Did a lessor owe California use tax when equipment returned after a sufficiently long out-of-state lease for use in its own California operations?

Plain-English summary

The same counsel's absent May 13, 1977 letter addressed equipment bought/held for lease, first leased for out-of-California use, then after termination sent to California for lessor operations rather than another lease. It treated self-use taxable on original purchase price. No equipment, location/timing, lease, use or tax record appears.

In 1980 staff reconsidered. Later self-use was nontaxable if either:

1. Property was never in California while lessor owned it and did not enter within 90 days after out-of-state lease started; or
2. Property had been in lessor's California inventory, went into out-of-state lease and did not reenter until after six months from lease start.

Counsel suggested immediate refund claim for overpayment caused by earlier advice. No claim or outcome appears.

Live Annotation 330.3071 publishes both branches, cites section 6009.1 for second, and adds that self-use is taxable if neither applies. Supporting letter cites no authority and does not state converse. It also visibly contains the, in either, preserved without correction.

No 1977 letter, equipment, purchase/title, California inventory/presence, out-of-state lease/lessee/use, start/termination, entry/reentry dates, later California operations, tax return/payment, overpayment calculation, claim, refund decision/payment, audit, assessment, appeal or later outcome appears.

What this means for you

Build a dated ownership/location/use timeline from acquisition through inventory, out-of-state lease, termination, reentry and self-use. Preserve original tax and refund filing. These historical windows do not establish current rules.

Common questions

What if never previously in California?

Under the 1980 letter, later self-use was not taxable if the equipment did not enter California within 90 days after that lease began.

What if first held in California inventory?

The letter applied a six-month test measured from the start of the out-of-state lease before the equipment reentered California.

Did counsel keep 1977 conclusion?

No. It expressly said staff had reconsidered that position.

What does live annotation add?

Section 6009.1 for six-month branch and tax if neither test fits.

Was a refund granted?

No. The letter only suggests filing immediately.

Are timing tests current rules?

The source does not establish that. They are historical rules stated in a 1980 letter, so current law and refund deadlines must be checked.

Citations and references

• May 13, 1977 letter — prior taxable advice; absent
• Historical 90-day/six-month tests — supporting letter cites no numbered law
• Section 6009.1 — added only by live annotation for second branch
• Every equipment/location/lease/use/tax/refund/outcome record — absent
• Live Annotation 330.3071 — fuller two-branch and converse rule

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 330.3071
• Original supporting opinion: 330.3071 PDF

Original ruling text

330.3071

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
916/445-2705

March 17, 1980

G--- C--- C--G--- T-----, Arizona XXXXX
Attention:

S- -- XX XXXXXX

Mr. L. H. B---, Tax Manager

Gentlemen:
On May 13, 1977, I wrote to you a letter concerning, in part, the situation in which a lessor buys and holds equipment for lease, first leases the equipment for utilization by the lessee at an out of California point and then, following termination of the out-of-state lease, the lessor sends the equipment to California, not for another lease to a lessee, but to utilize the formerly leased equipment in the lessor’s own operations in California. In that letter, I advised you that the use attributable to the lessor took place in California, and that the use by the lessor was subject to California’s use tax, measured by the original purchase price of the equipment. Now the Board’s staff has reconsidered and has concluded that (1) if the property was never in California while it was owned by the lessor and does not enter California within 90 days of the start of the out-of-state lease, or (2) if the property had been in California before while it was owned by the lessor in its California inventory and then devoted to an out-of-state lease and did not re-enter California until after six months from the start of the out-of-state lease, the, in either of those two circumstances, the lessor’s use of the property in the lessor’s own operations in California following the end of the lease is not a use taxable to the lessor. You may wish to file immediately a claim for refund for amounts overpaid as a result of my earlier letter. Very truly yours,

Philip R. Dougherty
Tax Counsel
PRD:ba