Did a contracted wharf operator qualify as forwarding agent when it accepted, unloaded and consolidated goods for ship or barge reloading?

Plain-English summary

A redacted operator and service company accepted and unloaded materials and supplies at a wharf, consolidated them and reloaded them onto ships for transport to a drilling platform. Sometimes the purchaser's own employees accepted vendor delivery instead.

A blanket service contract required the operator to furnish crane and forklift services when requested. The operator appeared generally to function as a common carrier, although perhaps not as one under this particular purchaser agreement.

Section 6396 defined carriers as common or contract businesses transporting others' property for compensation and forwarders as businesses preparing or arranging shipment. Regulation 1620 said purchaser designation alone could not create either status.

Counsel concluded that consolidation for reloading made the operator a forwarding agent. Besides being designated to receive and move goods to barges, it was “otherwise so engaged,” as supported by Annotation 325.1480.

Retailer delivery to that forwarding agent could satisfy section 6396 when the sales contract required outside-state shipment. The live annotation frames the next stage as reloading aboard another common carrier hired by the purchaser; the PDF identifies ships, barges and a drilling platform but does not clearly state that exact carrier relationship.

The exemption failed whenever purchaser employees accepted directly from vendors. No specific sale, shipment, tax amount or later proceeding is supplied.

Common questions

Did purchaser designation alone make the operator a forwarder?

No. The operator also had to be otherwise engaged in preparing or arranging shipment; its consolidation for reloading supplied that function.

Was the operator acting as a common carrier under this contract?

The memorandum leaves that uncertain. It appeared generally to operate as one, but might not under an agreement calling for crane and forklift services.

Why did counsel still find forwarding-agent status?

The operator accepted, unloaded and consolidated merchandise for reloading and already appeared otherwise engaged in that work.

What happened when purchaser employees accepted delivery?

The exemption did not apply, because the goods went directly from vendors to the purchaser's own personnel rather than a qualifying intermediary.

Was the second carrier documented?

The live annotation describes another purchaser-hired common carrier. The PDF supplies only redacted operator, ship, barge and drilling-platform descriptions and no underlying contract or shipping record.

Citations and references

• Cal. Rev. & Tax. Code § 6396 — outside-state shipment and carrier/forwarder definitions
• Regulation 1620 — purchaser designation alone insufficient
• BTLG Annotation 325.1480 — cited otherwise so engaged support
• Two internal memoranda and blanket service contract — identified but not reproduced
• Official Annotation 325.1530 — supplies the second-carrier framing and omits purchaser-employee receipt

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.1530
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-1530.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. J. A. Najarian

From:

Gary J. Jugum

Subject:

U--- O--- C--- C---

325.1530

Jan. 7, 1976

SZ -- XX XXXXXX

This is in response to your memorandum of December 23, 1975. You have asked that we consider the question as to whether the acceptance of goods at the wharf by O--- C--- and S--Co., under contract to U--- O--- [U---], has any effect on the exemption from tax on sales to U--as provided by Revenue and Taxation Code Section 6396. As stated in Mr. Gee’s memorandum of September 3, 1975, the material and supplies are accepted and unloaded by O--- C--- and S--- Co. who consolidate the merchandise for reloading onto ships for transportation to the drilling platform. Occasionally, U---’s employees, rather than O--- C---, accept the merchandise directly from the vendors. Section 6396 provides that: “There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property which, pursuant to the contract of sale, is required to be shipped and is shipped to a point outside this state by the retailer by means of…delivery by the retailer to a carrier…or forwarding agent, whether hired by the purchaser, or not, for shipment to such out-of-state point. “For purposes of this section, the term ‘carrier’ shall mean a person or firm engaged in the business of transportiong for compensation tangible personal property owned by other persons, and includes both common and contract carriers. The term ‘forwarding agent’ shall mean a person or firm engaged in the business of preparing property for shipment or arranging for its shipment.” Our Regulation 1620 provides that “An individual or firm not otherwise so engaged does not become a ‘carrier’ or ‘forwarding agent’ …simply by being designated by a purchaser to receive and ship goods to a point outside the state.”

Mr. J. A. Najarian

-2-

January 7, 1976
325.1530

The blanket service contract entered into between U--- and O--- C--- and S--- Co. provides that O--- will “furnish crane and forklift service” as requested by U---. It appears from Mr. Gee’s memorandum that O--- C--- and S--- Co. operates as a common carrier, although O--- may not be operating as a common carrier under the terms of its agreement with U---. It is our conclusion that O--- is a “forwarding agent” within the meaning of that term as it is used in Section 6396 since O--- is consolidating the merchandise for reloading. It appears that O---, in addition to being designated by U--- to receive and move the goods to the barges, is also “otherwise so engaged” as a “forwarding agent.” [See BTLG Anno. 325.1480.] Where U---’s employees accept the merchandise from the vendors, the exemption will not apply.

J:alicetilton
cc:

Mr. T. P. Putnam