Did an out-of-state computer seller have to collect California use tax when local agents solicited orders and related companies installed the equipment here?

Plain-English summary

An out-of-state computer-equipment seller had no California place of business of its own. A California agent solicited orders and forwarded them for acceptance, while related but separate corporations completed the seller's contractual installation obligations at customer locations here.

Those California sales and installation agents made the seller a retailer engaged in business in the state under section 6203. It therefore had to register, collect customers' use tax, and remit it; failure to collect left the tax as a debt owed by the retailer.

The memorandum nevertheless did not impose sales tax. Under the historical Regulation 1620 analysis, the seller itself had no California place of business participating in the sales, and completion of delivery by a separate installation agent did not satisfy that distinct condition.

Orders were sent to the seller for acceptance and billed directly by it. Shipments ordinarily went by common carrier f.o.b. an outside-state point directly to customers, although isolated shipments went to the sales agent for redelivery. The seller fulfilled its contractual installation duty through two related but legally separate corporations.

The audit request, agency and installation agreements, orders, shipping and installation records, entity-relationship evidence, returns, collections, remittances, tax computation, and later audit outcome are absent. The live annotation states the key distinction but omits the referral history, related-corporation fact, four cited cases, and those missing records.

Common questions

What California activity created the collection duty?

The seller had a California agent soliciting equipment orders and separate agents installing equipment under the seller's contractual obligation. Counsel treated either the sales-agent or installation-agent presence and operations as sufficient under section 6203's historical definition.

Who accepted orders and billed customers?

The California sales agent forwarded orders to the out-of-state seller. The seller accepted them, shipped the equipment, and billed the customers directly; the source supplies no orders, invoices, or payment records.

Did occasional delivery through the sales agent matter?

The facts included isolated shipments to the agent for redelivery, but counsel did not limit the use-tax collection conclusion to those transactions. The regular sales solicitation and contractual installation activities independently supported the stated result.

Why did counsel distinguish use-tax collection from sales-tax liability?

Historical section 6203 treated activity through California agents as enough to make the seller collect use tax. The summarized Regulation 1620 sales-tax test separately required participation by a California place of business of the retailer itself, which counsel found absent despite agent installation.

What happened if the seller failed to collect?

The memorandum cited section 6204 and Bank of America for the uncollected amount remaining a debt owed by the retailer to the state. It supplies no amount, collection action, payment, or later result.

Was this a final audit result?

No. The source provides legal advice to the audit office but no completed audit, assessment, registration, returns, remittances, claim, appeal, Board decision, or later outcome.

Citations and references

• California Revenue and Taxation Code sections 6203, 6204, and 6226 and Bank of America v. State Board of Equalization, 209 Cal.App.2d 780 — cited for retailer status, registration, collection, remittance, and debt; complete authorities, procedures, amendments, histories, later treatment, and current law not supplied
• National Geographic Society v. State Board of Equalization, 430 U.S. 551; Scripto v. Carson, 362 U.S. 207; and Standard Pressed Steel v. Washington, 419 U.S. 560 — cited for constitutional reach; opinions, complete facts and holdings, procedural histories, and later treatment not supplied
• California Sales and Use Tax Regulation 1620(a)(2)(A) — summarized for California sale and retailer-place participation; complete authority, definitions, conditions, amendments, later history, and current law not supplied
• February 21 audit request and May 21 legal response — no request, agency or transaction records, tax calculation, completed audit, assessment, claim, appeal, or later outcome supplied
• Official Annotation 325.0053's historical analysis and date — omits provenance, some authority, related-party facts, records, audit 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/325-0053.pdf

Original ruling text

State of California

Board of Equalization

Memorandum
325.0053

To:

Oakland – Auditing

From:

Headquarter – Legal
John Abbott

Subject:

Q--- (P--- R---) Corp – [no account number]
C--- S--- Co., Inc. – [no account number]
M--- Q--- – SR --- XX-XXXX
M--- D--- S--- – SY --- XX-XXXXXX
Use tax collection – Installation in state

Date:

May 21, 1985

In your February 21, 1985 memorandum to Mr. Les Sorensen of the legal section, which was transferred to me for reply, you contend that Q--- (P--- R---) is engaged in business in California and is either required to collect use tax or pay sales tax on its sales to California customers, and you ask for our opinion on this matter. You relate, in summary, that while Q--- itself has no place of business in California, it has an agent (C--- S--- Co.) located in California which solicits equipment orders from California customers and forwards the orders to Q--- for acceptance. When the order is accepted, the equipment is shipped and billed directly to the customer by Q--- although in some isolated instances, the shipment is to the agent for redelivery to the customer. While shipments are made by common carriers, F.O.B. --- ---, the agreements require Q--- to install the equipment at the customer’s location and Q--- completes its installation obligation by contracting with related but separate corporations, either M--- D--- S--- Q--- or M--- D--- S---, to install the equipment. Q---’s obligation to collect the use tax on its sales to California customers is clearly established by Revenue and Taxation Code section 6203. While the use tax is imposed on the purchaser, a retailer engaged in business in this state is obligated to register with the Board and to collect the use tax from the purchaser and pay it to the Board. Code sections 6203, 6226. If the retailer fails to collect the tax, it nevertheless constitutes a debt of the retailer owed to the state. Code section 6204; Bank of America v. State Board of Equalization, 209 Cal.App. 2d 780.

Q--- Corp.

-2-

May 21, 1985
325.0053

Section 6203(a) and (b) defines a retailer engaged in business in this state to include (among other things) a retailer who has an agent with a place of business in this state, or who has a representative or agent operating in this state under the authority of the retailer for the purpose of selling, delivering, or taking orders for tangible personal property. Q--- qualifies as such a retailer because of the presence and operations in California of either its sales agent or its installation agents. The broad reach, and constitutionality, of section 6203 and similar statutes in other states is illustrated by cases such as National Geographic Society v. State Board of Equalization, 430 U.S. 551; Scripto v. Carson, 362 U.S. 207; and Standard Pressed Steel v. Washington, 419 U.S. 560. While our conclusion is that Q--- is required to register with the Board and collect the use tax liabilities of its California customers, we also conclude, based on the facts you present, that Q--is not liable for sales tax on its retail sales in California. This is because Q--- itself (as distinct from its agents) has no place of business in California. Regulation 1620(a)(2)(A) provides in summary that the sales tax applies only if there is both a sale which occurs in California, and some involvement in the sale by a place of business of the retailer. The latter condition is not met when Q---’s installation agent, rather than Q--- itself, completes the delivery of the equipment in California by installing the equipment at the buyer’s location.

JA:ss