Could separate body and chassis sales remain exempt when the body was installed here and the chassis builder shipped the completed vehicle outside California?

Plain-English summary

A redacted purchaser wrote on April 6, 1967 after a recent conference. It asked Tax Counsel E. H. Stetson to confirm that the proposed procedure on page 2 of its absent letter would exempt separate sales by a body builder and a chassis builder.

Each proposed purchase order would require its vendor to ship or deliver that vendor's property to the purchaser at a directed point outside California. Before shipment, the body had to be installed on the chassis so the complete vehicle could travel as one unit.

The chassis builder would handle the final shipment because it had to service the vehicle before issuing a service warranty. A written agreement would authorize it to act as the body builder's agent in fulfilling the body builder's separate outside-delivery obligation.

Counsel conditionally approved exemption for both sales under that proposal. Without the agency arrangement, the purchaser-directed delivery of the body to the chassis builder would have completed a taxable California sale by the body builder. The parties therefore had to create an actual principal-agent relationship in which the chassis builder genuinely represented the body builder on shipment of the body portion outside the state.

Documentation was also essential. The body builder would retain shipping records showing the entire vehicle went outside California as one unit. One advance pool order could cover several vehicles without separate paperwork for every transaction, but the order and both vendors' retained shipping documents had to identify each vehicle and tie it to a specific purchase order.

If a pool order initially referred to unidentified vehicles, it had to be amended or supported by a supplemental order or other proof identifying the vehicles. Shipping documents likewise would need to identify each vehicle directly or by reference to its purchase order.

The source documents no executed agreement, completed vehicle, shipment or actual exemption. The live annotation publishes the proposal's core outside-delivery and agency conditions but omits the warranty reason, no-agency taxable alternative and pool-order record rules.

Common questions

Why could the body be installed in California without ending exemption?

Under the proposal, the body builder still had an outside-delivery obligation and appointed the chassis builder as its actual agent to perform that duty.

What if there were no real agency relationship?

Counsel said purchaser-directed delivery of the body to the chassis builder would then complete a taxable California sale by the body builder.

Why did the chassis builder handle shipment?

The request said it had to perform final service on the completed vehicle before issuing a service warranty.

Could one pool order cover several vehicles?

Yes. Separate documentation for each transaction was unnecessary if the order and both vendors' shipping documents identified every vehicle covered.

What if the advance order did not yet identify the vehicles?

It needed amendment, a supplemental order or other proof tying specific vehicles to the pool order; the shipping documents also needed vehicle-level identification.

Did the letter verify that the proposal was carried out?

No. It supplies no executed orders or agency agreement, vehicle identifiers, shipping records, tax amount or later proceeding.

Citations and references

• Sales and Use Tax Ruling 55 — historical chassis-delivery authority cited without a paragraph or reproduced text
• April 6, 1967 purchaser letter and recent conference — identified but absent
• Proposed purchase orders and body-builder/chassis-builder agency agreement — described but not executed in the source
• Proposed shipping and pool-order documents — vehicle-specific proof required but absent
• April 17, 1967 Tax Counsel response — conditionally approves both exemptions under the proposal
• Official Annotation 325.0880 — publishes the core agency structure while omitting the proposal's record rules

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.0880
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0880.pdf

Original ruling text

STATE OF CALIFORNIA

325.0880

STATE BOARD OF EQUALIZATION

April 17, 1967

--- --- ----- --- -----, -- XXXXX
Dear Mr. ---:
This is in reply to your letter of April 6 requesting confirmation of your understanding as a result of our recent conference that under the procedure described on page 2 of your letter the sale by both the body builder and the chassis builder will be exempt as a sale in interstate commerce. You have provided that the purchase order to the chassis vendor will require him to ship or deliver the property sold by him to you at an out-of-state point as directed. Upon compliance with this instruction, the chassis vendor will have complied with the requirements for an exempt interstate sale as set forth in Sales and Use Tax Ruling 55. The purchase order to the body builder will also require that he ship or deliver the body sold by him to you at an out-of-state point as directed. Before shipment, however, the body must be installed upon the chassis so that the complete vehicle can be shipped as a unit. You propose that the chassis vendor actually handle the shipping of the unit because he must finally service the vehicle in order to issue a service warranty. You propose that the body builder shall enter into a written agreement with the chassis builder authorizing the chassis builder to act as the body builder’s agent for carrying out the obligation to ship which the purchase order issued to the body builder requires of him. You also propose that the body builder retain appropriate shipping documents to show that the entire vehicle was shipped as a unit to a point outside this state. We believe that this procedure will result in tax exemption of both the sale of the chassis and the sale of the body. If it were not for the agency arrangement, the sale of the body by the body builder would be taxable because completed in this state by delivery to the chassis builder as directed by the purchaser. We believe, however, that it is an appropriate procedure for the body builder to designate the chassis builder as his agent for carrying out his obligation the ship the property to a point outside this state. It is understood that the legal relationship of principal and agent must be created between the body builder and the chassis builder so that the chassis builder will, in fact, represent the body builder in matters relating to the shipping of the body portion of the complete vehicle to a point outside the state.

--- --- ---

-2-

April 17, 1967
325.0880

You request a statement of our requirement that as to pool orders (an advance order for several vehicles) each transaction must be separately documented. There would be no necessity for a separate documentation of each individual vehicle contained in a single order provided all vehicles were covered by the order and by the shipping documents issued and to be retained by both vendors. The documents would of necessity refer to each individual vehicle covered thereby, so that each vehicle could be clearly identified as covered by a specific purchase order. If, however, the so-called pool order refers to unidentified vehicles, then it should be amended to identify each vehicle to be covered by the order. This could, perhaps, be done by supplemental order or other means of proving that the pool order covers specific vehicles. The shipping documents would presumably cover each specific vehicle either by reference to the purchase order or by specific reference to each individual vehicle. Very truly yours,

E. H. Stetson
Tax Counsel

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