Would sales tax, lessor use tax or tax on rentals apply to piggyback trailers bought, leased and first used in interstate service outside California?

Plain-English summary

An unidentified woman and tax counsel discussed proposed drive-in trailers by phone on August 29, 1969. The letter confirms counsel's view but provides no written request or call notes.

The plan had several linked conditions. The trailers would be bought outside California for railroad piggyback service. A redacted trustee would hold title for an unidentified trust or beneficiaries. The lease and first for-hire transportation of property would occur outside California.

Only after entering that interstate service would the trailers come into California, and afterward they would operate continuously and principally in interstate commerce.

Counsel gave three separate no-tax conclusions:

• The sale was exempt because it occurred outside California.
• The lessor's use was exempt under Ruling 55B and Union Oil.
• The lease rentals were not taxable sales under section 6006(g)(4).

A bank exemption was not the basis. Counsel doubted it applied when property was held in a separate trust, but identified neither the provision nor the trustee's bank status.

The answer was explicitly factual: different facts could produce different tax consequences. The live annotation publishes only the use-tax result and omits the trust, sale, rental and conditionality layers.

Common questions

Was California entry by itself taxable?

No on the proposed facts. Entry occurred during ongoing interstate movements after out-of-state purchase, lease and first qualifying use.

Did any interstate use qualify?

The letter assumed for-hire property transportation and continued, principal interstate use. It supplies no mileage, trip or revenue records to define the test.

Why was the original sale exempt?

Counsel said it would occur outside California. No contract, delivery, title-transfer or location record is supplied.

Why was lessor use exempt?

Ruling 55B and Union Oil were cited, but their rules and factual comparison are absent.

Were rental receipts taxable?

No under the described arrangement; counsel said section 6006(g)(4) meant the lease did not constitute a “sale.” The provision's conditions are not reproduced.

Did the bank exemption apply to the trustee?

Counsel doubted an unidentified bank exemption would cover property held in a separate trust and resolved the transaction on other grounds.

Was a completed transaction or audit documented?

No. Every event is future-tense, and no purchase, lease, movement, return, tax or later proceeding appears.

Citations and references

• California Sales and Use Taxes Ruling 55B — cited lessor-use exemption without text
• Union Oil Co. v. State Board of Equalization, 60 Cal. 2d 441 — cited lessor-use authority
• California Revenue and Taxation Code section 6006(g)(4) — lease not a taxable sale
• Unidentified bank exemption — doubted for separate-trust property
• August 29 telephone conversation — identified without notes or request
• Official Annotation 325.1740 — publishes only the interstate use-tax result

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.1740
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-1740.pdf

Original ruling text

325.1740

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 2, 1969

Dear Miss.
This will confirm the view I expressed to you in our telephone conversation of August 29, 1969, concerning the application of sales or use tax to certain trailers to be leased to ---. I understand that drive-in trailers to be used as railroad “piggyback” equipment will be purchased outside of California. Title to the trailers will be held by --- as trustee for the ---. The trailers will be leased to --- outside of California for use by --- in for-hire transportation of property in interstate commerce. The trailers will be placed into such use outside of California, will enter California while being used in that manner, and will thereafter be used continuously and principally in interstate commerce. On these facts, no sales or use tax will apply. It is doubtful that the tax exemption afforded to banks would apply where, as in this case, the property will be held in a separate trust. However, the sale will be exempt since it will occur outside the state and the use by the lessor will be exempt pursuant to sales and use taxes ruling 55B, and Union Oil Co. v. State Board of Equalization, 60 Cal. 2d 441. The rentals will not be taxable, since the lease will fall under section 6006 (g) (4) of the Revenue and Taxation Code and will not constitute a “sale.” This conclusion, of course, is based on my understanding of the facts. If the facts are not as stated herein, the tax consequences may be different.

Very truly yours,

T.P. Putnam
Tax Counsel

Cc: San Francisco District – Mr. William A. Smith