What records should a California vehicle business keep to prove that it delivered a vehicle to its buyer outside the state?

Plain-English summary

An unidentified representative's August 2, 1988 letter described a redacted business that converted customer-owned factory automobiles into stretch limousines and delivered many completed vehicles to their owners outside California. The Board's Santa Ana office continued to demand more proof even though the business believed its evidence was adequate. The business was under audit, and the letter, vehicles, deliveries and audit record are absent.

Two example purchaser-signed delivery certificates accompanied the request. The business reportedly sent each driver with instructions and a few hundred dollars for food and gasoline, provided no credit card, and often had the driver pick up another car for the return trip. The certificates, instructions, expense records and return-car records are not reproduced.

Counsel expressly declined to apply the response to transactions covered by the audit. If the business disagreed with audit findings, counsel identified a petition for redetermination or full payment of tax, interest and penalty followed by a refund claim, with possible hearings before a hearing officer and the Board. The source supplies no audit finding or later procedural result.

No particular paper could guarantee the section 6396 exemption. Actual out-of-state delivery controlled, and staff could look behind any certificate to determine what happened. Counsel cited Engs Motor Truck Co. as an example but did not quote it.

As practical evidence, the Board suggested having both the buyer and the business's driver sign an out-of-state delivery certificate before a notary at the delivery location. The notarial certificate should show that both people appeared there. The driver should also keep fuel, hotel, transportation, and similar receipts documenting presence near the place and date of delivery.

Counsel said such a certificate normally documented that the buyer and driver were present outside California on the delivery date, not necessarily that every assertion in the certificate was true. The stated Regulation 1620 enclosure is absent. The live annotation publishes the suggested evidence and date, calls the business a dealer, and omits the source's stretch-limousine, request, audit, no-guarantee, look-behind, remedy and missing-record limitations.

Common questions

Did a notarized certificate guarantee the exemption?

No. Counsel said actual delivery controlled and staff could look behind the paperwork.

What did the notary need to establish?

The notarial certificate should indicate that both the purchaser and driver appeared and signed at the out-of-state delivery location.

What supporting receipts did counsel suggest?

Gasoline, hotel, transportation and similar cash-expenditure receipts showing the driver's presence at or near the location and delivery date.

Did counsel approve the sample certificates already supplied?

No. The letter does not reproduce or approve them and expressly avoids deciding audited transactions.

What could the business do if it disputed the audit?

Counsel described a petition for redetermination or full payment followed by a refund claim, with possible hearings before a hearing officer and the Board.

Does the source reveal how the audit ended?

No. It supplies no finding, amount, petition, payment, claim, hearing, appeal or other outcome.

Citations and references

• Revenue and Taxation Code section 6396 — actual out-of-state delivery controls the claimed exemption
• Regulation 1620 — stated enclosure absent
• Engs Motor Truck Co. v. State Board of Equalization (1987) 189 Cal. App. 3d 1458 — cited without a quoted passage as a look-behind example
• August 2 request, certificates and audit records — described but not reproduced
• Official Annotation 325.0602 — publishes the suggested certificate and receipt practice while omitting material provenance and limits

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.0602
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0602.pdf

Original ruling text

325.0602

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

(916) 445-6493

September 26, 1988

Out-of-state vehicle deliveries - documentation
Dear:
In your August 2, 1988 letter to Mr. Gary Jugum, Assistant Chief Counsel, you write in summary that you represent --- Corporation. Your client modifies factory automobiles owned by its customers into stretch limousines. Your client delivers many of these cars to their owners outside the State of California. Your client believes that it has adequate proof that the delivery actually occurred outside the state, but the Board's Santa Ana office continues to require additional proof of the out-of-state delivery. You attached to your letter two examples of certificates-signed by purchasers attesting to the out-ofstate delivery. You relate that --- sends a driver out with delivery instructions and a few hundred dollars in cash to pay for food and gas. --- does not give a credit card to these drivers. Many times the driver will then pick up another car and drive it back to the factory. You request that we give your client written guidelines or firm rules as to what constitutes adequate proof of out-of-state deliveries. Opinion Since --- is under audit by the Board, this letter should not be construed as relating to the transactions covered by that audit. As you know, if your client disagrees with the findings of a Board audit, it may file a petition for redetermination of the audit findings, or pay the tax, interest, and penalty in full and file a claim for refund. In either case, your client may have a hearing before a Board hearing officer and before the Board itself. The Board staff cannot give you absolute assurance that any particular documentation will always constitute adequate proof of out-of-state delivery. It is the fact of out-of-state delivery, not the documentation, that determines whether you client may claim the sales tax exemption under Revenue and Taxation Code Section 6396. The Board staff is always entitled to look behind the documentation of a particular transaction in order to determine the actual facts involved. For example, see Engs Motor Truck Co. v. State Board of Equalization (1987) 189 Cal. App. 3d 1458. With the foregoing in mind, our suggestion is that your client should document out-ofstate deliveries by having a certificate of out-of-state delivery executed by both the

purchaser and your client's driver before a Notary Public at the out-of-state location where the delivery occurs. The Notary's certificate should indicate that both the purchaser and the driver were present to sign the certificate in the presence of the Notary. The Board will normally accept such a certificate as documentation, not necessarily of the truth of the facts asserted in the certificate, but rather as documentation of the fact that the driver and the purchaser were both actually present at the out-of-state location on the date of delivery. Your client should also require its drivers to obtain gasoline receipts, hotel receipts, transportation receipts, and the like for their cash expenditures which will document the driver's presence at the out-of-state location on or about the date of delivery of the vehicle. Your client should retain these receipts in its records as additional documentation together with the notarized certificate of out-of-state delivery. I enclose a copy of Regulation 1620 for your information. Please feel free to contact me if you have any further questions or comments about this letter.

Sincerely,

John Abbott
Tax Counsel

JA.:jb
Enclosure