Was providing trained animals for rides, performances, or exhibitions a taxable lease when the owner kept custody and control?

Plain-English summary

The official PDF combines two letters. The first addresses a wild-animal-show business; its page prints July 7, 1979, although it answers a June 20, 1969 request and the live annotation dates it July 7, 1969. The second is dated January 14, 1986 and addresses animals furnished for performances/exhibitions.

In the first, California sellers charged sales tax on animals, most animals were bought outside California with no California use tax paid, and others were born at the client's premises. Some property was tax-paid, some ex-tax, and animals were used partly in leases and partly in nonlease activities. The letter calls that mixed treatment difficult and complex but provides no allocation or transaction records.

When a handler led animal rides at fairs or shopping centers, the rider lacked direction/control, so no lease occurred. If an animal used that way was bought outside California from a retailer, use tax was due on purchase price, with credit for rental-receipts tax previously paid. More generally, the letter said ex-tax leased property put to nonleasing use incurred purchase-price tax with such a credit.

The second requester described clients furnishing animals for performance/exhibition. The owner/trainer always accompanied the animal and never surrendered custody or control; customers were billed separately for animal time, trainer time and transportation.

Regulation 1660(a) treated temporary property use as a lease when property was operated by or under customer direction/control, while section 6006.1 focused on possession. Because the owner/trainer kept both, the customer bought the combined services of trainer and animal. The 1986 letter found no sales/use-tax liability on the described performance transactions.

Separate billing did not overcome the absence of possession/control. Sections 6012(a)–(b) would include services that were part of a taxable lease sale, but the threshold lease itself was missing.

The live annotation publishes the owner-accompanied performance/exhibition service result and lists both dates, marking it amended 2001-3. It omits the ride facts, acquisition tax, mixed-use problem, prior-tax credit, separate billing, printed date conflict and missing records.

Common questions

Did separately billing animal time, trainer time and transportation create a lease?

No. The 1986 opinion still focused on who possessed and controlled the animal.

What if a customer directs or controls the animal?

The source identifies direction and control as a critical lease element, so different control facts can change the classification.

Why were handler-led rides not leases?

The rider lacked direction/control while the handler led the animal.

Was tax on acquiring the animals automatically avoided?

No. The earlier letter applied owner-use tax to qualifying out-of-state purchases used in nonlease activities.

What if rental tax had already been paid on an animal later used by its owner?

The earlier letter said purchase-price use tax was due with credit for tax previously paid on rentals.

Did the first letter resolve all mixed animal uses?

No. It called the application difficult and complex but supplied no animal-by-animal allocation or completed result.

Why is the earlier letter's date disclosed as conflicting?

Its printed date says 1979, but its body references a 1969 request and the official annotation labels it July 7, 1969.

What does amendment 2001-3 change?

The live annotation carries that marker, but neither the amendment record nor prior wording is supplied, so this page does not infer a change.

Is a completed tax proceeding shown?

No. Neither letter supplies agreements, returns, audit, assessment, payment, claim or appeal.

Citations and references

• Revenue and Taxation Code sections 6006(g) and 6006.1 — lease/continuing-sale definitions
• Revenue and Taxation Code sections 6012(a), 6012(b)(1) — rental price and services that are part of a sale
• Regulation 1660(a) — temporary use under customer direction/control
• Entremont v. Whitsell, 13 Cal. 2d 290 (1939) — possession/control authority; citation independently resolved
• June 20, 1969 and November 18, 1985 requests — referenced/described; standalone letters absent
• July 7 printed-year-conflicted and January 14, 1986 counsel letters — combined source; transaction records/outcomes absent
• Official Annotation 330.1940 — two-date, amended-2001-3 control rule without rides/acquisition/source limits

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.1940
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/330-1940.pdf
• Citation verification: Entremont v. Whitsell

Original ruling text

330.1940

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)

July 7, 1979

Dear Mr. ---:
This is in response to your letter of June 20, 1969 asking the correct application of tax to your client’s wild animal show business. Sales tax is paid on all animals purchased from California sellers, but most of the animals are purchased outside the state, and no tax has been paid on the use of these animals in California. Other of the animals are born on your client’s premises, the offspring, I assume, of animals owned by your client. As you know, subject to certain conditions respecting passage of time, property purchased outside California for use in this state is subject to use tax. Property purchased for leasing may be purchased ex-tax and tax reported and paid on rental receipts, or tax may be paid at the time the property is acquired or with the return for the period in which it is first placed in rental service, and tax will not be due on rental receipts. Where property has been leased and tax has been paid measured by rental receipts, use tax will be due on the full purchase price with a credit for taxes paid on rental receipts if the lessor makes any use of the property other than leasing. The application of tax is difficult and complex when these rules test rental property, some of which has been purchased tax paid, some ex-tax, and which is used partly in transactions which are not leases and partly in transactions which are leases. On the animal rides given at fairs, shopping centers, etc., where the handler leads the animal, there is no lease as the customer lacks direction and control. Consequently, if the animals used in such an activity were purchased outside of California from a retailer, use tax would be due on the purchase price with a credit for any tax that might have been paid on previous rentals. Sincerely,

Lawrence A. Augusta
Tax Counsel

330.1940

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-2242

January 14, 1986

Dear Ms. ---:
I am responding to your letter of November 18, 1985 wherein you requested a legal opinion as to the potential sales tax liability of leasing animals accompanied by the animal’s trainer/owner. The information you provided states that your clients are in the business of leasing animals to parties for performance and/or exhibition. The owner/trainer always accompanies the animal and never relinquishes custody or control. The customer is billed separately for the time of the animal, the time of the trainer, and for transportation. Section 6006(g) of the Revenue and Taxation Code outlined “sale” to include “any lease of tangible personal property in any manner or by any means whatsoever, for a consideration….” A lease is deemed to be a continuing sale pursuant to Section 6006.1 of the Revenue and Taxation Code. Tax is based upon the rental price unless otherwise exempted. (Rev. & Tax. Code § 6012(a).) Section 6012(b)(1) states further that the lease or rental price shall include any services that are a part of the sale. The principal question at hand is whether or not the furnishing of animals for entertainment constitutes a nontaxable service or a taxable lease. The term “lease” is outlined by Regulation 1660(a) as follows: “The term ‘lease’ includes rental, hire, and license. It includes a contract under which a person secures for a consideration the temporary use of tangible personal property which although not on his premises is operated by or under the direction and control of the person or his employee….” Section 6006.1 defines a “continuing sale” as “the granting of possession of tangible personal property by a lessor to a lessee….” As set forth in the determinations above, one of the critical elements of a “lease” is that the tangible personal property be placed under the direction and control of the lessee. From the facts that you have provided, this critical element appears to be missing in that your clients never

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January 14, 1986
330.1940

give up possession of the animals to their customers. The owner/trainer retains complete control over the animal at all times. Without the requisite possession or control (see Entremont v. Whitsell (1939) 13 Cal.2d 290) the customer has not leased the animal but rather has engaged the services of the trainer and the animal. Based upon the facts that you have provided, your clients would not be subject to sales or use tax liability. If you are in need of any further assistance, feel free to contact us again. Sincerely,

Teresa Armstrong
Legal Counsel

TA:ba
bc:

Van Nuys District Administrator
Mr. Les Sorensen