Which lease payments did the 1965 opinion tax when property moved in and out of California?

Plain-English summary

A redacted July 26, 1965 letter to the San Jose district office was referred to Tax Counsel. The request and referral record are absent. The response cited an unidentified Sales and Use Tax Law change operative August 1 for tangible-personal-property leases.

Under that change, the lessor collected use tax only on payments received while property was physically in California. If the lessee bought at lease end, tax applied only to the added purchase amount, assuming tax had been paid on prior rent while the “vehicle” was in California. The source changes from property to vehicle without identifying what was leased.

The requester also asked whether the same applied to “early termination.” Counsel said the phrase was unclear and assumed it meant cancellation before the full lease period. On that assumption, tax applied to actual rent paid; after termination stopped further rent, no additional tax arose if every prior payment had entered the tax measure.

The PDF cites no numbered statute, regulation, ruling or case. Live Annotation 330.3700 publishes the location and lease-end purchase rules but omits the unclear-question and early-termination answer. No request, property or vehicle, acquisition, lease, California-location record, rental/tax payment, option, purchase, cancellation, return, audit or later outcome appears.

Common questions

Did the opinion tax rent for periods when the property was outside California?

No. It limited collection to lease payments received while the property was physically in the state.

What amount was taxed if the lessee exercised a purchase option?

The additional amount required to buy the property, assuming tax had been paid on the relevant in-state rental payments.

Did early termination itself create more rental tax?

No. If no more rent was received and all prior rent had entered the tax measure, the opinion found no additional tax on rent.

Did counsel know what “early termination” meant?

No. The letter expressly says it was uncertain and assumed cancellation before the lease's full stated period.

Did the source identify the leased item?

No. It generally says property, then calls it a vehicle in the purchase-at-termination sentence.

What law changed on August 1, 1965?

The letter does not identify a bill, chapter, code section or regulation.

Does the live annotation include the termination answer?

No. It publishes only the in-state rent and lease-end purchase rules.

Citations and references

• No numbered statute, regulation, ruling or case citation appears in the supporting opinion
• Unidentified Sales and Use Tax Law change operative August 1, 1965 — stated basis
• July 26 request and San Jose referral — referenced but absent
• Live Annotation 330.3700 — location and lease-end purchase rules dated August 11, 1965; termination omitted
• Property/vehicle, lease, location, rent/tax, purchase, termination, return, audit and outcome records — absent

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.3700
• Original supporting opinion: 330.3700 PDF

Original ruling text

330.3700

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

August 11, 1965

Gentlemen:
Your letter of July 26, 1965 addressed to our San Jose district office has been referred to this office for reply. Under the change in the Sales and Use Tax Law, operative August 1, 1965, with respect to tangible personal property leases, the lessor is required to collect the use tax only with respect to lease payments received while the property is physically located within the state. If a lessee should purchase the leased property at the termination of the lease, he would only be required to pay the use tax on the amount he is required to pay in addition to previous rental payments, provided tax had been paid on such rental payments during the period the vehicle was located in the state. You inquire whether the same would apply to “early termination”. We are not certain as to your meaning of early termination, but we assume you refer to a situation in which for some reason a lease is terminated prior to the running of the entire period of the lease. The tax is imposed upon the actual rentals paid and should there be a cancellation or termination for any reason so that no more rental payments are received, there would be no additional tax to be paid provided all rental payments received have been included in the measure of the tax paid. Very truly yours,

E. H. Stetson
Tax Counsel

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