Did use tax apply when a new packaging machine made California field-trial samples before its planned move to an Illinois production plant?

Plain-English summary

An unidentified purchaser bought a redacted-brand continuous-motion packaging machine for a new biopesticide R&D formulation. The price was a little over $100,000. Its August 31, 1992 request is absent; a fax copy reached the Board on October 14.

The machine came from Illinois to California in August 1992. The purchaser planned California testing and sample packages for field trials at unspecified universities.

The purchaser said it would remain here “only five months,” then move to a new packaging plant in a redacted Illinois location. The same paragraph says it would perform some Illinois production in December 1992 and full production “next year.” The source does not reconcile December with five months after an August delivery.

Section 6201 taxed California storage, use or other consumption of tangible property bought from a retailer for that purpose. Counsel relied specifically on making sample packages as California use and held the machine taxable despite the later Illinois production plan.

The source describes California testing but does not separately analyze whether testing alone was use or address any research-and-development rule. The live annotation similarly identifies testing but bases its conclusion on sample making.

Common questions

Was the later Illinois production enough to avoid California tax?

No. The machine had already been used in California to make field-trial sample packages.

Did the samples have to be sold?

No sale is described. They were to be sent to universities for field-trial purposes, and making them was the stated taxable use.

Did testing alone trigger the result?

The letter says the machine would be tested here, but its conclusion identifies sample-package making as the section 6201 use. It gives no testing-only answer.

Was an R&D exemption considered?

The product is called an R&D formulation, but the letter cites no R&D provision or exemption and supplies no qualifying analysis.

How long did the machine actually remain in California?

The plan says five months, while also forecasting December 1992 Illinois production after August California delivery. No actual shipment or production dates resolve that tension.

Was a tax amount or assessment supplied?

No. The only price fact is “a little over $100,000”; no return, rate, tax computation, audit or later outcome appears.

Citations and references

• California Revenue and Taxation Code section 6201 — quoted California use-tax rule
• August 31 requester letter and October 14 fax receipt — identified, not reproduced
• California testing and university field-trial samples — planned activities without records
• Five-month California stay and December 1992 Illinois production — unresolved schedule
• Official Annotation 325.1730 — publishes the sample-making result

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.1730
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-1730.pdf

Original ruling text

325.1730

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

October 15, 1992

This is in response to your letter of August 31, 1992. A facsimile transmission of your letter was received in this office on October 14, 1992. We understand that you bought a --- continuous motion packaging machine to package your biopesticides in a new R&D formulation product. The price was a little over $100,000. The machine was delivered from Illinois to California in August 1992. You will test the machine in this state. In addition, you will make some sample packages to send to some universities for field trial purposes. You indicate that the machine will remain in California for only five months. You will then ship the machine to your new packaging plant in --- Illinois. The machine will be used there in December 1992 for some production. The machine will be used for full production next year. You inquire as to whether you must pay California use tax under the circumstances described. It is our opinion that use tax applies in this case. California Revenue and Taxation Code section 6201 provides that the use tax is imposed on the storage, use or other consumption in this state of tangible personal property purchased from any retailer for storage, use or other consumption in this state. The machine will be used in this state for the purpose of making sample packages. California use tax thus applies, notwithstanding the fact that the machine will later be moved to Illinois and placed in full production use there.

Very truly yours,

Gary J. Jugum
Assistant Chief Counsel

GJJ:wk