How did California apply the first-12-month principal-use test and exemption-certificate rules to vehicles delivered to Indian purchasers on reservations?

Plain-English summary

Robert Nunes's absent March 28, 1989 memorandum asked several questions about property delivered to an Indian on a reservation. One concerned a submitted form, also used for out-of-state purchasers, that some districts used for reservation-delivered vehicles. The form itself and Assistant Chief Counsel Tom Putnam's referenced 1978 approval are not included.

California found that the submitted form appeared to satisfy Regulation 1667 because it contained the required writing, date, signature, purchaser identity and address, permit information if any, property description, and intended-use statement.

The regulation did not require an additional acknowledgement that the purchaser would report tax if the property was later used differently.

For vehicles bought from an off-reservation retailer and delivered to an Indian purchaser on a reservation, Regulation 1616 applied a principal-use test during the first 12 months after delivery.

Use tax did not apply unless the vehicle was used off reservation more than on reservation during that period. When not in functional use, a vehicle owned and used by an Indian on a reservation was treated as garaged or stored there.

The PDF supplies no request, submitted form, status, delivery, certificate, use, audit, refund, appeal, or later outcome record. The live annotation publishes the principal-use and garaging rule but omits the form question and Regulation 1667 analysis.

What this means for you

Vehicle dealers and Indian purchasers

Certificate contents and first-year location of use both mattered.

Accountants and tax professionals

Retain the signed certificate, purchaser and property details, reservation delivery, use logs, storage or garaging records, and first-year mileage or other evidence.

Common questions

Q: What time period controlled principal use?

A: The first 12 months after delivery.

Q: When did use tax apply?

A: When off-reservation use exceeded on-reservation use.

Q: Did the certificate need a special future-liability acknowledgement?

A: No.

Citations and references

• California Sales and Use Tax Regulation 1667 — described for certificate contents and no later-reporting acknowledgement; complete text, definitions, form rules, versions, amendments, and later history not supplied
• California Sales and Use Tax Regulation 1616(d)(4)(E) — quoted or cited for the reservation-delivery and first-12-month principal-use test; complete text, definitions, proof rules, versions, amendments, and later history not supplied
• 1978 Assistant Chief Counsel Tom Putnam form approval — approval, submitted and prior forms, districts, users, transactions, and implementation records not reproduced
• March 28, 1989 Robert Nunes request about delivered property, the form, and reservation vehicle use — request, form, transaction, status, delivery and use evidence not reproduced
• June 2, 1989 Gary J. Jugum Legal Division memorandum — no replies, revised form, instruction, transaction, certificate, return, audit, assessment, refund claim, appeal, or later outcome supplied; copies sent to three named staff members and Business Taxes Attorneys
• Official Annotation 305.0360's Regulation 1616, property and vehicle examples, purchaser, retailer, delivery, principal use, garaging, and June 2, 1989 rules — annotation omits the request, prior approval, certificate analysis, missing records, later outcome, and reliance status and supplies no additional record

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 305.0360
• Original supporting opinion: 305.0360 PDF

Original ruling text

State of California

Board of Equalization
Legal Division (MIC:82)

Memorandum
305.0360

To:

Mr. Robert Nunes
Chief of Field Operations

From:

Gary J. Jugum

Subject:

Sales to Indians:

Date:

June 2, 1989

This is in response to your memorandum of March 28, 1989. You have raised several questions regarding the sale of property which is delivered to an Indian on an Indian reservation. First, you have questioned the form used by some districts when vehicles are sold and delivered to an Indian reservation or to an out-of-state purchaser. As you know, these forms were originally approved by Assistant Chief Counsel Tom Putnam in 1978. The form submitted appears to meet all the requirements of Regulation 1667. Sales and Use Tax Regulation 1667 provides that a valid exemption certificate must be in writing and include the date, the signature of the purchaser, the purchaser’s agent, or employee, the name and address of the purchaser, seller’s permit, if any, a description of the property purchased and a statement regarding the manner in which the property will be used. It does not require a statement that the purchaser acknowledges liability and responsibility for reporting tax in the event the property is used in some other manner. We are of the opinion that a more formalized procedure is unnecessary in light of the fact that the form is of limited use to a very small number of people. Second, you question the sale of automobiles for “use on the reservation.” This test for “use” found in Sales and Use Tax Regulation 1616 is a “principal use” test. Regulation 1616(d)(4)(E) provides that use tax does not apply to the use of tangible personal property, including vehicles purchased by an Indian from an off-reservation retailer and delivered to the

Mr. Robert Nunes

-2-

June 2, 1989
305.0360

purchaser on a reservation, unless within the first 12 months following delivery, the property is used off a reservation more than it is used on a reservation. Thus, if the automobile is owned and used by an Indian on an Indian reservation, the principal use is considered to be on the reservation. When not in functional use the automobile would be “garaged” (stored or used) on the reservation. If you have further questions concerning this matter, we will be happy to discuss them with you.

MCA:cl
cc:

Ms. Judy Agan
Mr. Glenn Bystrom
Mr. Les Sorensen

bc:

Business Taxes Attorneys

305.0360.doc