How did California tax a Florida manufacturer's sales through its California office when goods were delivered either inside or outside the state?

Plain-English summary

A Florida corporation manufactured most of its products in Florida but maintained a California sales office that handled its West Coast sales. Some products moved directly from the Florida plant to customers, while other goods moved from the California office. Customers could be inside or outside California, and payment could go to either office.

Tax counsel separated the transactions by where shipment began and where delivery occurred. Goods delivered from Florida to customers outside California were not subject to California sales tax. For direct Florida-to-California deliveries, sales tax would not apply if the conditions of Ruling 55 A-1-(a) were satisfied; in that event, use tax applied, and the corporation had to collect it because it maintained a California place of business.

Goods shipped from the California office to out-of-state points were not subject to sales tax if the conditions of Ruling 55 A-1-(c) were met. Goods delivered from the California office to California points were taxable.

The letter expressly assumed that none of the California sales were for resale or otherwise exempt. It described the answer as general and offered to analyze a particular transaction if the taxpayer supplied complete facts.

The manufacturer sometimes fabricated parts at the California office and sometimes collected customer payments there; other payments went to Florida. The letter did not say those facts alone controlled. It referred instead to conditions in the two enclosed historical rulings, whose texts are absent from the official PDF.

The request, Rulings 55 and 74, orders, invoices, delivery and office-participation evidence, permits, returns, remittances, tax computation, and any later outcome are absent. The live annotation states that California-office participation could make direct Florida-to-California delivery subject to sales tax, but supplies no text of Ruling 55 or transaction applying that test.

Common questions

Were Florida-to-outside-California deliveries subject to California sales tax?

The letter said no when the consumer received delivery outside California. It supplies no particular contract, destination, carrier record, or other-state tax analysis.

What happened on direct Florida-to-California delivery?

The letter said sales tax did not apply if Ruling 55 A-1-(a)'s conditions were met. Its live annotation describes the distinction as whether the California office participated. If sales tax did not apply, use tax applied and the corporation had to collect it because it maintained a California place of business.

What about shipment from the California office to another state?

The letter said sales tax did not apply if Ruling 55 A-1-(c)'s conditions were met. The missing enclosure prevents this page from stating the complete historical conditions.

Were California-office deliveries to California customers taxable?

Yes under the general answer. Counsel assumed the sales were not for resale and had no other exemption.

Did payment location decide the result?

The facts said some prices were collected through the California office and others paid directly to Florida, but the answer did not identify payment location as independently controlling. Complete agreements and payment records are absent.

Did the letter decide a specific assessment?

No. Counsel called the discussion general and invited complete details for a particular transaction. No prices, tax computation, return, remittance, audit, assessment, claim, appeal, or later outcome is supplied.

Citations and references

• California Sales and Use Tax Ruling 55 A-1-(a), A-1-(c), and B — cited for interstate delivery, office participation, and use tax; the enclosed ruling, complete conditions, procedures, later history, replacement authority, and current law not supplied
• California Sales and Use Tax Ruling 74 — cited for collection by a seller with California places of business; the enclosed ruling, complete conditions, procedures, later history, replacement authority, and current law not supplied
• January 21 request and March 3 response — no request, enclosures, transaction records, applied tax computation, audit, assessment, claim, appeal, or later outcome supplied
• Official Annotation 325.0020's historical summary and date — omits material facts, permits, assumptions, missing rulings, reporting referral, records, later outcome, and reliance status and supplies no additional transaction 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/325-0020.pdf

Original ruling text

325.0020

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

March 3, 1953

S---, T---, M--- & D--A--- I. D--- Building
--- XX, Florida

Attention:

Your letter of January 21

Mr. B---

Account No. -- - XXXXX
F--- E--- &
E--- Corp.

Gentlemen:
You ask for advice with respect to the application of California sales tax to this situation: Your client, F--- E--- & E--- Corp., maintains a manufacturing plant in Florida and a sales office in California. The California sales office handles all sales of your client’s products on the West Coast. Practically all of the items sold through the California office are manufactured and fabricated in Florida but in some cases parts are fabricated at the California office. Shipment of goods sold through the California office are often made directly from the Florida plant to the consumer and the point of delivery may or may not be within California. The California office on occasion collects the sales price of goods sold through them, but in other instances payments are made directly to the Florida office. Your problem, from the facts given, appears to be governed by Ruling 55 (copy enclosed). It occurs to us that there are two situations with respect to which you may wish an interpretation of the application of the California tax under that ruling. These are: 1.

Sales in which delivery is made from Florida.

In such sales, when delivery is made to the consumer at a point outside of California, the California sales tax would not apply. Where delivery is made directly to the consumer in this State, sales tax would not apply if the conditions of Ruling 55, Section A-1-(a) are met. If the sales tax does not apply, then under Ruling 55, Section B, the California use tax would apply and your client, since it maintains a place of business in the State of California, would be required to collect that tax and pay it over to this Board. See Ruling 74 (copy enclosed). 2. Sales in which delivery is made to points outside the State of California from the California office. If the conditions of Ruling 55, Section A-1-(c) are met, then the California sales tax does not apply. Where delivery is made from your California office to points inside California, California sales tax applies.

S---, T---, M--- & D--Re: F--- E--- & E--- Corp.

-2-

March 3, 1953
325.0020

In our discussion we have assumed that none of the sales in California are for resale or otherwise exempt from tax. Also our discussion of Ruling 55 is of necessity somewhat general, but if you have any question with respect to a particular transaction we will be happy to answer it if you will give us the full details involved in that transaction. We understand that your client holds seller’s permits for its California offices. If its local representatives so desire they may obtain information as to the method of reporting sales, etc. from our local office at 3220 West 85th Street, Inglewood, California, telephone Pleasant 1-5154 Yours very truly,

E. H. Stetson
Tax Counsel

JHM:ja
cc:

Inglewood – Auditing

cc:

Mr. R--- W--XXXX --- Avenue
--- ---, California