Was there one tax or two when a dealer's resale-inventory car was auctioned by educational television and the station kept the proceeds?

Plain-English summary

A dealer supplied a resale-inventory automobile to an educational television auction. The station kept the proceeds, but the car was returnable if unsold, registration did not transfer to the station, and the dealer handled registration and tax on the ultimate sale.

Under those facts, the station was trustee or agent for the dealer. The dealer donated sale proceeds, not the vehicle, so only the dealer-to-buyer retail sale was taxed.

The memorandum gave this as a general approach absent clear unrestricted title transfer. A nonretailer's donated item was different: the station, as auctioneer of many supplied items, would be retailer of the auction sale.

Citations and references

• The source memorandum cites no statute or regulation by number.
• May 9, 1968 Headquarters memorandum and May 2, 1968 letter — questions and principles referenced; complete documents and attachments not reproduced in the official PDF
• Return-if-unsold term, no station registration, dealer registration handling, dealer tax reporting, station-retained receipts, title evidence, trustee or agency status, and nonretailer alternative — rules and conditions supplied; vehicle identity, title and registration, consignment or agency agreement, auction terms and bids, purchaser record, proceeds, return, tax return and payment, and donor-status evidence not reproduced in the official PDF
• Official Annotation 280.0766's three automobile conditions, donated-receipts rationale, nonretailer alternative, and auctioneer-retailer summary — annotation omits the caution about extending the rule and supplies no May 2 letter, transaction, title, auction, proceeds, or tax record
• Possible later auction, vehicle sale or return, registration, return filing, audit, assessment, payment, refund claim, appeal, or other agency action — not supplied in the official PDF

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 280.0766
• Original supporting opinion: 280.0766 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Headquarters - Evaluation and Planning (RN)

From:

Tax Counsel (TPP) - Headquarters

Subject:

Items Donated for Auction Sale

280.0766

Date:

May 15, 1968

In reply to your memorandum of May 9, 1968, it is my intention that the principles set forth in my letter of May 2, 1968, to Mr. F--- -. W--- should govern in future transactions of the type described in the letter. Thus, only one tax should be imposed when an automobile purchased by a dealer under a resale certificate is sold at auction through an educational television station which keeps the proceeds and (1) the television station has accepted the automobile for sale subject to return if it is not sold, (2) there is no transfer of registration to the station, and (3) the dealer handles the registration requirements on behalf of the purchaser and reports and pays tax on the sale. Under these circumstances, the television station should be regarded as a trustee or agent for the dealer and the dealer should be regarded as having donated the receipts from the sale. Although it seems desirable to avoid applying a “double tax” whenever any items are donated by dealers to be sold at auction without any intervening functional use of the items, it may not be possible to do so in all situations. How much further the result reached in my letter of May 2 can be extended will depend on the circumstances. As a general rule, however, unless there is clear evidence that unrestricted title passes to the television station, there should be only one tax when the following conditions are present:

Headquarters – Evaluation and Planning (RN)

-2-

May 15, 1968
280.0766

1.

an item is purchased by a dealer under a resale certificate;

2.

the item is put up by the dealer for sale though an auction by an educational television station; and

3.

the receipts from the sale are retained by the television station.

The ground for imposing only one tax under these circumstances is that the dealer has merely donated the receipts from the sale of the item. You ask what the result would be if a nonretailer makes a donation to a television station. Under those circumstances, tax would apply to the sale of the item at the auction. Even though the television station may be acting as a trustee or agent of the nonretailer, the station is an auctioneer and, therefore, is a retailer, assuming that it auctions a number of items supplied by various persons.

TPP:kc