Did a California retailer have to collect use tax when it physically delivered property outside California to a buyer not known to be a California resident?

Plain-English summary

Gary J. Jugum's internal memorandum to James E. Mahler followed an April 17, 1987 discussion with Donald J. Hennessy and E. L. Sorensen Jr. about section 6203. The discussion proceeded even though W. E. Burkett, a planned participant, was unavailable. No separate notes or assignment are supplied.

The memorandum considered a California retailer physically delivering property outside California to a purchaser not known to be a California resident. It did not identify a retailer, purchaser, property, sale, destination or actual delivery. Counsel was reluctant to apply section 6203 literally because of due-process observations attributed to Montgomery Ward v. State Board of Equalization, 272 Cal. App. 2d 728.

Historical section 6247, as described, imposed an “aggressive double presumption” for outside delivery to a known California resident and supplied a certificate procedure protecting the retailer. Read with section 6421, counsel said it protected against the “hard facts” as well as the presumption. But section 6247 contemplated the certificate only for a known resident, and section 6421 did not literally cover an exemption based on use outside California. Counsel resisted placing a seller in a worse position when delivery was to someone other than a known resident merely because no express statutory protection applied.

Although “not free from doubt,” the memorandum applied Montgomery Ward's concept that outside delivery could disconnect a seller from the collection obligation in some circumstances. Counsel viewed the state's factual position here as weaker because Montgomery Ward itself involved deliveries to known California residents.

The memorandum raised a separate, more serious question whether section 6247 could be used at all after Montgomery Ward for outside physical delivery to a known California resident. It reported a prior staff conclusion to continue relying on section 6247 but supplies no underlying analysis, approval or later treatment.

No certificate, residency record, use evidence, tax measure, assessment, payment, claim, appeal or applied outcome appears. The live annotation states without qualification that the seller need not collect when it delivers outside to a person not known to be a California resident. It omits the internal discussion, statutory gaps, due-process authority, explicit doubt, separate known-resident issue and absence of transaction records.

Common questions

What residency fact mattered?

The purchaser was not known by the retailer to be a California resident. The memorandum does not establish that the purchaser actually was a nonresident.

Why was counsel reluctant to apply section 6203 literally?

The memorandum cited due-process observations in Montgomery Ward and the possibility that physical outside delivery could disconnect the seller from use-tax collection.

What protection did section 6247 provide for a known resident?

As described, it paired a double presumption with a certificate procedure. Counsel said that express protection contemplated a known California resident only.

Why did unknown residency create a statutory gap?

The seller lacked section 6247's express certificate route, while section 6421 did not literally cover an exemption based on use outside California.

Was the no-collection conclusion certain?

No. The memorandum expressly called the matter “not free from doubt.”

Did the memorandum resolve section 6247 for known residents?

No. It raised a more serious question after Montgomery Ward and reported an earlier decision to keep relying on section 6247, but supplies no supporting or later record.

Citations and references

• Revenue and Taxation Code sections 6203, 6247 and 6421 — discussed for collection, presumptions, certificates and statutory protection; complete provisions and current law absent
• Montgomery Ward v. State Board of Equalization, 272 Cal. App. 2d 728 — cited for due process and collection disconnection; full opinion and later treatment not supplied
• April 17 discussion and prior staff conclusion — identified but unsupported by meeting notes, analysis, approval or implementation records
• April 30 memorandum — tentative unknown-residency view and unresolved known-resident question, without transaction or outcome records
• Official Annotation 325.0570.280 — states the result while omitting the source's doubt, statutory gaps, provenance and evidentiary limits

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.0570.280
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0570-280.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. James E. Mahler

From:

Gary J. Jugum

325.0570.280

Date:

April 30, 1987

Subject:

On April 17, 1987, I did discuss with Messrs. Hennessy and Sorensen the question of the interpretation of Revenue and Taxation Code section 6203. I hadn’t planned to discuss the matter at that time since Mr. Burkett was not available, but we proceeded anyway. Where tangible personal property is delivered by a California retailer to a purchaser at a point of physical delivery outside this state and the purchaser is not known to be a California resident, I am reluctant to apply section 6203 literally in view of the due process observations of the court in Montgomery Ward v. State Board of Equalization, 272 Cal. App. 2d 728. Section 6247 does provide an aggressive double presumption in the circumstance where property is delivered outside this state to a known resident of this state. Section 6247 does provide a means for the retailer to protect himself from the presumption, and when section 6247 is read with section 6421, the seller is protected from the hard facts as well as the presumption. Section 6247 contemplates use of the certificate in the case of a known resident only. I am reluctant to see the seller in a worse position where the property is delivered to a non-resident. Where the delivery is to someone other than a known a resident, the seller is without an express statutory means of protecting himself from the collection obligation. Section 6421 does not literally cover the case where the basis for exemption is use outside this state. While the matter is not free from doubt, we believe it appropriate to apply the concept of the court in Montgomery Ward, that there are circumstances where the seller can disconnect himself from the use tax collection obligation by delivering the property outside this state. A more serious question may be whether we can utilize section 6247 at all after Montgomery Ward; that is, whether we can utilize that section where there is a physical delivery outside this state to a known California resident. We have previously concluded, after the Montgomery Ward decision was handed down, that we would nevertheless rely on section 6247. in the case at hand, the facts are weaker for our side in one sense than in Montgomery Ward, since that case also concerned deliveries to known California residents.

GJJ:sr
cc:

Mr. W. E. Burkett,
Mr. Donald J. Hennessy

Mr. E. L. Sorensen, Jr.