Were diesel, oils, and greases exempt when the seller used a chartered vessel to deliver them to a drilling platform outside California?

Plain-English summary

A redacted seller's August 26, 1964 letter described dieseline, lubricating oils and greases supplied to redacted corporation B for its performance of a contract with seller S. Counsel understood the drilling platform to be outside California and did not question that redacted facility M could be treated as operated by S for offshore delivery. The current annotation calls M a ship chartered by the seller, a detail not stated in the response itself.

Tax counsel divided the products into two groups. The portion actually delivered to and sold to independent contractor B at the offshore platform was exempt under the quoted part of historical Ruling 55 because the seller's facility completed delivery outside California. The quoted rule and request are absent.

The portion consumed in operating M was taxable. Seller S consumed those products itself, so tax applied to the purchase price of products or raw materials that became part of the consumed products.

Counsel accepted the remaining delivery as a bona fide sale because the request's next-to-last paragraph reportedly said the S–B contract required B to buy from S. Neither the contract nor any invoice, quantity, price, purchase cost, delivery record, consumption allocation or tax measure is supplied.

The live annotation preserves only the outside delivery exemption and adds the seller-chartered-ship description. It omits the taxable products consumed aboard M, the missing contract basis, assumptions, evidence gaps and absence of any applied calculation or later result.

Common questions

Why was the delivered portion exempt?

Counsel treated M as the seller's delivery facility and understood the contractor to receive the products at a platform outside California.

Why was the portion used aboard the delivery facility taxable?

Seller S, rather than contractor B, consumed that portion while operating M.

What measure did counsel identify for the consumed portion?

The purchase price of purchased products or raw materials that became part of the products consumed aboard M.

Why did counsel treat the contractor transfer as a bona fide sale?

The missing request reportedly quoted a contract provision requiring B to buy from S. No contract or completed sale record is reproduced.

Did the source establish the actual taxable and exempt amounts?

No. It gives no quantities, costs, sale prices, allocation, filing, audit or later outcome.

Citations and references

• California Sales and Use Tax Ruling 55 — quoted in the absent request for seller-facility outside delivery; a source note identifies it as now Regulation 1620, but complete historical and current rules are not supplied
• August 26 request and S–B contract — absent; parties, facility, platform, required purchase, products, prices, delivery and consumption remain unproved
• September 1 response — conditional on stated facts, with no actual exempt or taxable measure and no later result
• Official Annotation 325.0440 — adds a seller-chartered ship but omits the taxable onboard-consumption portion and provenance gaps

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.0440
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0440.pdf

Original ruling text

325.0440

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 1, 1964

--- --- ----- --- ----- --- --“S”
From the facts stated in your letter of August 26, 1964, it is our opinion that the sale of dieseline, lubricating oils and greases by “S” to “B” for use by that corporation in performing its contract with “S” is exempt from sales tax under that portion of Ruling 55 [now Reg. 1620] quoted by you. We do not question the fact that “M” may be regarded as a facility operated by “S”, by means of which “S” effects delivery to the drilling platform, which we understand to be located outside the boundaries of the State of California. The tax will apply, and we believe you do not question this, to that portion of the products which are consumed in the operation of the “M”. These products would be consumed by “S” and tax would apply to the extent of the purchase price of any of the products or raw materials purchased which become a part of the products consumed. The remainder of the products actually delivered to “B” and used by that corporation acting as an independent contractor are, as we understand your letter, in fact, sold by “S” to that contractor in a bona fide sales transaction. We gather this from the next to the last paragraph of your letter in which you state “our contract with “B” contains a provision that they buy from “S”. Very truly yours,

E. H. Stetson
Tax Counsel

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