Did a lessor's $1,500 charge for each photographic slide lost by a customer constitute taxable gross receipts from selling the slides?

Plain-English summary

The Board's Return Review Section asked about a redacted taxpayer's deduction on its sales/use-tax return for a charge to a customer. The taxpayer leased photographic slides; in the case at issue, the customer lost five and was charged $1,500 each—a stated total of $7,500, though the source does not itself total it.

The question was whether the lost-slide amount entered taxpayer gross receipts as a sale of the slides. Counsel said no transaction sale resulted from the supplied facts.

Instead, the charge was analogous to Regulation 1660(c)(1)'s nontaxable lessor charges for insuring, repairing or refurbishing leased property after default. The memo does not say title passed, the customer retained replacement property or the payment bought continued use.

The source contains no lease, loss/default record, return/deduction, charge computation or adjustment. It also does not decide the tax status of the underlying rent or show how Return Review processed the deduction.

The live annotation publishes the five-slide, $1,500-per-slide and default-charge analogy. It omits the return-deduction setting, limited-information posture, absent records and missing outcome.

Common questions

Did the customer's loss of the slides create a sale?

No. The memorandum did not treat the $1,500-per-slide charge as sale proceeds.

Were the charges included in taxable gross receipts under this analysis?

No.

What comparison did the Board use?

It compared the charges to nontaxable lessor charges for insuring, repairing, or refurbishing leased property following default.

What total amount did five $1,500 charges represent?

$7,500 arithmetically, but the memorandum states only the count and per-slide amount.

Did the memorandum say the customer acquired title?

No. It concluded no sale occurred and supplies no title term.

Was the underlying rental tax decided?

No. The question was the loss charge as sale gross receipts, not rent tax.

Were the lease and return deduction supplied?

No. The source references both but reproduces neither.

Is the final return adjustment shown?

No. There is no processed deduction, audit, assessment, payment, claim or appeal.

Citations and references

• Regulation 1660(c)(1) — no-tax default-charge categories used by analogy
• April 13, 1993 Return Review memorandum — return-deduction request referenced; absent
• Lease, loss/default, slides, title, charge calculation and return/deduction — absent
• June 14, 1993 Legal Division memorandum — limited-information no-sale conclusion without adjustment/outcome
• Official Annotation 330.2030 — core facts/analogy without return/evidence limits

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.2030
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/330-2030.pdf

Original ruling text

State of California

330.2030

Board of Equalization
Legal Division

Memorandum
To

:

Mr. Steve Guest
Return Review Section - MIC:35

From :

Ronald L. Dick
Senior Tax Counsel

Subject:

-----

Date:

June 14, 1993

This is in reply to your April 13, 1993 memorandum regarding a deduction by --- on its sales and use tax return for a charge to a customer for photographic slides lost by the customer. We understand that the taxpayer leases photographic slides to its customers. In the case at issue, the customer lost five photographic slides and the taxpayer charged the client
$1,500 for each slide lost by the customer.
Given this information, you asked whether the charge for the lost slides is includible in the gross receipts of the taxpayer as a sale of the slides. No, we do not believe the transaction resulted in a sale. Rather, we believe the transaction is analogous to the situation presented at subdivision (c)(1) of Sales and Use Tax Regulation 1660, Leases of Tangible Personal Property-In General, which provides that tax does not apply to certain charges by a lessor including which are charges for insuring, repairing, or refurbishing the leased property following a default.

RLD:sr