Which promotional assignments of new vehicles qualified as demonstration or display, and which were taxable transportation or accommodation use?

Plain-English summary

California treated short VIP loans designed to draw attention to a vehicle, race-track official or pace cars where display predominated, assignments to automotive editors, and demonstrations to employees of related divisions as nontaxable demonstration or display.

It treated replacement cars for dissatisfied owners awaiting repairs as taxable accommodation use. Vehicle assignments to motion-picture or television studios, ski lodges, and professional or college sports teams were also taxable because the use looked more like transportation than demonstration.

The memorandum emphasized that the line was a matter of degree and depended on which function predominated.

Common questions

Were short VIP promotional loans treated as demonstration?

Yes.

What about official or pace cars at race tracks?

Nontaxable where display predominated.

Which assignments were treated as taxable transportation or accommodation?

Repair-customer, studio, ski-lodge, and sports-team assignments.

Citations and references

• July 20, 1966 memorandum — enumerated the eight promotional vehicle-assignment patterns; described as attached but not separately reproduced in the official PDF
• July 28, 1966 Out-of-State Auditing memorandum — transmitted the July 20 memorandum for review; not separately reproduced in the official PDF
• Review by Mr. Denny, Mr. Dickson, and the August 23 memorandum's author — review stated; no separate review records supplied in the official PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/215-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/215-0400.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Out of State – Auditing

From:

Tax Counsel (EHS) – Headuqarter

Subject:

X---------------

215.0400

Date:

August 23, 1966

Mr. Denny, Mr. Dickson, and myself have reviewed Mr. X----------- memo to you of July 20, 1966, transmitted with your memo of July 28. The question of whether the various transactions enumerated in Mr. X------------ memo can be considered as falling within the demonstration and display exclusion is a matter of degree. It is our combined opinion that the transactions should be clarified as follows: 1.

Short term loan of passenger vehicles to VIP’s such as movie and sports personalities during their visits to California. Not taxable. In the past, we have regarded similar uses of vehicles as within the demonstration and display exclusion.

2.

Cars assigned to race tracks for display and use as an official car or pace car. Not taxable. The element of display seems to be predominant here.

3.

Cars assigned to X-------- owners who are dissatisfied with their purchase. Taxable. This we believe is clearly a use beyond demonstration or display. The owner has already bought a new car and is not likely to be considering another new car so soon. This seems to be purely an accommodation to car owners with providing them with transportation while their cars are being repaired.

4.

Cars assigned to automotive editors of newspapers and magazines. Not taxable. This again appears to be predominantly a demonstration or display use. This is, perhaps, closer than some of the others, but as we have said, it is a matter of degree.

5.

Assignment to Motion Picture and Television Studios.
Taxable. This we believe falls on the taxable side of the line. There seems to be a use of the cars involved here that cannot be sufficiently identified with demonstration or display.

6.

Cars assigned to Ski Lodges for display and use.
Taxable. This appears to be more of a transportation service than demonstration.

7.

Cars assigned to progessional and college sports teams for display before, during and after games. Taxable. Again this use appears to be primarily to provide transportation.

8.

Assignment of cars to other divisions of X------------ such as: X--------------- etc. for demonstation to employees of these divisions. Nontaxable. We agree that this use is compatible with a reasonable meaning of demonstration or display.

EHS:fb
Attach./Mr. X---------- memo, 7-20-66