Did intended exports escape sales tax when title passed in California and the goods waited before shipment to Peru?

Plain-English summary

The purchaser acquired title no later than delivery in Natomas, California. After transshipment, it held the property for indefinite periods before sending it to Peru. Counsel concluded the sales-tax incidence occurred when title passed in California. The property, agreement, invoices, title and delivery documents, shipping records, holding periods, and tax measure are not supplied.

An intention to export, even one later carried out, was not enough. While the property waited, it had not begun its export journey and was not irrevocably committed to export, so the measure of tax remained unchanged.

The letter also upheld a failure-to-file penalty. Revenue and Taxation Code section 6421 made the purchaser liable for sales tax as if it were the retailer making the retail sale; counsel concluded that liability brought with it a duty to file returns. Because no returns were filed, section 6511 applied. The matter was still to be scheduled for predetermination; no notice, hearing, final Board decision, payment, claim, appeal, or later outcome is supplied.

The live annotation publishes only the purchaser-as-retailer filing duty and failure-to-file penalty. It omits the entire export issue, title passage, Natomas delivery, transshipment, Peru shipment, both cases, preliminary hearing, lost report, and pending-predetermination posture.

Common questions

Did later shipment to Peru prove the export exemption?

No. The relevant question was whether the property was already in the export process when title passed and tax attached.

Was the hearing officer's report available?

No. The source's later notation says both attached copies of the approved report had been lost.

Citations and references

• California Revenue and Taxation Code section 6421 — partially quoted for purchaser sales-tax liability and treated as carrying a return duty; quotation incomplete, and complete text, triggering facts, procedures, amendments, later history, and current law not supplied
• California Revenue and Taxation Code section 6511 — cited for the failure-to-file penalty; complete text, rate, conditions, relief, procedures, amendments, later history, and current law not supplied
• Empress Siderurgica v. County of Merced, 337 U.S. 154, and Flying Tiger Line, Inc. v. State Board of Equalization, 157 Cal.App.2d 85 — names and citations preserved as printed; opinions, facts, exact holdings, quotations, and later history not supplied
• June 10, 1964 hearing and August 19 hearing officer's report — petition and hearing record not reproduced; both approved report copies noted lost by David Levine on December 4, 1997
• September 3, 1964 recommendation — no underlying transaction records, notice, predetermination, final Board decision, payment, claim, appeal, or later outcome supplied
• Official Annotation 320.0180's purchaser filing duty, penalty conclusion, and date — omits the export issue and facts, cases, hearing and lost report, predetermination posture, missing 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/320-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/320-0180.pdf

Original ruling text

320.0180

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 3, 1964
--- --- ----- --- ----- --- --Dear --- ---:
We have reviewed your client’s petition for redetermination of sales and use tax in the light of information obtained at the preliminary hearing on this matter. It is our opinion that no legal basis exists for adjustment to the measure of tax originally determined. As was indicated to you at the preliminary hearing, the determinative issue is whether the property in question was in the process of export at the time title to the property was obtained. We have concluded that title to the property passed your client no later than the date of the deliveries in Natomas, California. The incidence of the tax occurred at this time. After transshipment, the property was held by your client for indefinite periods prior to shipments to Peru. During this period, the property had not begun its export journey nor was it irrevocably committed to export. While the surrounding facts and circumstances indicate that the property was intended for export and, indeed, was subsequently exported, this is not sufficient to classify the property as being in the process of export. The prospect of export, no matter how bright, does not constitute a part of the exportation (Empress Siderurgica v. County of Merced, 337 U.S. 154 [and Flying Tiger Line, Inc., v. State Board of Equalization, 157 Cal. App. 2d 85].) We have also concluded that the penalty for failure to file was properly applied. Under the provisions of § 6421, a purchaser in the circumstances of your client, is liable for the payment of sales tax….” Since there was an obligation to pay sales tax as a retailer imposed by the statute, the duty to file returns and declare this tax also attaches. Since no returns were filed, the penalty provisions of § 6511 of the Revenue and Taxation Code (failure to file) apply. This matter will now be scheduled for predetermination and your client will receive notice of predetermination in due course. Very truly yours,

W. E. Burkett
Associate Tax Counsel
cc:

--- --- District Administrator
Attached are two copies of hearing officer’s report dated 8-19-64, which has been approved. This hearing was held in San Francisco on June 10, 1964. (Both have been lost per David Levine, 12/4/97).