Was tax due on sublease rent when the owner paid tax on the trailers' purchase price and leased them in the same form?

Plain-English summary

The official PDF begins with a historical 1538.45 Subleases – Lease Contracts summary and combines two separate August 18, 1965 letters answering two absent August 13 requests. Both applied a new personal-property rental law operative August 1, only 17 days earlier, without naming its statute.

The first requester leased 30 rental trailers from an owner and rented them weekly to customers. The requester said the owner reported paying use tax on trailer acquisition cost; counsel expressly assumed that meant purchase price. No invoice, tax proof, trailer identity/condition, prime lease or weekly rental appears.

On the stated facts, the owner owed no tax on prime rent and the first lessee owed none on weekly customer rent because purchase-price-taxed property was leased in substantially the same form. The requester had previously received district-office advice to charge lessees. Counsel said that might reflect factual misunderstanding or uncertainty about the new law, sent the office a copy and invited correction. No district response or later resolution appears.

The second letter concerns a different requester and supplies almost no underlying facts. It says a sublessor could give its lessor—a named Illinois corporation—a valid resale certificate when it subleased property and reported/paid tax on its own rental receipts. The requester would collect and remit use tax from sublessees with returns. No property, lease, certificate or return appears.

Counsel said amended Sales and Use Tax Ruling 70 was enclosed to reflect the August 1 change, but the PDF does not reproduce it. The two letters therefore present alternative historical methods: purchase-price tax followed by untaxed same-form rent, or resale certificates followed by rent-based tax at the sublease level.

Live Annotation 330.2880 combines both letters and closely follows those branches. It omits the two absent requests, 17-day-old law, acquisition-cost/purchase-price assumption, 30 weekly trailers, prior conflicting district advice, nearly factless second transaction, Illinois corporation, absent Ruling 70 enclosure and missing implementation/outcome evidence.

No request, trailer/property list, purchase/acquisition invoice or tax proof, condition/same-form evidence, prime lease, weekly/customer sublease, prior office-advice record, district response, second transaction, Illinois-corporation lease, resale certificate, rental receipt, tax collection/return, Ruling 70 enclosure, audit, assessment, claim, appeal or later outcome appears.

What this means for you

Choose and document the method from inception: preserve purchase-price tax and same-form evidence for the first branch, or timely valid resale certificates and rent-tax returns for the second. Keep every lease and tax record; the letters rely on assertions and assumptions that the official PDF does not substantiate.

Common questions

Did the first lessee owe tax on weekly sublease rent?

No. The owner had paid tax on the purchase price, and the trailers were leased in substantially the same form as acquired.

Did the owner owe tax again on prime rent?

No, under the same stated facts.

Was purchase-price tax actually documented?

No. The requester relayed acquisition cost tax, and counsel assumed it meant purchase price.

Could different parties use resale treatment?

Yes. The second letter allowed a sublessor to give its Illinois-corporation lessor a valid certificate and collect/remit tax on sublease rent.

Did the source treat a resale certificate as automatic?

No. It described a certificate validly furnished within the alternative structure; it did not excuse missing or untimely documentation.

Is amended Ruling 70 available in this PDF?

No. It is identified as an enclosure but not reproduced.

Did the district resolve its earlier contrary advice?

No response appears.

Citations and references

• New rental law effective August 1, 1965 — described without statute number
• Former Ruling 70 — amended enclosure identified but absent
• Two August 13 requests and all property/lease/certificate/tax records — absent
• Live Annotation 330.2880 — combined branches without source/evidence limits

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 330.2880
• Original supporting letters: 330.2880 PDF

Original ruling text

330.2880

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001
TELEPHONE (916) 445-6450

August 18, 1965

1538.45 Subleases – Lease Contracts. When a lessor purchase property with tax paid on the purchase price and leases it in substantially the same form to a lessee who in turn subleases the property, the sublessor (first lessee) is not required to collect and pay tax on the rental receipts received under the sublease. A lessor may, however, purchase property under a resale certificate and collect and pay tax on his rental receipts, and his lessee likewise may give a resale certificate to the first lessor and pay tax on his receipts derived under a sublease. 8/18/65.

J--- B--- E---, Inc.
dba A--- T--- S--- & R----- & -----, California
Attention:

SR -- XX XXXXXX

Mr. R--- L. A--Office Manager

Gentlemen:
This is in reply to your letter of August 13, 1965, concerning the application of use tax with respect to thirty rental trailers which you are leasing from B--- T--- S--- and R---. You in turn are renting these trailers to your customers by the week. You state that B--- T--- S--- has informed you that it has paid use tax based on the acquisition cost of the trailers. We assume this means the purchase price of the trailers. Under these facts, B--- T--- S--- is not required to collect and pay use tax with respect to its rentals to you, nor are you required to collect and pay use tax with respect to your weekly rentals to your customers. The new law, operative August 1, 1965, relating to personal property rentals, excludes from its operation any tangible personal property leased in substantially the same form as acquired by the lessor as to which the lessor has paid sales tax or use tax measured by the purchase price of the property. We note that you were advised by our [Name] office to charge tax to your lessees. This information may have been based on a misunderstanding of the facts, or because that office was not entirely clear as to the operation of the new laws. We are sending a copy of this letter to that office in the event there should be any difference in the understanding of the facts involved. Very truly yours,

E. H. Stetson
Tax Counsel
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cc:
[Name] – District Administrator: If you have any different understanding of the facts than what is set forth in R--- L. A---’s letter of August 13, we would appreciate it if you would let us know.

330.2880

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

August 18, 1965

B--- E--- Company
XXXX --- ----- X, California
Attention:

Mr. R. G. O--Secretary-Treasurer

SR -- XX XXXXXX

Gentlemen:
In answer to your letter of August 13, 1965, we advise that under the change in the law relating to personal property rentals, operative August 1, 1965, a resale certificate may be validly given by a sublessor to his lessor when the sublessor subleases the property and reports and pays tax on his rental receipts. Accordingly, from the facts stated in your letter, you may furnish a valid resale certificate to the Illinois Corporation, and you will then collect and remit the use tax from your sublessees with your tax returns. Enclosed is a copy of ruling 70, as amended to conform to the changes in the law, effective August 1. Very truly yours,

E. H. Stetson
Tax Counsel

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Enclosures
cc:

--- – District Administrator