Is a mill's charge for delivering its own wood shavings taxable when it calls the charge reimbursement for hauling expense?

Plain-English summary

California concluded that a mill was selling wood shavings to dairies, stables, and other customers when it hauled the shavings to them for a charge. Calling the payment reimbursement for hauling did not change the transaction's character.

The key fact was ownership at delivery. The shavings remained the mill's property until they reached the customer, so title presumably passed upon delivery. Under the sales-tax definition described in the letter, taxable gross receipts included the total customer payment without a deduction for delivery expense incurred before title passed.

The letter also discussed a historical alternative: if the mill were merely hauling property for hire, the then-current three-percent transportation gross-receipts tax could apply, subject to the stated city-limits and private-property exceptions. But that tax did not apply when sales tax was paid on the delivered price without a separately stated transportation charge.

Common questions

Was the charge exempt because the mill called it hauling reimbursement?

No. The Board looked to the underlying sale and when title passed, not the label placed on the charge.

Why was the full delivered charge taxable?

The mill owned the shavings until delivery, so the delivery expense arose before title passed and could not be deducted from taxable gross receipts under the rule stated in the letter.

Does the letter's three-percent hauling tax still apply today?

The source states that historical rule as of 1956. It does not establish the current rate or current transportation-tax treatment.

Citations and references

• No numbered statute, regulation, or case citation appears in the official source

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/495-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/495-0400.pdf

Original ruling text

495.0400

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

June 8, 1956

X----------------------

Attention:

X-------------------Secretary – Treasurer

Gentlemen:
We believe that under the facts stated in your letter of April 28, you are making a sale of wood shavings to the dairies, stables, and other customers to whom you haul them even though you apparently regard your charge as simply a hauling charge. As the shavings are apparently your property until they are delivered, the charge which you make, even though it is to reimburse you for the hauling expense, is subject to sales tax for the reason that the sales tax law defines gross receipts subject to tax as the total amount received from the customer without any deduction for delivery expense prior to passage of title. As the title to your shavings presumably passes upon delivery, the charge you make is, therefore, within the definition of gross receipts taxable under the California Sales and Use Tax Law. If you were to be regarded as merely making a charge for hauling, you would then be subject to the three percent tax on gross receipts from hauling for hire which applies except with respect to hauls entirely within the limits of incorporated cities, or entirely on private property. The gross receipts tax on transportation does not, however, apply where sales tax is paid on the delivered price without a separate statement of transportation charges. Very truly yours,

E. H. Stetson
Tax Counsel
EHS:ds
cc:

Pasadena – Compliance