Is a boat dealer's promotional loan of boats to a California State University associated-students program exempt from use tax?

Plain-English summary

A retail boat dealership proposed lending two resale-inventory boats to Associated Students at San Diego State University's Mission Bay Aquatic Center. The boats would be used to teach boating safety and water-skiing courses.

The Board concluded that the loan was not exempt. Revenue and Taxation Code section 6404(a) covered loans of tangible personal property to school districts, but California State University was not a school district for that provision.

Section 6404(b)'s narrower university exemption also did not apply. It covered motor vehicles loaned directly to the University of California or California State University for exclusive use in an approved driver-education teacher-preparation certification program. The proposed property was boats, not motor vehicles, and the intended borrower was Associated Students rather than the university itself.

What this means for you

Retailers lending inventory to schools

Identify the legal borrower, the type of institution, the property, and the program. A broadly educational purpose does not substitute for the statute's specific requirements.

Boat and equipment dealers

The university provision discussed here was limited to motor vehicles used in a qualifying driver-education teacher program. It did not extend to boats used for boating-safety or water-skiing instruction.

University-affiliated organizations

An associated-students organization was not treated as the university itself in this letter. The identity of the recipient independently defeated the claimed exemption.

Common questions

Q: Was San Diego State University treated as a school district?
A: No. The letter says California State University operates as a public trust and is not a school district for section 6404(a).

Q: Did the educational use make the boat loan exempt?
A: No. The school-district provision and the narrower university provision each imposed requirements the proposed loan did not satisfy.

Q: Why did section 6404(b) not apply?
A: The boats were not motor vehicles for the specified driver-education teacher program, and they would be loaned to Associated Students rather than directly to the university.

Q: Did the Board decide the tax treatment of a qualifying motor-vehicle loan?
A: No. It described the statutory exemption but concluded the proposed boats and borrower fell outside it.

Citations and references

• California Revenue and Taxation Code § 6404(a)-(b)
• California Sales and Use Tax Regulation 1669(d)
• California Education Code § 66600 et seq.
• Retail boat dealership's April 4, 1994 letter — proposed the two-boat loan; request letter not reproduced in the official PDF
• Copy to the San Bernardino District Administrator — copy recipient listed; no separate transmittal record supplied in the official PDF

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 210.0630
• Original supporting opinion: 210.0630 PDF

Original ruling text

210.0630
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-2642

MEMBER
First District
BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

June 7, 1994

GRAY DAVIS
Controller, Sacramento

BURTON W. OLIVER
Executive Director

Mr. REDACTED TEXT
Re:

REDACTED TEXT

Dear Mr. REDACTED TEXT:
This is in response to your letter dated April 4, 1994. You are a retail boat dealership. As a promotional venture, you want to loan two boats (presumably from your resale inventory) to Associated Students (Associated), Mission Bay Aquatic Center, San Diego State University, San Diego. The boats would be used by Associated to teach boating safety and water skiing courses. You ask whether this loan to Associated would be exempt from Taxation under Regulation 1669(d). Subdivision (a) of Revenue and Taxation Code section 6404 states: "The loan by any retailer of any tangible personal property to any school district for an educational program conducted by the district is exempt from the use tax." (This language is repeated in subdivision (d) of Regulation 1669.) This provision applies only to loans to school districts. Another provision of section 6404, subdivision (b), provides an exemption for certain specific loans to the University of California or to the California State University: "The loan by any retailer of any motor vehicle to the University of California or to the California State University for the exclusive use in an approved driver education teacher preparation certification program conducted by the university or the state university is exempt from the use tax." If a loan of property to California State University could qualify for the subsection (a) exemption, there would be no need for the more narrow exemption in subdivision (b) which applies only to the loans of vehicles. That is, the California State University is not a school district as that term is used in subdivision (a) of section 6404. (See also Educ. Code § 66600, et seq. (California State University operates as a public trust).) Therefore, the tax exemption available for loans of any tangible personal property to any school district, under section 6404(a), is not available for the

Mr. Peter G. Maly

-2-

June 7, 1994
210.0630

proposed loan of two boats.
While subsection (b) of Revenue and Taxation Code section 6404 provides exemption for loans to California State University at San Diego, qualifying loans of property are limited to loans of motor vehicles, and do not include boats. Furthermore, you plan to loan property to Associated rather than the California Sate University at San Diego. Thus, even if your loan were to be vehicles, that loan would not qualify for the exemption provided by subdivision (b) of section 6404. If you have further questions, feel free to write again. Sincerely, Pat Hildebrand Staff Counsel PH:cl correct.ltr

cc:

San Bernardino District Administrator