Were car sales exempt exports when Mexican buyers and a United States consul took National City delivery and drove the vehicles to Mexico?

Plain-English summary

An unidentified National City dealer's protested items fell into two groups: numerous used-car sales to Mexican nationals and one automobile sale to the United States Consul in Tijuana. Both groups had been reported as foreign-commerce sales.

For the Mexican-national sales, the dealer charged sales-tax reimbursement and refunded it after customers supplied export proof. But no evidence showed delivery to anyone other than the purchasers at the National City business where they bought the cars.

Counsel thought a prior auditor likely allowed claimed foreign-commerce sales upon proof like that furnished at the hearing. Where a purchaser received and drove the car to the border, however, the exemption should not have been allowed despite documents showing border crossing and later Baja California registration.

Tax counsel concluded that the sales were not exempt exports. The purchasers took delivery in California, and driving the vehicles through the state was local use. Later evidence that the cars crossed the border and were registered in Mexico did not change the place or manner of delivery.

Counsel said charging and later refunding reimbursement would have been unnecessary if dealer employees had delivered the cars to an export broker at the border, to the customer at the border, or even to an export broker at the dealer's National City premises.

Ruling 55 separately described purchaser-conveyance export and forwarding/export-business delivery routes and generally taxed purchaser or representative delivery in California. A quoted 1965 Highway Patrol letter treated Mexican-purchaser driving as local use but contemplated employee delivery to Mexican police, supported by retained Customs export declarations or other proof.

The consul sale used a “Certificate of Mexican Export Via Buyer's Vehicle.” Its statement that merchandise was delivered into the purchaser's vehicle was impossible on these facts because the merchandise itself was the vehicle. The purchaser received the car and drove it to Tijuana.

Counsel recommended denying the petition. If the redacted officials wanted a Board hearing after reviewing the proposed recommendation, they were to notify counsel in writing within three weeks.

The source supplies no later hearing request, Board decision, tax amount or outcome. The live annotation publishes only the taxable-result rationale and omits the reimbursement/refund, alternate-delivery, certificate and procedural facts.

Common questions

Why did later proof of crossing and registration not cure the sales?

Because the purchasers first received the cars at the California dealership and drove them through California, which counsel treated as local use.

What seller-controlled delivery could have changed the sequence?

The opinion identifies dealer-employee delivery to an export broker or customer at the border, or delivery to an export broker at the National City premises, rather than delivery to the buyer.

What was wrong with the consul's certificate?

It certified delivery of merchandise into the purchaser's vehicle, but the merchandise sold was the vehicle itself. Counsel called that impossible.

Did export documents have no value?

The letter did not say that. It required documentary evidence for a qualifying seller/export route, but proof of later crossing could not undo purchaser delivery and California use.

Was the petition finally denied?

Not by this letter. Counsel recommended denial, offered an opportunity to request a Board hearing and referenced an approved but absent hearing report; no final action is supplied.

Citations and references

• California Sales and Use Tax Ruling 55(1)(E) and (F) — purchaser-conveyance and export-business routes
• January 22, 1965 Highway Patrol letter — quoted but not reproduced
• Certificate of Mexican Export Via Buyer's Vehicle — described but not reproduced
• September 22 hearing and approved October 16 report — report copies absent
• Official Annotation 325.1340 — publishes the purchaser-delivery/local-use result

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.1340
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-1340.pdf

Original ruling text

325 .1340

October 24 • 1969

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Dear I~ir.

This is with rc~erence to the petition of
and the he&r ing held on the ~a ~~er ia~ c ~ ~~t~~bor 22 ~~ San Di ego .

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The i tecs under pr otest are clas3ified into t~ro gr oups . One c onGi.J~d d oi' 1!u. ...erotw 3.:.,,lc::. o: ".,!:,;1:;d c ~7.•3 t o i·:ox ica n

t.tnt ;_ona l s -:•;hich H8r e t:re :ited fo r tax: r nport.ing pur~ot.r ns li!:e sul,::s in forei rrn commerc e . ~iJ.d Ol,i1e.1· ·1-,f',a a c.:.:1-J of a autc,:..o u ile to the :J.1::. ~ cc: ,Jt,~rt.e ~ Con s ul i:.1 ~ijuan a. It, t oo , ue.c t re,1tec.i l ike t1 5,de in foreign comr.ierce .

As f a r as t~10 saL..!O to tha 1-~m:ic.:~n Nationals we re concerned, 1 t ,;h.:. r veu s a l-.::J ta:-: ::-::i::-:b:~r se!:len 't , and when p roof of c:~I)ort w:::.:3 rccei vea l'ror,1 the custor.1er , the ~ales t.:1x v1as r ~f und ~d . If the c .::: rs had be en deli v e r eJ by ei:ployees to the t.;Xport bro ker at the borci.er or to the custor.:er 1::: plA.ce at the bonte r, or even co t~le t:....;.po1· r.. :.,.;"okc.:' .:: t of !);.;:.:3~.. c ~.:; i:: E·:.:::ti 0n .'.!l c ;,y; t?~er e would hnvc been no n eed to ndd sale.::; t :.1x r e ir.bur~~~0nt to the s::.:.lc and then J.ar..er re.r unu i t upon r eceip t of proo.!.· of ,?:-:port . _',12re i::; no 2vid ~nc e that the cars ·. rare rbli v~re rt to nnyo nc othor than the purcha~er a and that deli very w.:1s 1acde a t th,~ Hntion al City place o l busine3s ,-1here the c ars ~mrG purchc!Sed .

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We nre of the O!-)inion thnt i t i :3 very likely thc1.t Hr . S teel, i n t he prior andi.t , .:illo\;e che ;:o.r·ue r, t ~ ~ ;,r . .::1..:::cct .en .:;::c u:i..d not h.:we ocen
.:illv·'led ~~ .1 ~ ~1 <~ i n -.c:·l.~ .L;l"r1 (!t., .. ~~1iJ 1--c0 , i r1 .s~.:. t c ul t :~J t: ·.-- cu­ mcnt.:iry r cooi' i::.~. c1 t t 1w V }Hicl 2 u i d , .:.:1 1.'.ic t .. c :co;33 tl,c ~ .:.r.r.i.c r and ul ti::.a tely bee owe r ogi.sterc : :e:dco . 1

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325 .1340

October 24, 1969

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Ruling 55, subdivi sions (l) (E) '1nd 0.) ( F) contain provisi ons whe r ein sales to f oreign consumers are exempt from sales t ax . They a re: 11

(1) ••• Sales tax does not apply to s ales of pr operty which i a :

11

(E) Sold to a fo r eign purchaser for shipment abroad and

delivered to a ship , ai rplane or o ther convev_{.l_!l Cl~ furn i shed by_th0. -ourchecscr f(\r t~l£._ T)ll!''!"ose of c,~rr_d-:1£.):,)1c J,rope::cty

abo~rd and actually corried to a foreign de2tination,
ti tlc and control o..t' tile property passing to the foreign purchaser ur,on deli·rery , ~~L n o r,or'cion of the prc..-,erty bej...!1f.1_ysed or con 9J.__.l£!~d in the United · ;:itates . 11

(F)

Purchnscd for UGe sol ely outside this state and

deli v--crcd "co n 1.'o.c~:- -:,.; :~ t_r~ 3;~r:1: ' 57:z~:ct, D~cl-:ex-- or r; -~}1er Rs':.!:?.9.n e_ngag eel i_r:il,i~ p]:~:i:!~sp~~ :3 of n re1?_0:-iI.Y---.......1"..9 o c~9,f.\ H :
_gxpo:rt or nrr.:.rn7j .n, .for thcL'.' c x-::-ort.:.1t.icn, and octu(.1.lly deli vorcd to .:1 po:"'t cut.side th!J conti::.c;ntal li:1i t:J of the United St.:: tes r:.r.::..0!' to___;·,.:·~:..t1J?... ::.n,:r use r,h~rn.of. 11

(Underlining added for emphasis .}
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1rte rui1ng a 1 so proviaos
cnac saies ~ax ooes app1 y t o soies
of property which is deliv8retl to the purchaser or his representative in this state (except under conditions described in (E) above) . f1"l'\

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The .follovtlne; pa r ar:.r.:.iph is an extract from a letter 1-·l!'i tten

by Tax Counsel on January 22, 1905, t o the fis cal officer of the California Hie;hway Patrol in Sacrar.;.ento : 0

1,fotor vehicles delivered to ~-.: oxican purcho.sers in

Califo rnio. cn.nnot be re e;u rd eri. as e;(einpt export i terns since the driving of the vehicles in this state con­

stitutes a loca l use and makea the t r a nsac~ion subject to t,hc (~2.:~j_f,::,1~~~i:i :::-.:.2.~::: t ~::. i_.,_r~ ~·:ot:ld [!Ost:::~ th2:: the vehicles whi ch tho Hi 0 h~·ray t'atrol may sell to police agend. es in Lexi co ;•:ould be driven to the purch~1ser in r;;exico by ,:m c:.1ployec of the P.1trol, thus qu.:1lifying

for the exeLlption . It is required, however, that
co p:i.es of U. S . Custo1.;s shippers I export declaro.tions fil ed with tho Collector of Custor.is or othe r docu:::.entary evidence of export Du st be obtained and r etained by retµilers to support deductions of sales as export sales . n The foregoin~ clearly indicates the position taken by the board in mattie r s involvinr i'orei r,n commerce exer,1:r->tio n cl.,:,i1:1s

\,, 325 . 134-0
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October 24t 1969

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where the sale is of an automobile- and the delive ry is to the purchaser . Clear ly , delive r y of the vehicle to t he purchAser who driv~s it to t~e forei ~n destination will not be consistent with the r equirements fo r sale s tax exemption under ruling 55.

We can not ac c ept the " Certi.fic:.1te of Lexie.in Export Via

Duyer ' s Vehicle 11 sir::::1.ed by r!r.

• _. ~he salesr.1a n who
  sold the
  · · J to the U. G. Con~ul in rr ijuana. . He has
  certified tha t he delive r ed the merchandi se into the purchaser;s vehicle. This is i mpos!:lible . s ince the me rchandi se was the pru·ckiser I s v0~1ic l e . - 't:~o
  ·d 1:r.:is c.cli vc:-cd to the
  purc h:~se r who drove i t -i:o 'l'i,ju~na . Thus . th0 sal e is not exet1pt from sales tax fe r t he same r eason that the aales to the Mexican purchaser3 who dro ve their auto1;,obil2::, to '1'ijuana a re not e;ce1:.pt .

The for nP:;oing i s oUl" r eason for recor.~1;;:,mding thD.t the
:petition f0r !"":'.'<l~t. ~rr·1tn:1.tion be dr-:ni ed . ".i. l, aft e r- consid e rin~ our propo8eci .r·er.::oMnencic\i:;ion anti ti1e 1·ea~ow:.i .J:or i t , th.a o _'.fici u l3
. deBir~ a he u r infl before the boar d on the matter, p l ~..:nc r:.cti.:':t ::::; i.~ :·.~ 2. ~!:1;:: ~:ti-cl1:~r1 tl:re~ ~··:·-~ eks .

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We are sorry a wors fuvoraiJle .i:e~or:.meri.<lati on cc.nnot be given , but as you cen see , even \·tl th s t .:2tc c1e;encies who sell cor~ to ;-.,:!xic,:n ii otion2.l::; {or ::...ny othe r 1.'or e.i..P'n purchc1s e rs) t he board has disallm·md the t'o rei.£11 cor.:me rce exemption i f the
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San Diego - District Administr ator

Attached a r e two copi es of hearing r eport dated 10/16/69 which has been approv~d . The roarin g on this matter via::; held 9/22/69 in Sa n Diep;o. - ~ ae , -- --o.:,el.i.,r.i awB i,tH, ..eL le '!! - f- - - s ~e1 :ei1- !19~tasi'" l:•±
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