Did California sales tax apply when an out-of-state dealer's driver took resale trucks from the California factory to the dealer's out-of-state business?

Plain-English summary

California found no seller tax under the second paragraph of section 6007 when a California seller sold trucks to an out-of-state dealer for resale and the dealer's driver drove them from the factory to the dealer's out-of-state business. The ultimate customer supplied no employee or representative to assist with delivery.

The result did not change merely because the ultimate customer reimbursed the dealer for the driver's fuel, wages, meals, lodging, and other operating expenses. The letter required that the customer do no more than reimburse those costs: the customer could not direct or control the driver, and the driver could not act as the customer's agent.

The trucks could also carry parts bought by the out-of-state dealer for use or resale at its out-of-state business. The Board found no tax on the trucks or parts. Driving was necessary to complete delivery, and the truck's incidental use as a carrier of parts did not destroy its status as property purchased for resale.

Common questions

Who drove the trucks out of California?

The out-of-state dealer's driver, without help from an employee or representative of the ultimate customer.

Could the final customer reimburse delivery expenses?

Yes, if reimbursement was all the customer did. The customer could not direct or control the driver or make the driver its agent.

Did carrying a load of parts make the truck taxable in California?

No. The Board treated that use as incidental to the delivery trip and did not view it as defeating the truck's resale status.

Did the letter find tax on the parts carried out of state?

No. On the stated facts, it found no seller sales-tax liability for either the trucks or the parts.

Citations and references

• California Sales and Use Tax Law § 6007, as described in the 1955 letter

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/495-0920.pdf

Original ruling text

495.0920

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
March 30, 1955
Attention:

REDACTED TEXT

Gentlemen:
This is in reply to your letter of February 28 in which you inquire concerning the sales tax with respect to trucks sold by REDACTED TEXT to an out-of-state dealer for resale whose driver drives the truck from the REDACTED TEXT plant at to the dealer's place of business outside this state with no aid by any employee or representative of the ultimate consumer. We agree that under these circumstances, REDACTED TEXT does not incur tax liability under the second paragraph of Section 6007. You inquire whether there would be any different tax consequence if the ultimate consumer reimburses the out-of-state dealer for fuel and other operating expenses including wages, meals and hotel accommodation of the driver. We do not believe that such reimbursement would have any tax consequence, it being understood that the ultimate consumer does no more than make reimbursement for these expenses and does not exercise direction or control over the driver in the operation and delivery of the truck to the dealer, the driver being in no sense the consumer's agent. You also inquire whether there would be any tax liability accruing to REDACTED TEXT if the truck purchased by the out-of-state dealer and driven by the driver from the factory to his place of business contains a load or partial load of parts which the dealer has purchased from for use or resale at his out-of-state place of business. We do not believe that this condition subjects REDACTED TEXT to payment of the sales tax with respect either to the truck or those parts purchased by the out-of-state dealer for resale. As you point out, there would appear to be no question as to any use having been made of the parts prior to the time they are delivered to the dealer outside this State. There might be more basis for such a question in the case of the trucks, but we do not believe that it would be a sound conclusion to regard the trucks as having been purchased for a purpose other than resale merely because while being driven from the factory to the dealer's place of business, they contain parts also purchased for resale; some of which parts, may be consumed by the dealer. The truck must make the trip in order for delivery to be effective. We do not believe that its incidental use as a carrier of parts should destroy its status as an article being purchased for the purpose of resale. Very truly yours, E. H. Stetson Tax Counsel EHS:djr cc:

REDACTED TEXT – Auditing