Was excess city sales-tax reimbursement retained on sales outside city limits part of state-taxable gross receipts?

Plain-English summary

A seller's salespeople sometimes charged 3.5% sales-tax reimbursement on transactions outside Los Angeles city limits. The seller paid 3% to the State and apparently kept the extra 0.5% even though city tax did not apply.

Section 6012 allowed exclusion only for tax actually imposed by a city. Because the excess amount was not city tax due on those sales, tax counsel treated it as part of the seller's gross receipts subject to state sales tax.

Citations and references

• California Revenue and Taxation Code section 6012 (as cited)
• September 18, 1951 letter asking how state sales tax applied to a client's excess city-sales-tax reimbursement charges — letter and attachments, if any, not reproduced in the official PDF
• Sales outside Los Angeles city limits on which salespeople sometimes charged 3.5 percent, the client remitted 3 percent to the State, and apparently retained 0.5 percent when city tax did not apply — sales records, invoices, customer receipts, returns, remittances, retention amounts, and accounting records not reproduced in the official PDF
• October 15, 1951 tax-counsel response with a blank cc: line — no client response, reimbursement correction, customer refund, return adjustment, audit, assessment, refund claim, agency adoption, appeal, or later outcome supplied
• Official Annotation 295.1240's erroneous inapplicable-city-tax charge, taxable-gross-receipts conclusion, and October 15, 1951 date — annotation omits the requester and client, September 18 letter, Los Angeles boundary, 3.5, 3 and 0.5 percent figures, apparent retention, section 6012, blank copy line, underlying records, later outcome, and reliance status and supplies no additional proceeding record

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/295-1240.pdf

Original ruling text

295.1240

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

October 15, 1951

Dear Mr. ---:
This is in reply to your letter of September 18, 1951, in which you ask concerning the application of State sales tax to certain excessive charges your client makes for city sales tax reimbursement. You state that your client’s salesman sometimes erroneously charge 3½% sales tax on sales outside the city limits of Los Angeles. Of this amount 3% is paid to the State, and your client apparently retains the excessive ½% in cases where the city tax is inapplicable. Section 6012 of the Sales and Use Tax Law defines “gross receipts” subject to tax so as to include “all receipts, cash, credits, and property of any kind”, except that, among other items, there may be excluded “the amount of any tax imposed by any city” upon retail sales. The exclusion is with respect to the amount of tax imposed. Accordingly, it is our opinion that only the actual amount of tax imposed by the city may be excluded from “gross receipts” taxable by the State. Where amounts are erroneously charged by your client from city sales tax in excess of the tax due the city, it is our opinion that the excess is a part of the gross receipts subject to the State tax.

Very truly yours,

E. H. Stetson
Tax Counsel

AOC:ja
cc: