Did U.S. AID funding make a California vehicle sale to Nicaragua an exempt sale to the United States?

Plain-English summary

The vehicle sale was not exempt as a sale to the United States. AID reimbursed the purchase money, but the Government of Nicaragua was the purchaser.

Foreign-government freedom from purchaser use tax did not exempt the retailer's California sales tax. Delivery to the purchaser's representative in California also defeated interstate or foreign-commerce exemption, despite an intent to take the vehicle elsewhere.

Common questions

Did U.S. funding make the United States the purchaser?

No.

Did foreign-government status exempt the retailer's sale?

No, under the memorandum's analysis.

Where was delivery made?

In California to the purchaser's representative.

Citations and references

• California Revenue and Taxation Code section 6381 — federal-government sale exemption found inapplicable
• Former California Tax Service Annotations 1910.50, 1152.75, and 1434.50 — cited for U.S.-funded purchases, foreign-government use tax, and retailer sales tax
• Former Board Ruling 55(a)(2)(B) — California delivery rule applied to interstate and foreign commerce; source omits the closing parenthesis after the citation
• Los Angeles District Principal Auditor's September 5, 1969 memorandum requesting advice on the automobile sale — memorandum referenced but not reproduced in the official PDF
• April 1, 1969 vehicle and possible-tax invoices and money-order receipt marked for delivery of one jeep to the Nicaraguan Government — facts supplied; complete invoices, receipt, payment, title, registration, delivery, and accounting records not reproduced in the official PDF
• April 24, 1969 AID reimbursement and resulting refund request — facts supplied; reimbursement voucher, funding agreement, refund claim, tax return, and remittance records not reproduced in the official PDF
• Source-printed May 12, 1969 AID Mission to Nicaragua letter and August 28, 1969 letter to the Inglewood office — letters quoted in part but not reproduced as separate records in the official PDF
• Contract between a redacted international entity and the Government of Nicaragua financed by AID — contract referenced and quoted about but not reproduced in the official PDF
• Evidence of California delivery to the purchaser's representative and intended or actual transport outside California — conclusion supplied; complete delivery receipt, agency authority, shipping, export, customs, and destination records not reproduced in the official PDF
• Official Annotation 250.0080 restating the U.S.-funding, foreign-government purchaser, retailer-tax, and California-delivery conclusions — current annotation supplies no additional transaction, funding, agency, delivery, shipping, or refund record
• Possible later refund disposition, audit, assessment, appeal, vehicle transport, registration, or other agency action — 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/250-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/250-0080.pdf

Original ruling text

State of California

250.0080

Board of Equalization

Memorandum
To:

Los Angeles District–District Principal
Auditor (JTQ)

From:

Tax Counsel (GJJ) - Headquarters

Subject:

REDACTED TEXT

Date:

October 14, 1969

Nonpermittee

This is in reply to your memorandum of September 5, 1969, in which you request our advice as to whether a certain sale of an automobile by REDACTED TEXT, Inc., of Hawthorne, California, was a sale to the United States and, as such, exempt from tax by virtue of section 6381 of the Revenue and Taxation Code. It appears that on April 1, 1969, Hansen issued two invoices--one for the sale of a new Wagoneer and one for the amount of tax which would be due on the sale of the vehicle if the sale were subject to tax. The purchaser of the vehicle, as listed on the first invoice, was the REDACTED TEXT of the Government of Nicaragua. The invoiced amounts were paid by REDACTED TEXT & REDACTED TEXT, Inc.--the money order receipt being marked “for delivery of one jeep to Nicaraguan Government.” REDACTED TEXT was reimbursed for this expenditure (exclusive of the sales tax reimbursement) on April 24, 1969, by the Agency for International Development (AID). REDACTED TEXT now seeks a refund of the reimbursement it paid to Hansen. REDACTED TEXT has provided us with a copy of a letter dated may 12, 1969, from the Aid Mission to Nicaragua which states that: “The Wagoneer was purchased by REDACTED TEXT, Inc., as agents for the Government of Nicaragua and they will be reimbursed for all expenses by the United States Agency for International Development. This sale is funded by an agency of the United States Government and sales taxes cannot be paid.” Finally, REDACTED TEXT states in its letter to our Inglewood office of August 28, 1969, that: “REDACTED TEXT, serving as agents for the Government of Nicaragua, purchased this vehicle under the terms of a contract between REDACTED TEXT, International and the Government of Nicaragua which was financed by the United States Agency for International Development,…”

Los Angeles District – District
Principal Auditor (JTQ)

-2-

October 14, 1969
250.0080

Apparently REDACTED TEXT is unaware of the basis upon which we have imposed the tax. It is clear that REDACTED TEXT was reimbursed for its purchase by the United States. It is clear that the vehicle was sold to the Government of Nicaragua. Neither of these factors have a bearing on the application of the tax however. Where the United States merely furnishes funds with which a vendee makes a purchase, the sale is not to the United States and is not exempt (CTS Anno. 1910.50). While foreign governments are exempt from the payment of use tax (CTS Anno. 1152.75), where a sale is made to a foreign government, the tax applies since the sales tax is a tax upon the retailer and not upon the consumer (CTS Anno. 1434.50). Sales tax applies to sales of property which is sold and delivered to the purchaser or his representative in this state, whether or not the disclosed or undisclosed intention of the purchaser is to transport the property outside the state, and whether or not the property is actually so transported (ruling 55(a)(2)(B). Since delivery of the vehicle in question was made in this state to a representative of the purchaser, the sale did not qualify as an exempt sale in interstate or foreign commerce.

GJJ:ph