Were reusable transoceanic tanks exempt when delivered to the buyer at a Richmond terminal, filled in California and later placed aboard ships?

Plain-English summary

Gar Wood manufactured large reusable tanks designed as transoceanic containers for liquid asphalt, dry cement and similar materials. Its customer purchased and leased them to governmental agencies and private contractors on government projects around the world, including Alaska.

The seller delivered the tanks by carrier, consigned to a redacted Tank Company at Parr-Richmond Terminal No. 5 in Richmond. They were filled with the cargo to be carried and shipped by steamship to the consumer; Transit-Tank Company was shipper.

The seller expected an ocean bill of lading for every transaction showing that its tanks actually went aboard ship for export. No such bill is reproduced.

Tax counsel concluded that the sales were taxable because the purchaser received the tanks in California and used them here by filling them with asphalt. The tanks entered interstate or foreign commerce only after purchaser delivery, filling and later carrier delivery for shipment.

The response invited reasons and authorities for disagreement. No reply, completed bill, tax amount, filing, audit or later outcome is supplied.

The live annotation publishes the same delivery-and-use result but omits the private contractors, worldwide/Alaska projects, named terminal, shipper, expected bills and invitation.

Common questions

Did tank design for transoceanic cargo make the original sale an export?

No. Their design and later ship loading did not change buyer delivery and filling in California before entry into commerce.

What California activity counted as use?

The purchaser filled the reusable tanks with asphalt or other products before carrier delivery for outside shipment.

Who used and shipped the tanks?

The customer leased them to government agencies and private contractors; delivery was to a Tank Company at Parr-Richmond Terminal No. 5, and Transit-Tank Company was named shipper.

Did ocean bills of lading prove exemption?

Counsel understood the seller would receive bills showing eventual shipboard export, but still found the earlier delivery and filling taxable. The bills are absent.

Did the source cite governing law?

No numbered statute, regulation or case appears. It gives the Board tax-counsel view and invites contrary reasons and authorities.

Citations and references

• No specific statute, regulation or case citation appears in the supporting letter
• March 24, 1953 additional-facts letter — identified but not reproduced
• Expected ocean bills of lading — described but not reproduced
• Official Annotation 325.1460 — publishes the California filling/use result

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.1460
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-1460.pdf

Original ruling text

325.1460

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
March 31, 1953
Attention:

Your letter of March 24

Gentlemen:
We have considered the additional facts presented by you in your letter of March 24 and are of the opinion that the transaction described is subject to California sales tax. In order that there be no misunderstanding, we are restating what we believe to be the facts concerning this transaction. Gar Wood manufactures large tanks for --- These tanks are designed as containers for transoceanic shipment of liquid asphalt, dry cement and other similar materials. These tanks are reusable items and your customer purchases them and in turn leases them to governmental agencies and private contractors on governmental projects located in various parts of the world including Alaska. You deliver these tanks by way of a carrier consigned to --- Tank Company, at Parr-Richmond Terminal No.5, Richmond, California. The tanks are then filled with the products to be carried and shipped by way of steamship to the consumer. The shipper is Transit-Tank Company. We understand that you will receive in each instance an ocean bill of lading indicating that the tanks sold by you are actually taken aboard ship for export shipment. We have in the past given considerable attention to the problem of whether under such circumstances there is a sale of the products in California, which sale is subject to California sales tax. It is our considered opinion that sales tax applies to such a transaction because the product is delivered to the purchaser in California and the purchaser in this state makes a use of the products here (filling the tank with asphalt). The tank is not actually in the stream of interstate or foreign commerce until after it is delivered to the purchaser, the purchaser has placed in it the products for shipment out of this state, and delivered it to a carrier for shipment. If you are not in agreement with our conclusion with respect to the taxability of this transaction, we will be pleased to have you furnish us with your reasons and authorities for believing that the transaction is not subject to tax. Yours very truly, E. H. Stetson Tax Counsel JHM: ja cc: Oakland - Auditing