• Original supporting opinion: 200.0220 PDF

Original ruling text

200.0220

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

August 14, 1967

REDACTED TEXT

Attention:

REDACTED TEXT

Gentlemen:
At the direction of Mr. Putnam, the written contracts for retail installment accounts for REDACTED TEXT and REDACTED TEXT have been subjected to a specific review. As you stated, the inclusion of their terms in a contract for specific merchandise would make those transactions conditional sales contracts because of the title retention clause each contains. As we understand the presented situation, the customer makes a contract of conditional sale pursuant to these documents by signing one of them after his credit and the payment terms are settled. It is the agreement that the specific goods conditionally sold are tagged with the customer’s name and are to be held, pursuant to the agreement, until the customer later requests delivery to him at a specific place or comes to the store to pick them up. It is our opinion that although the contracts are binding upon the parties, there has been no transfer of possession to the conditional vendee. The tagging and reservation would constitute “identification” of the goods, as that term is used in the Uniform Commercial Code, but identification is not equivalent with a transfer of possession. Nor can we find any constructive possession by the buyer when there has been no transfer of possession by the seller to anyone. Very truly yours, Philip R. Dougherty Tax Counsel PRD:cb