Could California require a Washington lessor to collect use tax when the lease was signed elsewhere but the tangible property was located and used in California?

Plain-English summary

Absent August 18 counsel letter cited numerous cases and argued California could not constitutionally require unidentified client to collect/remit use tax where lease entered in Washington, although tangible property located in California. Counsel conceded state could collect from lessee.

Section 6203 required in-state retailer collection; subsection (c) treated person deriving rent from California lease as engaged in business. Rigby knew no case directly addressing constitutionality of that statute or similar one, then discussed out-of-state-retailer collection decisions.

In Scripto, retailer collected despite exclusively interstate sales and Florida independent contractors. Rigby reasoned mere leased-property presence in California supplied sufficient nexus. Sections 6006.3/6010.3 treated lease as continuing sale/purchase while in state.

Conclusion required lessor under section 6203(c) to collect from lessee and remit directly; section 6204 kept amount debt to state until paid. No lease, property, location, rent or payment records appear.

Second page header unexpectedly says January 24, 1992 and Annotation 330.0008. It continues same addressee/argument and signature; first page/live annotation identify September 2, 1969 / 330.2540. Live entry publishes one-sentence result and omits constitutional cases, debt rule and header conflict.

Common questions

Did signing lease in Washington control?

No. The source focused on the property's California location and use.

Was lessee still liable for tax?

Yes. Counsel conceded California could collect from the lessee, while the opinion also imposed collection duty on the lessor.

Why was lessor considered engaged in California business?

It derived rental receipts from property leased and used in the state.

Did opinion identify directly controlling constitutional case?

No. Rigby said he knew none directly deciding section 6203 or similar statute.

What did opinion take from Scripto?

Collection could apply despite exclusively interstate sales; that case also involved in-state independent contractors.

Why does second page say 1992 and 330.0008?

It is unexplained header conflict. Letter continuity, first page and live entry support 1969 Annotation 330.2540.

Are case captions normalized here?

No. Citation metadata preserves PDF's printed forms, including Miller Pros. Co., rather than guessing corrections.

Is 1969 constitutional analysis current guidance?

The source does not establish that; current nexus law and statutes must be checked independently.

May another out-of-state lessor rely on this result?

No. It is historical advice with missing transaction proof and obsolete constitutional context; current nexus and collection law must be checked.

Citations and references

• Sections 6203(c), 6204 — in-state-rent collection duty and debt to state
• Sections 6006.3/6010.3 — continuing lease sale/purchase in state
• Six historical nexus cases — captions preserved as PDF prints them
• August 18 counsel letter and client/lease/property/use/rent/collection evidence — absent
• September 2 Rigby letter — physical-property nexus result
• Official Annotation 330.2540 — result without authority/header limits

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.2540
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/330-2540.pdf

Original ruling text

330.2540

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 2, 1969

Law Offices of
C---, B--- and C--XXX --- Building
---, California XXXXX

Attention: Mr. J--- D. C--Dear Mr. C---:
Thank you for the numerous case citations contained in your letter of August 18, 1969. It is my understanding that it is your position that we cannot constitutionally require your client who is leasing tangible personal property located in California, to collect the use tax from such lessees and remit it to the state, when the lease was entered into in the State of Washington. You do not, however, contend that we may not constitutionally collect the tax from the lessee. I have reviewed the cases you cited with great interest, but I am unable to agree with your conclusion. As you are aware, Section 6203 of the California Sales and Use Tax Law requires every retailer engaged in business in this state to collect the use tax. Paragraph (c) of this section provides a person is engaged in business in this state when he derives rentals from a lease within this state. To my knowledge, I am not aware of any case directly passing on the constitutionality of this statute or one of similar import. However, there have been several cases passing on the requirement of an out-of-state retailer to collect the use tax of another state. A few of these cases are Miller Pros. Co. v. Maryland, 347 U.S. 340, Scripto v. Carson, 362 U.S. 207, Nelson v. Montgomery Ward, 312 U.S. 373, Nelson v. Sears & Roebuck & Co., 312 U.S. 359, People v. West Publishing Co., 35 Cal.2d 80 [216 P.2d 441], and National Bellas Hess v. Dept. of Revenue, 386 U.S. 753. It is interesting to note that in the Scripto case, Scripto was required to collect use tax notwithstanding the fact that its sales were exclusively in interstate commerce.

C---, B--- and C---

-2-

January 24, 1992
330.0008

While recognizing that Scripto had independent contractors soliciting business from within the State of Florida, it is still our opinion that the mere presence of the leased property in this state is sufficient nexus for us to require that the lessor collect the tax. One must remember that the lease is a continuing sale and purchase so long as it is in this state (§§ 6006.3 and 6010.3). Summarily, it is our conclusion that your client is required by Section 6203(c) to collect the use tax from your lessee and remit it directly to the state. As Section 6204 points out, said amount is debt owed to the state until it is paid Very truly yours,

Glenn L. Rigby
Tax Counsel

GLR:lt
Bc:

--- – Auditing (JDD)
--- – Compliance (DF)