Did section 6387 exempt sales to Germany's Ministry of Defense when its own California representative received the goods for later export?

Plain-English summary

A redacted seller had several contracts with the Federal Republic of Germany's Ministry of Defense, identified as BWB. BWB's United States representative, the German Military Representative, operated a transportation warehouse and shipping facility in Sun Valley, California.

The representative claimed its facility operated so that California shipments to it were exempt. The source supplies neither that operating procedure nor any contract, delivery or export record.

Section 6387 exempted qualifying property bought solely for use outside the United States when it was delivered to a forwarding agent, export packer, or similar export business and actually delivered outside the continental United States before use.

Staff counsel concluded that the exemption did not apply. Although the German Military Representative's California operation might have effects similar to a forwarding agent, delivery to the purchasing entity in California made section 6387 unavailable.

Accordingly, tangible-personal-property sales to the Ministry were subject to sales tax when delivered to its California representative for later Germany export.

The letter does not identify the goods, prices, title terms, exact delivery practice, foreign ports, actual use, tax amount or later proceeding. The live annotation repeats the result but adds no missing transactional evidence.

Common questions

Why did forwarding-agent-like operations not qualify?

Because the recipient was the foreign purchaser's own representative. Counsel treated delivery to it as delivery to the purchasing entity in California, regardless of operational similarity to a forwarding agent.

What conditions did the quoted statute require?

The property had to be bought solely for use outside the United States, delivered to a qualifying forwarding agent, export packer or other export business, and actually delivered to a port outside the continental United States before any use.

Was later export to Germany enough?

No. The opinion says the intervening California delivery to the purchaser's representative made the exemption inapplicable.

Did the source prove how the warehouse operated?

No. It reports the representative's claim but supplies no warehouse procedure, agency agreement, shipping record, export document or foreign-port proof.

Was the seller a construction contractor?

The PDF does not say so. It identifies only a redacted party with several contracts to sell tangible personal property to the Ministry.

Citations and references

• Cal. Rev. & Tax. Code § 6387 — quoted foreign-use, export-intermediary and foreign-port conditions
• February 10, 1981 request — identified but not reproduced
• March 4, 1981 Staff Counsel Mary c. Armstrong response — purchasing-entity conclusion
• Official Annotation 325.1196 — publishes the same taxable-sale result

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.1196
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-1196.pdf

Original ruling text

325.1196

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

March 4, 1981

916-445-3237
Your letter of February 10, 1981 to --- of the San Jose District office has been referred to the legal staff for reply. Your inquiry concerns the correct application of tax to your sale of tangible personal property to the Federal Republic of Germany. We understand that --- has several contracts with the Federal Republic of Germany’s Ministry of Defense (BWB). --- representative within the U.S.A., the German Military Representative (GMR), operates a transportation warehouse and shipping facility in Sun Valley, California. The GMR claims that their shipping facility is operated in such a manner that shipment form within the State of California to the facility are exempt from California sales tax. Revenue and Taxation Code Section 6387 exempts from sales tax the “gross receipts from sales of tangible personal property purchased for use solely outside the Untied States and delivered to a forwarding agent, export packer, or other person engaged in the business of preparing goods for export or arranging for their exportation, and actually delivered to a port outside the continental limits of the United States prior to making any use thereof.” It is our opinion that the requirements of Section 6387 are not met under the facts you describe. Although the effect of GMR’s operations in California may be similar to the operations of a forwarding agent, delivery to a purchasing entity in California will in all cases render the exemption found in Section 6387 inapplicable. In conclusion, it is the position of this Board that sales of tangible personal property to the Federal Republic of Germany’s Ministry of Defense which are delivered to the Ministry’s representatives in California, the GMR, for later export to Germany, are subject to sales tax. If you have further questions concerning this matter, please write this office.

Very truly yours,

Mary c. Armstrong
Staff Counsel