Could a seller preserve interstate-sale exemption when film prints went first to the buyer or its representative in California before outside shipment?

Plain-English summary

A redacted seller wrote on May 13, 1957 after client S--- R--- objected to billed California state and local sales tax. The client argued that the seller shipped the merchandise to Chicago. The seller enclosed the client's letter, but neither document is published.

The seller explained that film went to Chicago only after prints were first delivered to the buyer in Hollywood for "positive editing" and returned to the seller for shipment. A separate set of prints mentioned in the absent client's third paragraph went to the client's redacted Hollywood recipient and apparently was shipped by the client because it never came back to the seller.

Tax Counsel E. H. Stetson distinguished inspection from use. He said the Board previously allowed prints to go to a purchaser's California representative for inspection and then return to the vendor for outside shipment without defeating the seller's interstate-sale claim.

Positive editing was different in counsel's preliminary view. If it was a purchaser use of the property, delivery for that purpose in California prevented the seller from later claiming the interstate exemption.

Counsel expressly said he did not know what positive editing involved. He invited more information and suggested that the seller contact the Los Angeles district office so its representatives could prepare a complete report. The source gives no follow-up.

For the second set of prints, counsel was direct: if the client rather than the seller actually shipped the merchandise outside California, there was no basis for the seller's exemption.

The letter cites no statute, regulation, case or constitutional provision and supplies no print, contract, invoice, tax amount, shipment proof or final proceeding. The live annotation publishes only the general inspection-versus-use distinction, omitting both the factual uncertainty and customer-shipment alternative.

Common questions

Could California inspection preserve the seller's exemption?

Yes, under the unidentified prior Board holding, if the purchaser's representative inspected the prints and returned them to the vendor for the vendor's outside shipment.

Why did positive editing matter?

Counsel viewed it as a purchaser use rather than mere inspection, which would make California delivery for that purpose incompatible with the seller's later interstate-sale claim.

Was that editing conclusion final on a complete record?

No. Counsel said he was unsure what positive editing involved and invited more information and a Los Angeles district report.

What if the purchaser shipped the prints outside California?

Counsel said there was clearly no basis for the seller's exemption if the customer, rather than the seller, actually made the outside shipment.

Does the source show how much tax was billed?

No. It identifies state and local sales-tax billing but supplies no invoice, rate, amount or payment.

Is the client's objection letter available?

No. The response says it was enclosed and refers to its third paragraph, but the published PDF omits it.

Citations and references

• May 13, 1957 seller request — described but not reproduced
• Enclosed client objection letter — absent despite the response relying on its third paragraph
• Unidentified prior Board inspection holding — no citation or record supplied
• June 3, 1957 Tax Counsel response — preliminary positive-editing analysis and conditional customer-shipment result
• Official Annotation 325.0900 — publishes only the inspection-versus-use distinction

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.0900
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0900.pdf

Original ruling text

325.0900

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

June 3, 1957

C--- --- I--XXX --- Street
--- XX, California

Attention:

Mr. I--- M. J---

--- - XXXXXX

Dear Mr. J---:
In your letter of May 13, you state that one of your clients, S--- R---, has objected to your billing for the State and local sales tax upon the basis that you ship the merchandise to them at Chicago. You enclose a copy of your customer’s letter setting forth his contention. You point out that although it is true you ship the film to Chicago, the prints were first delivered to the buyer in Hollywood for positive editing and were later returned to you for shipping. You state that the prints referred to in the third paragraph of your customer’s letter were delivered by you to their H--- E--in Hollywood and evidently were shipped by them as they were not returned to you for shipping. Although we have held that such items as prints may be delivered to a purchaser’s representative in this State for inspection and returned to the vendor for out-of-state shipment without preventing the seller from validly claiming exemption as an interstate sale, we believe that where the purchaser makes a use of the property such as positive editing the delivery in this State to the purchaser for such purpose prevents the seller from subsequently claiming the interstate exemption. We are not sure just what the positive editing involves and we shall be glad to give further consideration to the question if more information is provided us concerning the details of the transaction. We suggest that you contact our Los Angeles district office and discuss the matter with our representatives there so that a complete report could be made to this office by our representatives.

C--- F--- I---

-2-

June 3, 1957
325.0900

With respect to the prints referred to in the third paragraph of your customer’s letter, it is clear that there is no basis for exemption if your customer rather than you actually shipped the merchandise to the out-of-state point. Very truly yours,

E. H. Stetson
Tax Counsel

EHS:ds

cc:

Los Angeles – Compliance