Did a California purchaser have to report use tax directly when a registered in-state retailer failed to bill or collect it?

Plain-English summary

California considered a taxable purchase from a retailer engaged in business in the state and registered to collect use tax, where the retailer nevertheless failed to bill or collect the tax.

Section 6202 kept the purchaser liable until the tax was paid to California, unless the purchaser held a sufficient receipt from a collecting retailer. Sections 6452 and 6453 required a purchaser that had not paid the retailer to file a return showing the taxable purchase price and tax.

The memorandum therefore concluded that the purchaser had to report and pay the tax directly. It also observed that the historical consumer-use-tax form instructions implied otherwise and that the sales-and-use-tax return instructions were unclear.

The conclusion was phrased would appear, and the author closed by questioning whether the problem was large enough to require action. No form revision, compliance action or actual purchaser transaction is supplied.

Question and conflicting historical return instructions

The memorandum from Gary J. Jugum to Robert Nunes followed a redacted person's office visit the day before. The visitor asked who had to file consumer use tax returns in a hypothetical purchase: a California taxpayer bought taxable tangible personal property from a retailer engaged in business in California and registered under section 6226 to collect use tax, but the retailer failed to bill or collect the tax.

The quoted State, Local, and District Consumer's Use Tax Return said direct payment applied to people who were not sellers and bought or leased from a retailer that was neither engaged in business in California nor registered for use-tax collection. Jugum said this implied that a purchaser did not file when buying from an in-state-engaged, registered retailer.

The quoted State, Local and District Sales and Use Tax Return directed taxpayers to report on line 2 the purchase price of property bought ex tax. Its explanation associated that term with purchases from unlicensed sellers, including an occasional vessel or aircraft seller or an out-of-state retailer. Jugum called the language unclear and said it suggested no direct reporting for purchases from registered out-of-state retailers.

Neither form, its revision date nor its full instructions are included. The source provides no filed return or purchaser facts against which to test either implication.

Statutory analysis, tentative answer, and no action

Jugum read section 6202 to keep the person storing, using or consuming retailer-purchased property liable until tax was paid to California, except that a sufficient receipt from an in-state-engaged retailer could relieve the purchaser. Section 6451 made taxes under the part due quarterly.

He quoted section 6452 as requiring a use-tax return from every purchaser of taxable property that had not paid the tax to a retailer required to collect it. Section 6453 required that purchaser's return to show the total sales price becoming subject to use tax in the prior reporting period and the tax for the period.

On that basis, Jugum said a purchaser would appear required to report directly when the registered retailer failed to collect. He called the consumer-use-tax instructions inconsistent with that view and the sales-and-use-tax instructions at least unclear.

The memo merely called the issue to Nunes's attention and said it was unclear whether the problem's magnitude required action. No instruction change, Board adoption, taxpayer return, assessment or payment follows.

Live annotation and current category reference

The live 405.0015 annotation turns the memo's tentative conclusion into the categorical statement that a purchaser must report and pay when the retailer fails to collect. It retains the January 15, 1975 date but omits the registered-retailer premise, receipt rule, quoted statutes and forms, conflicting instructions, would appear posture and uncertainty about agency action.

The live 405.0000 category header links current Regulation 1685, Payment of Tax by Purchasers. The 1975 memorandum does not cite that regulation, so its current text is a separate reference rather than evidence of what Jugum wrote.

The official two-page PDF has a clean rendered text layer and no image or case citation. Both fresh downloads and text extractions matched, and the original-text tail remains byte-identical after removing only pdftotext's terminal newline and form feed.

What this means for you

California purchasers, retailers, and tax professionals

Do not assume a seller's registration extinguishes purchaser liability. Verify that tax was actually collected and retain the receipt; otherwise determine the purchaser's direct filing duty under current forms.

Common questions

Q: Did retailer registration alone relieve the purchaser?

A: No.

Q: When was purchaser liability extinguished?

A: When tax was paid to the state or the purchaser held a sufficient retailer receipt.

Q: What did the memorandum say about the forms?

A: One set of instructions was inconsistent with the statutory view and another was unclear.

Q: Was this an actual purchaser's assessment?

A: No. The memorandum poses the question in a hypothetical context and identifies no purchaser, retailer, property, return or assessment.

Q: Did the agency revise the forms?

A: The source does not say. It questions whether the problem was large enough to require action.

Q: Is Regulation 1685 part of the 1975 analysis?

A: No. The current category header links that regulation, but the source does not cite it.

Citations and references

• California Revenue and Taxation Code § 6202 — purchaser liability, payment and sufficient-receipt relief quoted
• California Revenue and Taxation Code § 6226 — registration to collect use tax cited in the hypothetical
• California Revenue and Taxation Code §§ 6451–6453 — quarterly payment, purchaser filing and return-content provisions quoted or described
• State, Local, and District Consumer's Use Tax Return — instructions quoted but complete form and version absent
• State, Local and District Sales and Use Tax Return, line 2 — ex tax instructions quoted but complete form and version absent
• California Sales and Use Tax Regulation 1685 — current live category reference, not cited by the 1975 source
• Redacted visitor; purchaser and retailer; property, price and taxable use; receipt; return and reporting period; tax measure and rate; billing and collection demand; assessment; payment; appeal; form revisions and agency action — described or implicated but not included

Verbatim support

From the official January 15, 1975 memorandum:

It would appear that a person, purchasing property subject to use tax from a retailer registered with this Board for use tax collection purposes who fails to collect the tax, is required to directly report the tax to the Board. The instructions on the use tax return are inconsistent with this viewpoint and the instructions on the sales and use tax return are at least unclear on this point.

We call this matter to your attention although it is not clear that the problem is of such magnitude as to require that we take action.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 405.0015
• Original supporting opinion: 405.0015 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. Robert Nunes

From:

Gary J. Jugum

Subject:

Consumer Use Tax Returns

405.0015

Date:

January 15, 1975

X------------- was in my office yesterday to discuss the question as to who must file consumer use tax returns. Specifically, he raises the question in the context of the purchase by a California taxpayer of tangible personal property from a “retailer engaged in business in this state” registered with this Board under Revenue and Taxation Code Section 6226 for the purpose of collection of use tax, who fails to bill or to collect from the taxpayer properly due California use tax. The question is – must the California purchaser directly report the use tax to the State of California? Our “State, Local, and District Consumer’s Use Tax Return” provides that: “This return should be filed by persons liable for state, local and district use taxes payable directly to the State who are not sellers of tangible personal property…..The state, local and applicable district use taxes are payable directly to the State by the purchaser when the property is purchased or leased from a retailer who is not engaged in business in this State and who does not hold a Certificate of Registration-Use Tax.” The implication is that a return need not be filed when the property is purchased from a retailer who is engaged in business in this state and who does hold a certificate of registrationuse tax. The “State, Local and District Sales and Use Tax Return” provides that taxpayers are to enter, on line 2, “PURCHASE PRICE of merchandise, equipment, or other tangible personal property purchased ‘ex tax.’” “Ex tax” is explained to mean “…without payment of California state use tax by reason of a purchase from an unlicensed retailer such as a person making an occasional sale of a vessel or an aircraft or an out-of-state retailer.” It is not clear how this language should be read. The suggestion is that taxpayers need not directly report use tax on purchases from “licensed” out-of-state retailers, i.e., retailers engaged in business in this state who are registered to collect California use tax.

Mr. Robert Nunes

-2-

January 15, 1975
405.0015

It would appear that the rule required by the Sales and Use Tax Law itself is that taxpayers must directly report use tax when the tax is due, even though they might have purchased the taxable property from a retailer engaged in business in this state who is registered with the Board, if the retailer fails to bill them for the tax. Revenue and Taxation Code Section 6202 provides that: “Every person storing, using, or otherwise consuming in this State tangible personal property purchased from a retailer is liable for the tax. His liability is not extinguished until the tax has been paid to this State except that a receipt from a retailer engaged in business in this State [etc.] is sufficient to relieve the purchaser from further liability…” Section 6451 provides that “The taxes imposed by this part are due and payable to the board quarterly…” Section 6452 provides that: “…for the purpose of the use tax a return shall be file…by every person purchasing tangible personal property, the storage, use, or other consumption of which is subject to the use tax, who has not paid the use tax due to a retailer required to collect the tax.” [Emphasis added.] Section 6453 provides that: “…in case of a return filed by a purchaser, the return shall show the total sales price of the property purchased by him, the storage, use, or consumption of which became subject to the use tax during the preceding reporting period. “The return shall also show the amount of the taxes for the period covered by the return…” It would appear that a person, purchasing property subject to use tax from a retailer registered with this Board for use tax collection purposes who fails to collect the tax, is required to directly report the tax to the Board. The instructions on the use tax return are inconsistent with this viewpoint and the instructions on the sales and use tax return are at least unclear on this point. We call this matter to your attention although it is not clear that the problem is of such magnitude as to require that we take action.

j:alicetilton