Was a refrigerated truck exempt after a power-of-attorney holder took California delivery and then transported it nonstop to Costa Rica?

Plain-English summary

An adviser's client was described in the PDF as an importer/exporter specializing in seafood products and using refrigerated vehicles. In May 1995 a Costa Rican company asked it for help buying a refrigerated truck for Costa Rica.

An early-May power of attorney had an illegible date. The quoted language gave an attorney-in-fact authority to undertake specified acts, with substitution and revocation, including purchase, transport and business functions in Santa Clara, Alameda and San Francisco Counties.

On May 3, a truck was bought from a San Jose company for $29,854; the buyer line used a redacted entity followed by “by” and a redacted signer. Its refrigeration unit was rebuilt in California, it was ready May 24 and, according to the request, left San Jose at 3:00 a.m. May 25 on a continuous nonstop Costa Rica journey.

The writer claimed its documents showed certainty against domestic diversion. Counsel instead applied the rule that export begins only after shipment or common-carrier entry and that California delivery to a purchaser or representative before irrevocable commitment is taxable regardless of intent or actual foreign transport.

Delos supported treating an attorney-in-fact as an agent under written authority. Counsel concluded the power holder acted as the purchaser's representative when taking California delivery, so sales tax applied.

For additional requests to facilitate Costa Rican-company vehicle purchases, counsel repeated four conditions: foreign destination, irrevocable commitment at sale, no earlier purchaser/representative delivery, and actual foreign delivery before use.

The two official evidence layers conflict materially. The live annotation makes the importer/exporter the Costa Rican company's agent and says the vehicle left the day after purchase. The PDF's redacted labels instead frame the power as authority for XX, attribute preparation to seller C, and place purchase May 3 and departure May 25 after rebuilding. Neither layer resolves the roles or chronology.

No actual foreign-arrival record, tax amount, filing, audit or later proceeding is supplied.

Common questions

Why did the power of attorney matter?

It supplied written authority supporting an attorney-in-fact agency relationship. California delivery to that purchaser representative came before irrevocable export commitment.

Did a continuous nonstop journey cure earlier delivery?

No. Counsel said actual later foreign transport was immaterial once the purchaser's representative had taken California delivery too soon.

How long after purchase did the truck leave?

The sources conflict. The PDF says May 3 purchase, rebuilding, May 24 readiness and May 25 departure; the live annotation says the vehicle left the day after purchase.

Who was principal under the power of attorney?

The sources do not align. The live annotation says the importer/exporter acted for the Costa Rican firm, while the PDF's redacted labels and quoted power refer to acting for XX.

What future export conditions did counsel identify?

Foreign destination, irrevocable commitment at sale, no prior purchaser or representative delivery, and actual foreign delivery before use.

Citations and references

• Cal. Rev. & Tax. Code §§ 6051, 6007 and 6284 — retail and vehicle-retailer rules
• Regulation 1620(a)(3)(C)1 and (C)2; Cal. Rev. & Tax. Code §§ 6352 and 6387 — export and representative-delivery rules
• Delos v.Farmers Ins. Group, Inc., (1979) 93 C.A. 3d 642; 155 Cal Rptr 843 — source forms; parallel reporters verified
• Power of attorney, sales agreement and Regulation 1620 enclosure — described but not reproduced
• Official Annotation 325.1371 — publishes conflicting principal, facilitator and departure details

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 325.1371
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-1371.pdf

Original ruling text

325.1371

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION – MIC: 82
450 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082
TELEPHONE (916) 327-2291
FAX (916) 323-3387

DEAN F. ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles
KATHLEEN CONNELL
Controller, Sacramento

October 3, 1995

Re: ---, Inc.

Dear ---:
This is in response to your letter dated July 21, 1995, in which you inquired about the application of California Sales and Use Tax to the use of a vehicle purchased on behalf of a company located in Costa Rica. It is my understanding that your client, XX is an importer/exporter specializing in seafood products. A portion of XX’s business is dedicated to transporting seafood products which is facilitated through the use of refrigerated vehicles. In May 1995, XX was contacted by a Costa Rican company, A, for assistance in purchasing a refrigerated truck for use in Costa Rica. In early May (the date on the document is not legible) 1995, a Power of Attorney was executed by you and B, a representative of XX. This document states that your, as XX’s “attorney-in-fact shall have full power and authority to undertake, commit, and perform only the following acts in my behalf to the same extent as if I had done so personally; all with full power of substitution and revocation of the prescence: “To purchase, transport and or conduct any and all functions of business in my behalf in Santa Clara County, Alameda County and San Francisco County.”

BURTON W. OLIVER
Executive Director

Mr. ---

-2-

October 3, 1995
325.1371

On May 3, 1995, a vehicle was purchased from C, a company located in San Jose, California for $29,854. The buyer’s signature lines on the sales agreement are executed as “XX by ---.” You state that the vehicle’s refrigeration unit was rebuilt in California and that the vehicle was ready for the journey to Costa Rica on May 24, 1995. According to your letter, “C was contracted to facilitate as an exporter to prepare the vehicle for export to Costa Rica [and t] he vehicle left San Jose, CA at 3:00 A.M. on May 25, 1995, on a continuous non-stop journey to Costa Rica.” You have requested an opinion on the California Sales and Use Tax consequences of this transaction. You cite Regulation 1620 to support your conclusion that: “The documentation provided herein, i[n] fact ‘provide certainty that the property is headed for its foreign destination and will not be diverted for domestic use.’” Retail sales of tangible personal property in California are subject to sales tax, measured by gross receipts, unless specifically exempted by statute. (Rev. & Tax. Code § 6051.) A retail sale is a sale for any purpose other than resale in the regular course of business. (Rev. & Tax Code § 6007.) Persons engaged in the business of selling vehicles are considered retailers whose sales are subject to sales tax unless specifically exempted by statute. (Rev. & Tax Code § 6284.) Sales and Use Tax Regulation 1620(a)(3)(C)2 (copy enclosed) provides that sales tax does not apply when the property is sold to a purchaser for shipment abroad and is shipped or delivered by the retailer to the foreign country. The provisions in this regulation are based in part upon Revenue and Taxation Code section 6352 which exempts transactions that the U.S. Constitution prohibits the states from taxing and in part upon Revenue and Taxation Code section 6387. To be exempt under Regulation 1620(a)(3)(C)2 a sale must meet the following three requirements:

1. The property must be intended for a destination in a foreign country;
2. The property must be irrevocably committed to the exportation process at the
   time of sales; and
3. The property must actually be delivered to the foreign country prior to any use
   of the property.
   This regulation also provides that “exportation does not begin until the property has been shipped or entered with a common carrier for transportation to another country.” However, sales tax does apply when the property is delivered in this state to the purchaser or the purchaser’s representative prior to an irrevocable commitment of the property into the process of exportation, and it is immaterial that the disclosed or undisclosed intention of the purchaser is to ship or deliver the property to a foreign country or that the property is actually transported to a foreign country. (Reg. 1620(a)(3)(C)1.)

Mr. ---

-3-

October 3, 1995
325.1371

The fact that you were empowered with the power of attorney “to purchase transport and or conduct all functions” on behalf of XX supports a conclusion that your were acting as its representative when you took delivery of the vehicle. California law clearly provides that an attorney-in-fact is an agent acting under a written grant of authority. (Delos v.Farmers Ins. Group, Inc., (1979) 93 C.A. 3d 642; 155 Cal Rptr 843.) Thus, pursuant to Regulation 1620(a)(3)(C)1, since you, as an agent of XX, took delivery of the vehicle in California and transported the vehicle to its foreign destination, sales tax applies regardless of the intention that the vehicle would be and actually was transported to a foreign country. (Reg. 1620(a)(3)(C)1.) You state that you have received additional requests to facilitate the purchase of vehicles on behalf of other Costa Rican companies. In order for the export exemption to apply the property must be intended for a destination to a foreign country; the property must be irrevocably committed to the exportation process at the time of sale; there can be no delivery to the purchaser or its representative prior to the irrevocable commitment into the exportation process; and the property must actually be delivered to the foreign country prior to any use of the property. If you have further questions please feel free to contact this office again. Sincerely,

Patricia Hart Jorgensen
Senior Staff Counsel
PHJ:cl
Enclosure (Regulation 1620)
cc:

District Administrator