Were automobiles exempt when nonresident buyers hired common carriers to pick them up in California and deliver them out of state?

Plain-English summary

The official PDF linked from Annotation 325.0663 answers an absent April 14, 1994 letter from a redacted California automobile retailer. Some out-of-state customers hired common carriers to pick up vehicles from the retailer and deliver them outside California. The bills of lading named each customer as both shipper and receiver, and the customers did not take physical possession in California.

Counsel assumed the customers bought for their own use rather than resale and were not known by the retailer to be California residents. On that assumption, the letter did not analyze section 6247's California-resident presumption. It also noted that sales tax was imposed on the retailer while contractual sales-tax reimbursement could be collected from the purchaser.

The delivery element of the interstate-sale exemption was satisfied even though the purchasers hired the carriers and the bills of lading named the customers as shipper and receiver. The remaining condition was contractual: the sales contracts themselves had to require out-of-state shipment.

Because the request did not state whether the contracts contained that requirement, the letter made exemption conditional on that missing fact. It supplies no contract, vehicle, invoice, bill of lading, carrier record, delivery, tax amount or later result.

The official source layers conflict. The linked PDF's first page is dated August 1, 2006 while its continuation says May 12, 1994. The live annotation is dated May 12, 1994 but describes an auctioneer selling unspecified property, not an automobile retailer, and says a qualifying nonresident-customer transaction produces neither sales-tax liability nor a use-tax-collection duty. The linked PDF makes no use-tax-collection holding. Neither official source explains these differences, so this page does not merge the auctioneer and automobile facts or import the live use-tax conclusion into the PDF's transaction.

Common questions

Did a buyer-hired carrier satisfy the delivery element?

Yes, under the linked PDF, because the carrier took the vehicle from the retailer and the buyer took no California possession.

Did naming the customer as shipper and receiver defeat that result?

No. Counsel still treated common-carrier delivery as satisfied on the described facts.

What contractual fact remained unresolved?

The request did not say whether the sales contracts themselves required shipment outside California.

Why did counsel assume the buyers were not California residents?

The source supplies no residency evidence; counsel expressly made that assumption and therefore did not discuss section 6247.

Does the live annotation describe automobiles?

No. It describes an auctioneer and unspecified property, despite linking to the automobile-retailer PDF under the same annotation number.

Can the live annotation's use-tax result be applied to the automobile facts?

The sources do not establish that. The live entry adds the result, while the linked PDF does not address it and does not resolve the taxpayer or date conflict.

Citations and references

• Revenue and Taxation Code sections 6051, 6247 and 6396; Civil Code section 1656.1; Regulation 1620(a)(3)(B)(2) — cited historical rules and assumption
• April 14 request, contracts, bills of lading and delivery records — described but not reproduced
• Linked PDF — automobile retailer, August 1, 2006 first page, May 12, 1994 continuation, no use-tax-collection holding
• Live Annotation 325.0663 — auctioneer, May 12, 1994 date and added use-tax-collection result; conflict unresolved

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.0663
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0663.pdf

Original ruling text

325.0663
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

450 N STREET, SACRAMENTO, CALIFORNIA MIC: 85
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-2608

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego

August 1, 2006

MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS

W--- C--- A--Attn: D--- W--XXXX --- Plaza Circle
---, CA XXXXX
Re:

Controller, Sacramento

BURTON W. OLIVER

Executive Director

W--- C--- A---

Dear Mr. W---:

This is in response to your letter dated April 14, 1994 in which you ask how tax applies to sales of automobiles by W--- C--- A--- (W---) to its out-of-state customers. You supplied us with the following information. W--- is a California retailer making retail sales of automobiles. Some of those sales are made to out-of-state customers who hire a common carrier to pick-up and deliver the automobile to the customer's out-of-state location. The bill of lading shows the customer as both the shipper and the receiver. The common carrier picks up the vehicle from World and then delivers it to the customer's out-of-state location. The customer does not take physical possession of the vehicle in this state. We assume the customers to which you refer purchase the vehicles for their own use and not for resale. We also assume that these customers are not known by you to be California residents. I therefore do not discuss the provisions of Revenue and Taxation Code section 6247 (presumption that property purchased for delivery outside California by a purchaser known by the retailer to be a California resident is purchased for use in this state). Discussion A retailer owes sales tax measured by the retailer's gross receipts from the retail sale of tangible personal property in California unless the sale is specifically exempted or excluded from tax by statute. (Rev. & Tax. Code § 6051.) The sales tax is imposed upon the retailer, but the retailer may collect sales tax reimbursement (usually itemized on the invoice as "sales tax") from the purchaser if the contract of sale so provides. (Civ. Code § 1656.1.)

W--- C--- A---

-2-

May 12, 1994
325.0663

Since W--- is a California retailer and its out-of-state customers purchase the vehicles for their own use and not for resale, W---'s sale is a taxable retail sale unless there is a specific exemption applicable. The exemption relevant to these transactions is provided by Revenue and Taxation Code section 6396. It provides an exemption from sales tax when the contract of sale requires the property to be shipped, and the property is shipped, to a point outside this state by the retailer by means of: (1) facilities of the retailer, or (2) delivery in this state by the retailer to a common carrier for shipment to an out-of-state point, whether hired by the purchaser or not. (Reg. 1620(a)(3)(B).) According to your letter, the out-of-state customer hires a common carrier to take delivery of the automobile from World. The automobile is then shipped to the customer's out-ofstate location. You further state the customer does not take possession of the vehicle until it is delivered to its out-of-state location. Thus, the delivery requirement of 1620(a)(3)(B)(2) is satisfied. You have not stated if the contract of sale requires the property to be shipped out of state (although you have stated it is shipped out-of-state) but if the contract does so state, the additional requirement of Regulation 1620 is satisfied and the transaction would be exempt from sales tax. If we can answer any other questions please feel free to write again. Very truly yours,

Rachel M. Aragon
Staff Counsel
RMA/md
cc:

--- - District Administrator