Did a museum lease traveling display pieces when it paid for exhibition rights but could not move, duplicate, or operate them outside strict owner instructions?

Plain-English summary

K--- temporarily supplied unique display pieces to California museums and received a percentage of special-exhibition receipts. Its agreements were called licenses. The live annotation alone identifies an animated dinosaur exhibit; the supporting PDF does not identify the subject beyond unique display pieces.

Counsel delayed answering the September 29 request pending D---, Inc.'s similar sales-tax redetermination petition. Initially scheduled November 8, 1993 and postponed several times, the Board acted publicly on March 9, 1994. Its now-public result could be discussed despite unnamed confidentiality provisions; the underlying petition, agreements and action record are absent.

D--- used an agreement labeled a lease, but the Board recharacterized it because museums lacked enough dominion/control for possession. K---'s license had substantially the same critical rights/duties: museum-premises use only; no movement without K---'s prior written approval; normal exhibit hours only; temperature-controlled enclosed protection; no unauthorized commercial photographs/videos/other duplications; and no component copying.

Museums performed routine maintenance—turning machines on/off and similar functions—only under K---'s manual or other written/oral guidelines. Counsel therefore found no lease from K--- to the museums and treated K--- as consumer of the pieces. The Van Nuys office was told K--- needed no seller's permit merely by virtue of its redacted exhibit-licensing activities.

No agreements, Board record, display inventory, payments, property/tax records, manuals, filings, audit or later outcome is supplied. The live annotation publishes the restrictions/consumer result but not the D--- procedural chain or these source limits.

Common questions

Did paying for exhibition rights create a lease?

No.

Why was possession and control insufficient?

The agreements tightly restricted location, movement, operation, protection, photography, duplication, and maintenance.

Did the contract label control?

No. D---'s express lease label did not overcome its actual rights/duties; K--- used a license label but substantially similar terms.

Could the museum operate and maintain the display?

Only during normal exhibit hours and on museum premises; routine maintenance had to follow K---'s supplied instructions/guidelines.

Does the PDF say the exhibit involved dinosaurs?

No. That detail appears in the live annotation; the PDF says unique display pieces without identifying them.

Is the D--- Board decision available here?

No. The letter describes its public result, but reproduces no petition, agreements, hearing material or action record.

Was K--- excused from every seller's-permit requirement?

No such broad result appears. The letter limited its statement to K---'s redacted exhibit-licensing activities.

Citations and references

• No numbered authority cited; unnamed confidentiality provisions mentioned
• March 9, 1994 D--- Board action — described substantially similar no-lease result; record absent
• September 29 request, K---/D--- agreements and transaction/tax records — absent
• March 11, 1994 Jugum letter — applies D--- result to K--- and limits seller-permit statement
• Official Annotation 330.2306 — adds animated-dinosaur detail absent from PDF and omits procedural/source limits

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.2306
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/330-2306.pdf

Original ruling text

330.2306

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-3723

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

March 11, 1994

GRAY DAVIS
Controller, Sacramento
────────
BURTON W. OLIVER
Executive Director

Mr. S--- H. L--K--- & M--XXXX --- --- East, Suite XXXX
--- ---, CA XXXXX
Re:

K--- C---, Ltd.

Dear Mr. L---:
This is in response to your letter of September 29, 1993. You had inquired as to California sales and use tax consequences of certain licensing agreements entered into between your client, K--- C---, Ltd. ("K---"), and various museums located in California. K--temporarily provides unique display pieces to museums for exhibition to the public. We had advised you by telephone that we would be unable to respond to your letter until the State Board of Equalization acted upon the petition for redetermination of sales tax filed by D---, Inc. D---, Inc., has been engaged in activities substantially similar to those conducted by your client. That matter had originally been scheduled for action on November 8, 1993. It was postponed several times and finally acted upon in public session on March 9, 1994. The Board's action in the D--- matter is now a matter of public record and can be discussed, notwithstanding the basic confidentiality provisions of the Sales and Use Tax Law. D--- was engaged in the same business as your client, providing museum display pieces for exhibition to the public. As with your client, D--- received compensation based upon a portion of the receipts derived by the museum from special exhibition fees. The D--- agreement was expressly characterized as a lease agreement. However, notwithstanding the expressed characterization of the relationship between the parties, the Board recharacterized the relationship and concluded that the transactions were not lease transactions. The Board concluded that the transactions were not lease transactions, despite the fact that the display pieces were exhibited on the premises of the museum, because the Board found that the museum did not acquire sufficient dominion or control over the properties such that the museum could be regarded as having acquired possession of the properties.

Mr. S--- H. L---

-2-

March 11, 1994
330.2306

The licensing agreements used by your client are not expressly identified as lease agreements. The critical terms concerning the rights, duties, and responsibilities of the museum are substantially the same as those found in the D--- agreements, however. The museum agrees (a) to operate the Exhibit on the Museum premises only; (b) not to move the Exhibit without the prior written authorization of K---; (c) to operate the Exhibit during the Museum's normal exhibit hours only; (d) to display the Exhibit in a temperature-controlled enclosed building to provide maximum protection for all of the components of the Exhibit; (e) not to allow photographs, videos or other duplications to be taken or made of the Exhibit by any person for commercial purposes; unless prior authorization has been obtained, and (f) not to duplicate, or attempt to duplicate, in any way the components contained in the Exhibit. It is the responsibility of the museum to provide routine maintenance for the proper functioning of the Exhibit, including, without limitation, turning machines on and off, and performing similar functions, all in accordance with written instructions contained in a manual to be provided to the Museum by K---, or other written or oral guidelines provided by K---. Based upon the decision of the Board in the D--- matter, it is our opinion that there is no lease of the exhibits from K--- to the museums. K--- is the consumer for sales and use tax purposes of the museum pieces in question. By copy of this letter to our Van Nuys Office, we are advising that office that your client is not required to hold a seller's permit by virtue of its --- exhibit licensing activities. Very truly yours,

Gary J. Jugum
Assistant Chief Counsel
GJJ:sr

cc:

Mr. N. Campos - Van Nuys District (AC)