What price measured tax when a trailer finance contract showed a fictitious down payment or understated the actual sale?

Plain-English summary

A trailer seller sometimes wrote a $1,500 finance contract with a fictitious $500 down payment even though the real cash price was $1,000. With no trade-in, the letter treated $1,000 as the tax measure. But if the seller charged the customer sales-tax reimbursement on $1,500, that higher amount became the seller's tax liability measure.

If the purchaser traded in property as part of the payment, the full $1,500 stated price was taxable. The letter also addressed the reverse manipulation: where a contract showed a $1,000 price and $350 down payment but the seller actually received $850 cash plus a $650 promise, tax applied to the real $1,500 consideration.

The contract labels therefore did not override the payment and reimbursement facts.

Citations and references

• The official letter cites no statute or regulation by number.
• January 8 letter asking about trailer finance contracts that overstated or understated purchase price and down payment — year and copy not provided in the published text
• Trailer sales for stated and actual prices of $1,000 or $1,500, stated or actual down payments of $350, $500, or $850, a $650 payment promise, possible trade-in property, and possible sales-tax reimbursement charged on $1,500 — examples supplied; dates, parties, property details, contract numbers, trade-in values, tax computations, and transaction records not reproduced in the official PDF
• Finance contracts and financing-company transactions showing purchase prices and down payments different from the actual consideration — described but not reproduced in the official PDF
• Official Annotation 295.0360's contract examples, financing purpose, trade-in treatment, stated and actual amounts, and Mar. 12, 1954 date — annotation calls the property a vehicle rather than the source body's trailer and says sales tax rather than the body's sales-tax reimbursement; it omits the Jan. 8 request provenance, absence of cited legal authority, missing contracts and transaction records, printed "paid to your" and spaced "$1,000 .00" forms, and later outcome and supplies no additional sale, financing, or tax record
• Possible completed sale, trade-in valuation, financing approval, reimbursement collection, audit, assessment, refund claim, appeal, or other later agency action — not 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/295-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/295-0360.pdf

Original ruling text

295.0360

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

March 12, 1954

Your letter of January 8
Dear Mr.
You inquire concerning the application of sales tax when you sell a trailer for
$1,000.00 but write a contract showing a purchase price of $1,500.00 with a $500.00 down payment. The $500.00 is never, in fact, paid to your by the purchaser nor is it ever intended that it should be paid. The transaction is handled in this manner for the purpose of obtaining financing from a financing company. If there is no trade-in, the correct measure of tax is $1,000 .00. However, if the customer is charged sales tax reimbursement on $1,500.00, then that $1,500.00 amount becomes the measure of your tax liability to the State. If property is traded in by the purchaser as a part of the payment of the price, the measure of the tax is the full $1,500.00. In some cases, you write down the sales price and at the same time do not show the entire down payment on the contract. For example, upon the sale of a $1,500.00 trailer with an $850.00 down payment, you might write a contract showing a purchase price of $1,000 .00 with a $350.00 down payment. This contract is then financed through a finance company. However, since you have received $850.00 in cash plus the purchaser's promise to pay an additional $650.00, the measure of the tax is the full
$1,500.00.

Yours very truly,

Bill Holden
Assistant Counsel
BH:ja