Was the federal excise tax under Internal Revenue Code section 4051 included in the California sales- or use-tax measure?

Plain-English summary

Internal Revenue Code section 4051 imposed a federal tax on the first retail sale of covered property, generally including truck and trailer bodies and chassis and highway tractors. California classified that charge as a federal retail tax rather than a manufacturer's or importer's excise tax.

If the claimed federal excise tax was imposed under section 4051, it was excluded from gross receipts subject to California sales tax and from sales price subject to California use tax.

Common questions

Was the section 4051 tax included in California gross receipts?

No.

Did separate statement control the exclusion?

No. Regulation 1617 said a federal retail tax was excluded whether or not separately stated.

Did the opinion cover every federal excise tax?

No. Its conclusion depended on the charge being the section 4051 retail tax.

Citations and references

• Historical Internal Revenue Code sections 4051 and 4052
• California Revenue and Taxation Code sections 6011(c)(4) and 6012(c)(4)
• California Code of Regulations, title 18, Regulation 1617(a), (b)(1), and (b)(2)
• Return Review Section's December 30, 1993 memorandum — deduction facts and question described; full memorandum not reproduced in the official PDF
• X---'s Sales and Use Tax Return line 10(e), claimed $22,393 deduction comprising $12,643 DMV fees, $2,700 freight, and $7,050 federal excise tax, and IRS Form 8807 line 8 — amounts and form locations described; underlying return, Form 8807, invoices, fee, freight, and tax records not reproduced in the official PDF
• Source-printed text defects "relates t9" and "If the at issue" — preserved in the original text; the latter leaves the conclusion expressly conditional on the charge being an IRC section 4051 tax
• Possible return adjustment, audit, assessment, refund, appeal, or other outcome after the memorandum — no follow-up or final outcome 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/235-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/235-0040.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. R. M. Wall
Return Review Section – MIC:35

From:

Sukhwinder K. Dhanda, Staff Counsel
Legal Division – MIC:82

Subject:

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

235.0040

Date:

February 18, 1994

This is in response to your memorandum of December 30, 1993 in which you request our opinion as to the deductibility of a Federal Excise Tax (FET) from gross receipts. Apparently, X--------- claimed a $22,393.00 deduction on line 10(e) of the Sales and Use Tax Return for DMV fees ($12,643.00), Freight ($2,700.00) and FET ($7,050.00). The amount of the FET is derived from line 8 of IRS Form 8807, Certain Manufacturers and Retailers Excise Taxes. Your inquiry relates t9 only the deductibility of the FET. The FET at issue is imposed pursuant to Internal Revenue Code (IRC) section 4051 which provides: "There is imposed on the first retail sale of the following articles (including in each case parts and accessories sold on or in connection therewith or with the sale thereof) a tax of 12 percent of the amount for which the article is so sold .... " Items subject to this tax include automobile truck chassis, automobile truck bodies, truck trailer and semitrailer chassis, and bodies and tractors of the kind used for highway transportation. IRC section 4052 defines a “first retail sale” as the “first sale, for a purpose other than for resale or leasing in a long-term lease, after production, manufacture, or importation.” Revenue and Taxation Code sections 6011(c)(4) and 6012(c)(4) provide an exclusion from the measure of tax for “the amount of any tax (not including, however, any manufacturers’ or importers’ excise tax) imposed by the United States upon or with respect to retail sales whether imposed upon the retailer or the consumer.” This exclusion from the measure of tax is explained in Regulation 1617, which states in relevant part:

“(a) Gross receipts subject to sales tax and the sale price subject to use tax do not include the amount of any federal tax imposed upon or with respect to retail sales whether imposed upon the retailer or upon the consumer and regardless of whether the amount of federal tax is stated to the consumer as a separate charge ….” “(b) (1) Except as stated in (b)(2) below gross receipts subject to sales tax and the sales price subject to use tax include the amount of any manufacturer’s or importers’ excise tax included in the prices of the property sold, even though the manufacturer or importer is also the retailer thereof, and it is immaterial whether or not the amount of such tax is stated as a separate charge.” If the at issue is a tax imposed under IRC section 4051, then it is a retail tax that comes within the Revenue and Taxation Code Sections 6011 (c)(4) and 6012 (c)(4) and is not included in the measure of the tax.

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