Were import duties and consular or brokerage fees included in California sales price for purchases from foreign suppliers?

Plain-English summary

California included consular and brokerage fees in sales price when they were merely part of the foreign seller's cost of doing business. If the seller instead obtained those services as the buyer's agent and contractually bound the buyer to the third-party providers, the fees were not part of sales price.

Import duties depended on consignee status. If the seller was consignee when the goods entered the United States, the duties were imposed on the seller and reimbursement increased the purchase price. If the buyer was consignee, the duties were legally imposed on the buyer, and reimbursement for the seller's payment on the buyer's behalf was not purchase price.

Common questions

Were seller-incurred brokerage fees included in sales price?

Yes.

What if the seller acted as the buyer's agent?

The fees were excluded if the buyer was contractually bound to the third parties.

Who determined the treatment of import duties?

The consignee on whom federal law imposed the duties.

Citations and references

• California Revenue and Taxation Code section 6011
• 19 U.S.C. sections 1001 and 1483
• Duty Act of April 27, 1816, chapter 107 (identified in the quoted case passage)
• Meredith v. United States, 38 U.S. 486, 493 (1839)
• Tax department's January 26, 1954 letter — Canadian-purchase facts and question described; full letter not reproduced in the official PDF
• Canadian-supplier invoices separately stating import duties and consular and brokerage fees, possible seller agency, third-party service contracts, consignee status, entry into the United States, seller payment, and buyer reimbursement — facts and alternatives described; underlying invoices, purchase agreements, agency authorizations, service contracts, customs entries, bills of lading, duty records, and payment records not reproduced in the official PDF
• Meredith's quoted reference to unspecified "various acts of Congress" — no titles or citations supplied in the official PDF
• Possible later use-tax returns, audits, assessments, refund claims, appeals, or transaction outcomes after the advice — 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/235-0060.pdf

Original ruling text

STATE OF CALIFORNIA
STATE BOARD OF EQUALIZATION

235.0060
March 16, 1954

REDACTED TEXT

Your letter of January 26
Account No. REDACTED TEXT

Attention:

Tax Department
REDACTED TEXT
Supervisor, Sales and Use Tax Section

Gentlemen:
You inquire concerning the measure of use tax upon your purchases from Canadian suppliers. The invoices rendered separately state import duties, consular and brokerage fees. The measure of the use tax is the “sales price”, which is defined in Section 6011 of the Revenue and Taxation Code as “the total amount for which tangible personal property is sold … without any deduction on account of … labor or service cost, interest charged, losses, or any other expenses.” It is our opinion that consular and brokerage fees are merely part of the seller's expenses of doing business and therefore included in the measure of tax. However, if he obtains such services as your agent and binds you contractually to the third parties for the payment of such fees, then they are not included in the measure of tax. As to the import duties, Section 1001 of Title 19 of the United States Code states “There shall be levied, collected and paid upon all articles when imported from any foreign country into the United States … the rates of duty which are prescribed.” In Meredith v. United States, 38 U.S. 486 (1839), the problem presented is whether personal liability for import duties was imposed upon the importer. The Court, per Mr. Justice Story, stated (at p. 493): “It appears to us clear upon principle, as well as upon the obvious import of the provisions of the various acts of Congress on this subject, that the duties due upon all goods imported institute [sic] a personal debt due to the United States from the importer …. The language of the Duty Act of the 27th of April, 1816. ch. 107, under which the present importations were made, declares that 'there

March 16, 1954
235.0060
shall be levied, collected, and paid,' the several duties prescribed by the act on goods imported into the United States.” Section 1483 of Title 19 of the United States Code states, “For the purposes of this subtitle, all merchandise imported into the United States shall be held to be the property of the person to whom the same is consigned.” Accordingly, it is seen that import duties are legally imposed upon the consignee. If the seller is the consignee at the time the goods enter the United States, the duties are legally imposed upon him and his charging you for such duties is merely an increase in the purchase price to reimburse himself for an expense of doing business. If you are the consignee at the time the goods enter the United States, the duty is legally imposed upon you and the seller's payment of such amount will be regarded as made on your behalf and your reimbursement of him for that amount will not be regarded as payment on the purchase price of the goods. Yours very truly, Bill Holden Assistant Counsel BH:ja cc:

New York