Did an out-of-state dealer need a resale certificate when its California purchase qualified as an interstate-commerce sale?

Plain-English summary

An unidentified purchaser's January 20, 1950 letter to the Governor asked whether it had to give a California vendor a resale certificate for merchandise purchased for resale. The letter was referred to the Board; neither it nor any transaction record is reproduced.

The letter explained that California generally presumed a retailer's gross receipts taxable until the seller proved otherwise. For property sold and delivered in California, a resale certificate was the practical way to separate taxable retail sales from nontaxable sales for resale.

A qualifying interstate transaction under historical Ruling 55 used different proof. The seller could retain bills of lading or other documents showing delivery to a carrier or forwarding agent for shipment outside California. In that situation, no resale certificate was necessary because the sale was exempt as interstate commerce whether the purchaser acquired the goods for use or resale.

Ruling 55 was enclosed but is missing. No vendor, merchandise, contract, delivery, resale, certificate, bill of lading, carrier record, forwarding-agent record, tax filing, audit or applied outcome is supplied.

Common questions

Why were resale certificates used for California delivery?

The letter said the seller bore the burden of proving nontaxability and certificates allowed auditors to separate California retail sales from sales for resale.

Why was a certificate unnecessary for a qualifying interstate sale?

The sale was exempt as interstate commerce regardless of whether the buyer intended use or resale, if the seller proved the qualifying outside shipment.

Was a bill of lading the only acceptable evidence?

No. The letter also allowed other documentary evidence of seller delivery to a carrier or forwarding agent for shipment outside California.

Did the source approve a specific dealer's records?

No. It contains no transaction, shipping document, certificate, audit or later result.

Does the source provide current Ruling 55 or successor requirements?

No. The enclosed rule and all amendment, replacement and current-law history are absent.

Citations and references

• Unnumbered Sales and Use Tax Law provisions — described for seller burden and resale certificates; citations, complete text, amendments, later history, and current law not supplied
• California Sales and Use Tax Ruling 55 — cited for interstate sale and shipping records; enclosed rule, complete conditions, replacement, later history, and current law not supplied
• January 20 request and transaction records — not reproduced or absent; parties, goods, contract, delivery, resale, certificate, shipping and outcome remain unproved
• January 27 response — general and historical, with no applied tax proceeding or later result
• Official Annotation 325.0400 — compresses the rule but omits the Governor referral, seller burden, California-delivery distinction, alternative documents, forwarding agents, missing evidence, outcome, and reliance status

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/325-0400.pdf

Original ruling text

325.0400

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

0952 Interstate commerce sales need not be supported by resale certificates

January 27, 1950

Gentlemen:
This is in answer to your letter of January 20, addressed to the Governor, with respect to the necessity of furnishing your vendor in this State with a resale certificate in connection with your purchases of merchandise for resale, which has been referred to this office for attention. The California Sales and Use Tax Law imposes a tax upon the gross receipts of all retailers in this State derived from the sale of tangible personal property at retail. It also provides that for the proper administration of the Act all gross receipts are subject to the tax until the contrary is established and that the burden of proving the contrary is upon the seller, unless he takes a resale certificate from the purchaser. Without this latter provision it would be impossible to segregate, by audit, the taxable sales and the nontaxable sales for resale with respect to property sold and delivered in this State. Where, however, the property is sold to an out-of-State purchaser in the course of interstate commerce, as defined by Sales and Use Tax Ruling 55, copy enclosed, the seller may support his claim for exemption from sales tax by retention of bills of lading or other documentary evidence of the delivery of the property to a carrier or forwarding agent for shipment outside of this State. In this case, it is not necessary for the seller to obtain a resale certificate as the sale is exempt as a sale in interstate commerce, whether sold at retail or for the purpose of resale.

Very truly yours,

R. G. Hamlin Associate
Tax Counsel
RGH:HB
cc: Governor's Office