Was a custom exhibit still an exempt out-of-state shipment after the buyer redirected it to a California company for electrical work?

Plain-English summary

A partially redacted California company custom-fabricated a metal exhibit for a Pennsylvania corporation. A California firm designed it. The selling price was $14,330, and the seller's invoice omitted sales-tax reimbursement because direct outside shipment was originally planned.

The buyer later instructed the seller to deliver the unfinished exhibit to the California design firm, which completed the work by adding electrical components and then shipped the unit outside the state. No design, fabrication or reimbursement agreement, invoice, instruction, delivery record, electrical-work record or shipping proof is supplied.

Direct common-carrier shipment outside California would not have produced a California sale. The substituted buyer-directed California delivery made the specially fabricated property's sale occur here, so the fabricator had to report and pay sales tax. Whether the buyer owed reimbursement depended on the corporations' agreement, which is absent.

The source has a facial date conflict. Its first page says April 18, 1966 even though it responds to an October 9, 1990 letter; page two and the live annotation say November 15, 1990. The continuation-page and annotation date controls here, while the erroneous first-page date remains verbatim in the original text.

The live annotation preserves the redirected-delivery result but omits the $14,330 price, Pennsylvania and California party roles, original common-carrier plan, invoice and reimbursement issue, source-date defect, missing evidence, seller payment duty and absence of an applied tax proceeding.

Common questions

Why would the original shipment have avoided a California sale?

The stated plan was direct delivery outside California by common carrier, with no intervening California delivery to the customer or its designee.

What changed the result?

The Pennsylvania customer directed the seller to deliver the unfinished special-order exhibit to a California firm for electrical completion.

Did later outside shipment undo the California sale?

No. The purchaser-directed California delivery had already made the fabricated-property sale occur here.

Who had to report and pay the sales tax?

The seller. The opinion treated reimbursement from the purchaser as a separate question controlled by the corporations' agreement.

Does the source supply the reimbursement agreement or tax calculation?

No. It states the $14,330 selling price but includes no contract, invoice, calculation, return, payment or later outcome.

Why is November 15, 1990 used as the issue date?

The letter answers an October 1990 request, page two is dated November 15, 1990, and the official annotation uses that date; the first page's April 18, 1966 date conflicts with all three signals.

Citations and references

• California Revenue and Taxation Code sections 6051 and 6006(f), and Civil Code section 1656.1 — cited for retail-sale tax, specially ordered fabricated property and contractual reimbursement; complete current authorities and agreement absent
• October 9 request and transaction records — only the stated facts are reproduced; parties, design, order, invoice, instructions, electrical work, delivery and shipment evidence remain absent
• November 15 response — seller duty and agreement-dependent reimbursement, with no tax calculation, proceeding or later result; first page prints the conflicting date April 18, 1966
• Official Annotation 325.0450 — confirms November 15, 1990 and the California-delivery result but omits the price, party roles, reimbursement, date defect and evidence gaps

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.0450
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0450.pdf

Original ruling text

325.0450

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 322-3400

April 18, 1966

Ms. L--- B--D--- M---, Inc.
XXX --- ----- ---, CA XXXXX
RE:

SR -- XX-XXXXXX

Dear Ms. B---:
I am writing in response to your October 9, 1990 letter requesting legal advice regarding the applicability of tax to the sale of a “metal exhibit” by D---M---, Inc. (D---). The facts, as I understand them, are as follows. D--- custom fabricated a metal exhibit for B--- I---, Inc. (B---), a Pennsylvania Corporation. The exhibit was designed by I---, a California firm. The selling price of the property is $14,330.00. D--- did not include sales tax reimbursement on its invoice to B---, because the property was to be shipped directly out-ofstate. However, the purchaser later requested that D--- ship the unfinished product to I---, which “completed the work by adding electrical components to the unit.” I--- then shipped the exhibit out-of-state. Unless specifically excluded or exempted from taxation by statute, all gross receipts from retail sales or purchases for use within this state of tangible personal property are subject to either sales or use tax. (Rev. & Tax. Code § 6051.) Although the legal obligation to pay sales tax is on the retailer, Civil Code Section 1656.1 provides that the retailer may seek sales tax reimbursement from the purchaser. A “sale” is defined as including a “transfer for a consideration of the title or possession of tangible personal property which has been produced, fabricated, or printed to the special order of the customer” (Rev. & Tax. Code § 6006(f)).

Ms. L--- B---

-2-

November 15, 1990
325.0450

If D--- had sent the property directly out-of-state via common carrier, as originally planned, there would have been no sale in this state and no sales tax owing. Since, however, the property was instead delivered in this state per the purchaser’s instructions, the sale took place in California and is subject to tax. D--- has the legal duty to report and pay the tax on this sale to the Board of Equalization. Whether B--- owes sales tax reimbursement to D--- is a matter of agreement between the two corporations. Please feel free to contact us again if you have further questions. Sincerely,

Stella Levy
Tax Counsel

SL:cs