Did a print become an exempt interstate sale when the customer picked it up at the seller's California plant and later returned it for outside shipment?

Plain-English summary

A redacted seller wrote on October 15, 1951 about prints it made from customer negative film in its possession. It delivered the finished prints to customers at its plant.

From a few days to as long as two or three weeks after pickup, a customer would return a print, ask the seller to ship it outside California for the customer's account and request credit for the sales tax charged at pickup.

Tax Counsel E. H. Stetson found that pickup had already completed a taxable California sale. Returning the print later and asking for outside shipment did not convert that finished transaction into an interstate sale.

Counsel said exemption required seller delivery to the purchaser outside California or seller delivery to a carrier consigned to an outside point in fulfillment of the sales agreement. That delivery had to complete the sale, not occur afterward.

The letter separately addressed metal film cans sold by the recipient back to a redacted company and delivered to its California representative. The recipient apparently had acquired title to the cans when it bought raw film in containers originally considered nonreturnable.

Tax treatment of the can resale depended on the buyer's use. Counsel presumed the company intended to use them later as returnable containers, cited three conditions in an absent Ruling 49 enclosure and asked for more facts. Nonreturnable containers would not be taxed; if later use made them returnable, the sale to the user appeared taxable.

The source documents no specific print, can, invoice, credit, destination, tax amount or follow-up. The live annotation publishes the complete print analysis but omits the entire conditional container issue and characterizes the pickup charge as sales-tax reimbursement rather than the PDF's simpler "sales tax."

Common questions

Why did the later outside shipment not exempt the print?

The sale was already complete when the customer picked up the print at the seller's plant. Outside shipment occurred only after that California delivery.

How quickly did customers return prints?

The source gives a range from within a few days to as long as two or three weeks after pickup.

What shipment would have supported interstate-sale treatment?

Seller delivery outside California or seller delivery to a carrier consigned outside the state had to fulfill the agreement and complete the original sale.

Did counsel order the requested tax credit?

No. He found the California sale taxable and supplied no credit order, amount, refund procedure or later result.

Were the metal film cans taxable?

The answer was conditional. Nonreturnable containers would not be taxed, but cans made returnable by their later use appeared taxable as a sale to the user.

What were Ruling 49's three conditions?

The published source does not include them. It says a copy was enclosed, but the enclosure is absent.

Citations and references

• Unidentified interstate-sale completion rule — stated without a legal citation
• Sales and Use Tax Ruling 49, Containers — historical three-condition enclosure absent
• October 15, 1951 seller request — identified but not reproduced
• November 19, 1951 Tax Counsel response — completed print sale and conditional container analysis
• Official Annotation 325.0980 — publishes only the print issue

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.0980
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0980.pdf

Original ruling text

325.0980

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

November 19, 1951

Gentlemen:
This is in reply to your letter of October 15 concerning the application of the California retail sales tax with respect to charges for prints made by you from a customer's negative film in your possession, which prints are delivered by you to the customer at your plant. You state that subsequently from within a few days to as long as two or three weeks later the customer returns the print to you and requests you to ship it out of state for his account and credit him for the sales tax which you charged when the customer originally picked up the print at your plant. Under these circumstances it is our opinion that there has been a completed sale of the print in this state to your customer and that the fact that he subsequently returns the print to you, requesting you to ship it outside the state, does not prevent the sales tax from applying. It is only when the seller in fulfillment of the sales agreement delivers the goods to the purchaser at a point outside this state or to a carrier for shipment to the purchaser at a point outside this state that the tax is rendered inapplicable on the basis that the sale is one in interstate commerce. The delivery to the out-of-state point or to the carrier consigned to the out-of-state point must be the act that completes the sale transaction and not an act that occurs subsequent to the completion of the sale. You also inquire concerning the application of the sales tax with respect to sales by you of metal film cans to --- Company. Apparently these cans were originally considered to be nonreturnable containers to which you acquired title when purchasing raw film contained therein. Thus, when you sell these cans back to --- Company with delivery being made to the company's representative in this state, the application of the tax depends upon the use that will be made of the cans by --- Company. Presumably it is that company's intention to use them in the future as returnable containers. We are enclosing a copy of Sales and Use Tax Ruling 49, Containers, and suggest that you give consideration to the three conditions set forth therein under which the tax does not apply to sales of containers. If you wish us to give you an opinion in the specific instance, please advise us the use that will be made of the containers purchased from you. The tax will not apply, of course, if they constitute nonreturnable containers when sold by

you. If they constitute returnable containers by virtue of their subsequent use, it would appear that the tax would be applicable as a sale of returnable containers to the user thereof.

Very truly yours

E. H. Stetson
Tax Counsel
EHS:ph
cc: Mr.