How did California tax one order of annual reports split between a New York destination and a California destination?

Plain-English summary

The printer would sell 14,000 annual reports under one order, sending 10,000 to New York for use outside California and 4,000 to the purchaser in California.

If the reports were printed in California and shipped from here, section 6396 exempted the 10,000 sent to New York in accordance with Regulation 1620. Sales tax applied to the 4,000 delivered in California.

If the reports were instead printed and shipped from outside California, no California use tax applied to the 10,000 delivered and used outside the state. Use tax applied to the sales price of the 4,000 delivered here, and the retailer engaged in business in California had to collect and report it.

The January 18 request, orders, printing and shipping records, outside-use evidence, prices, tax calculations, and later outcome are not reproduced. The response also says a copy of Regulation 1620 was enclosed, but that enclosure is absent. The live annotation publishes the quantities and tax allocation but omits most statutory authority, the missing enclosure, correspondence provenance, named counsel, records, and prospective and conditional posture.

Common questions

How were reports printed and shipped from California treated?

The 4,000 sent to the customer in California were subject to sales tax. The 10,000 sent to New York were exempt under the conditional answer if the purchaser required the outside shipment, the seller made it as section 6396 described, the reports were used outside California, and the shipment complied with Regulation 1620.

How did the result change when printing and shipment began outside California?

Use tax applied to the sales price of the 4,000 reports delivered to the purchaser in California. No California use tax applied to the 10,000 delivered to the purchaser outside California for outside-state use under the stated facts.

Who had to collect the California use tax?

The response treated the printer as a retailer engaged in business in California and said it had to collect the tax from the purchaser, report it, and pay it to the Board under section 6203. The PDF gives no supporting nexus facts or collection record.

Did the letter decide whether the printer could pass sales tax to the customer?

It said sales-tax reimbursement was a contract matter under Civil Code section 1656.1. The customer contract is not reproduced.

Were the shipping conditions proved?

No. The response assumed the New York reports would be used outside California and, for the California-printed scenario, shipped in accordance with Regulation 1620. The orders, destination instructions, carrier records, outside-use proof, and enclosed regulation are absent.

Citations and references

• California Revenue and Taxation Code sections 6051 and 6396 — described for California retail sales and required out-of-state shipments; complete texts, definitions, rates, proof requirements, exceptions, procedures, amendments, later history, and current law not supplied
• California Civil Code section 1656.1 — cited for tax reimbursement as a contract matter; complete text, contract rules, procedures, amendments, later history, and current law not supplied
• California Revenue and Taxation Code sections 6201 and 6203 — described for use tax and collection by a retailer engaged in California; complete texts, definitions, rates, nexus facts, procedures, amendments, later history, and current law not supplied
• California Sales and Use Tax Regulation 1620 — identified for interstate shipments; the stated enclosure, complete text, conditions, procedures, amendments, later history, and current law not supplied
• January 18 request and March 8, 1993 response — no request, orders, printing or shipping records, outside-use evidence, prices, tax amounts, completed sale, claim, appeal, or later outcome supplied
• Official Annotation 325.0005's quantities, scenarios, conclusions, and date — omits most authority, missing enclosure, correspondence provenance, named counsel, records, prospective and conditional posture, later outcome, and reliance status and supplies no additional order 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/325-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0005.pdf

Original ruling text

325.0005

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6450

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

March 8, 1993

GRAY DAVIS
Controller, Sacramento

BURTON W. OLIVER

Executive Director

--Dear Ms. -This is in reply to your January 18, 1993 letter regarding the application of sales tax to your charges for annual reports. You described two situations and asked whether you should charge sales tax to your customer on the sale. We understand that, in each situation you would sell 14,000 annual reports and ship them to two separate destinations. You would ship 10,000 to New York and 4,000 to California. We assume the 10,000 shipped to New York would be used outside California. In the first situation, you would print the annual reports in California and ship them from within this state. California sales tax is imposed upon all retailers at the applicable rate of the gross receipts from the sale of all tangible personal property sold at retail in this state. (Rev. & Tax. Code § 6051.) Whether or not you collect reimbursement from your customer for the sales tax is a matter of contract between you and the customer. (Civ. Code § 1656.1.) When you print annual reports in California and ship them to the purchaser in this state, your sale is subject to sales tax. Revenue and Taxation Code section 6396 provides an exemption from sales tax for your sale of tangible personal property which the purchaser requires you to ship, and you do ship, to a point outside this state by your facilities or by delivery to a carrier, customs broker, or forwarding agent, whether hired by the purchaser or not, for shipment to the out-of-state point. We are enclosing a copy of Sales and Use Tax Regulation 1620, Interstate and Foreign Commerce, for your further information. When you sell 14,000 annual reports and ship 10,000 to the purchaser in New York in accordance with Regulation 1620, and ship 4,000 to the customer in California, your sale of the 10,000 is exempt from sales tax, and tax applies to your sale of the 4,000.

Ms. ---

-2-

March 8, 1993
325.0005

In the second situation, you would have the annual reports printed outside California and ship them from the out-of-state point. California imposes a use tax on the storage, use, or other consumption in this state of tangible personal property purchased from any retailer for storage, use, or other consumption in this state at the applicable rate of the sales price of the property. (Rev. & Tax. Code § 6201.) As a retailer engaged in business in this state, you are required to collect the use tax from the purchaser and report and pay it to this Board. (Rev. & Tax. Code § 6203.) When you have the annual reports printed outside California and shipped to the purchaser in this state, the use tax applies, and you are required to collect the tax from the purchaser. When you have the annual reports printed outside California and shipped to the purchaser outside California for use outside the state, the use tax does not apply. Using your example, where you have 14,000 annual reports printed outside this state and have 10,000 shipped to New York and 4,000 shipped to the purchaser in this state, you are required to collect and report and pay use tax on the sales price of the 4,000 annual reports shipped to the purchaser in this state. We hope this answers your questions; however, if you need further information, feel free to write again. Very truly yours,

Ronald L. Dick
Senior Tax Counsel
RLD:sr
bc: San Jose District Administrator