Could a California laundry-rental business buy garments and towels ex-tax because customers rented them in Nevada?
Apply this to your situation
This page answers the general question as of 1988. Ask about yours and see what current California tax law says, with citations.
Plain-English summary
A California business rented garments, towels, and similar items to Nevada customers while providing recurring laundering or cleaning.
The opinion said that when recurring cleaning is an essential part of the rental contract, the operator is the consumer of the rented articles. Tax therefore applied to the sale of the items to the operator rather than treating their purchase as an ex-tax purchase for resale.
The source also treated the textiles as used in the operator's California business even though customers rented them in Nevada. It therefore rejected an ex-tax resale purchase and said no California credit was available for Nevada taxes under the circumstances previously presented.
Common questions
Why was the operator the consumer instead of a reseller?
Because the recurring laundering or cleaning service was assumed to be an essential part of the rental contract.
Did Nevada delivery by itself allow an ex-tax purchase?
No. The opinion said the California-based operator used the articles in its business.
Does the source establish that a Nevada-tax credit is never available?
No. It denied a credit only under circumstances described in an earlier letter that is not reproduced here.
Citations and references
- Cal. Rev. & Tax. Code §§ 6006(g)(2) and 6010(e)(2); Cal. Code Regs., tit. 18, reg. 1506(a) — consumer treatment when recurring laundering or cleaning is essential to the rental
Source
- Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
- Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/330-0000-all.html
- Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/330-2668.pdf
Original ruling text
330.2668
STATE OF CALIFORNIA
STATE BOARD OF EQUALIZATION
(916) 445-5550
September 13, 1988
Mr. W--- G--Manager, Tax Department
A--- S---, Inc.
P. O. Box XXXX
---, CA XXXXX
Re:
SY -- XX-XXXXXX
Dear Mr. G---:
In a letter dated September 12, 1988, I discussed alternatives available to A--- when purchasing property to be rented in Nevada. That property includes garments, towels, and other such items. However, I overlooked the fact that your rentals of such items probably involves furnishing the recurring service of laundering or cleaning of the items rented. If this is the case, the following rules apply. A--- is the consumer of the items rented when an essential part of the rental contract is the furnishing of the recurring service of laundering or cleaning of the articles rented, and tax applies to the sale to A--- of such items. (Reg. 1506(a); see Rev. & Tax. Code §§ 6006(g)(2), 6010(e)(2).) The items rented are regarded as used by A--- in its business. Since the business is located in California, A--- uses the items in California even if it rents them in Nevada. A--- may therefore not purchase these items ex-tax for resale. As I previously noted, there is no credit in California for the taxes paid to Nevada under the circumstances you present. Sincerely,
David H. Levine
Tax Counsel
DHL:ss
Enclosures
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