Could a vehicle lessor using rental receipts as the tax measure exclude California registration fees advanced for lessees?

Plain-English summary

An automobile lessor elected to measure tax by rental receipts rather than by the cost of its vehicles and advanced California registration fees for years when the vehicles were in lessees' possession.

Tax counsel said the lessor could exclude the qualifying registration-fee amounts from taxable rental receipts under the new statutory amendment described in the source.

No particular allocation method was prescribed, but the lessor had to maintain records that adequately showed the basis for every exclusion claimed.

Citations and references

• California Revenue and Taxation Code section 6012(c)(9) — identified by the live annotation; the supporting letter quotes the exclusion but does not give its section number
• Sales and Use Tax Law amendment effective June 25, 1960 excluding specified California motor-vehicle fees or taxes from gross receipts — bill, chapter, statutory section, enactment date, legislative materials, and amendment copy not supplied in the supporting letter
• December 28 letter asking how sales tax applied to license-plate fees on leased vehicles — year, request, and attachments, if any, not provided in the official PDF
• Vehicle leases, rental-receipts election, lessor-advanced registration fees, lessee-possession years, and claimed exclusions — leases, vehicle records, registration bills, fee payments, allocation workpapers, rental records, returns, and accounting records not reproduced in the official PDF
• January 10, 1961 tax-counsel response signed by E. H. Stetson “By” Roy Gill — no taxpayer reply, claimed method, return treatment, audit, assessment, refund claim, agency adoption, appeal, or later outcome supplied
• Official Annotation 295.1260's section 6012(c)(9), rental-receipts election, registration-fee exclusion, no-prescribed-method, adequate-records conclusion, and January 10, 1961 date — annotation omits the December 28 request and missing year, June 25 amendment and missing authority, lessor advances and lessee-possession years, named signatories, 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/295-1260.pdf

Original ruling text

295.1260

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

January 10, 1961

--- --- ----- --- ----- --- --Gentlemen:
This is in reply to your letter of December 28 concerning the application of sales tax with respect to license-plate fees on vehicles which you leased to others. Effective June 25, 1960, the Legislature passed an amendment to the Sales and Use Tax Law excluding from “gross receipts” subject to tax the following: “The amount of any motor vehicle fee or tax imposed by and paid to the State of California that has been added to or is measured by a stated percentage of the sales or purchase price of a motor vehicle.” When you elect to use your rental receipts as the measure of tax rather than the cost of the vehicles to you and you advance the registration fees for your lease customers covering years for which the vehicles are in possession of lessees under lease from you, you are entitled to exclude the amount of such registration fees from the measure of your tax liability applicable to the leasing of the vehicles. There is no prescribed method for excluding this amount from the rental receipts. However, you should maintain records which adequately reflect the basis of any exclusion taken from the rental receipts used to measure tax liability. Very truly yours,

E. H. Stetson
Tax Counsel

By
Roy Gill
RG/o’b

[at]