Were payments due after a leased vehicle was completely destroyed in a collision taxable rent or purchase consideration?
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This page answers the general question as of 1970. Ask about yours and see what current California tax law says, with citations.
Plain-English summary
An unidentified lessor asked about a lessee's payment after a leased vehicle was demolished in a collision during the term and could not be used further. The payment approximated—rather than necessarily equaled—the amount due under the rental contract.
Assistant Counsel said the Board recently considered a similar case and treated its payment as indemnity for loss rather than rent or tangible-property purchase. The letter supplies no date, identifier, facts or text for that other matter.
On the described complete-loss facts, tax applied only to rental receipts through the destruction date. The post-loss amount was nontaxable indemnity. No lease, collision date, vehicle, amount, payment calculation, title, insurance proceeds, reported tax or later outcome appears.
Live Annotation 330.3340 matches the result but adds no missing record. The opinion does not address repairable damage, a vehicle that remained usable, a replacement, an option price, a different loss-value formula or the effect of insurance.
Common questions
Was rent taxable before the collision?
Yes, through the destruction date, which the source does not identify.
Was the remaining contract balance taxable rent?
No. The source says the payment approximated the contract amount and treated it as indemnity for total loss.
Was the payment treated as a purchase price?
No. The opinion characterized it as loss indemnity rather than a tangible-property purchase.
Would the same result necessarily apply to repairable damage?
No conclusion is supplied for repairable damage; the stated vehicle was demolished and unusable.
Is the similar Board case available?
No. The opinion gives no identifier, date, facts or copy.
Does the source show the payment amount or insurance proceeds?
No. It provides neither the balance calculation nor any payment, title or insurance record.
Citations and references
- No numbered statute, regulation, or case citation appears in the supporting letter.
- Unidentified recent Board case — described as reaching the same indemnity result, but no source or facts are supplied
- Live Annotation 330.3340 — same rent-through-destruction and post-loss indemnity conclusion
- January 21 request and every lease, loss, vehicle, title, payment, insurance, tax and outcome record — absent
Source
- Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
- Annotation page: Annotation 330.3340
- Original supporting opinion: 330.3340 PDF
Original ruling text
STATE OF CALIFORNIA
330.3340
STATE BOARD OF EQUALIZATION
January 27, 1970
Dear Mrs. ---:
Mr. Thomas Putnam has asked me to reply to your letter of January 21, 1970 asking the correct application of tax to payment made by your lessee when a vehicle subject to a lease was destroyed in a collision during the lease term. The payment approximated the amount due under the rental contract, but the vehicle was demolished and could not be used further. We recently considered this problem on a case similar to yours and concluded that the payment was indemnity for the loss rather than payment for rental or purchase of tangible personal property. Accordingly, no tax is due other than that measured by rental receipts up to the date the vehicle was destroyed. Very truly yours,
Lawrence A. Augusta
Assistant Counsel
LAA:ph [1b]
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