Did a wholesaler make taxable retail sales when it gave records to radio stations at a supplier's request and received replacement records?

Plain-English summary

A wholesale record dealer distributed records to radio stations at its supplier's request. Neither the dealer nor the supplier charged the stations, but the supplier agreed to furnish replacement records to the dealer.

California upheld the audit's treatment of those distributions as taxable retail sales by the dealer. It also said the audit's measure of tax was appropriate, although the short source does not state the measure or its calculation.

The memorandum noted that inconsistent treatment in earlier audits of the supplier did not change the proper application of tax to the transactions under review.

Common questions

Did the stations' lack of payment prevent a taxable sale?

No under the described replacement arrangement.

What did the dealer receive?

The supplier was understood to furnish replacement records for those distributed to the stations.

Does the source disclose the taxable measure?

No. It only states that the measure used in the audit was appropriate.

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/495-0950.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. J. J. Saunders

From:

T. P. Putnam

Subject:

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

495.0950

Date:

June 7, 1972

In reply to your memorandum of May 31, it is my view that the audit treatment of X--------------- is correct, i.e., X------------- is making taxable retail sales of those records distributed to radio stations at X--------------- request, without any charge to the radio stations, and with the understanding that X------------ will furnish replacement records. The measure of tax used in the audit is appropriate. It is unfortunate if the transactions were not treated consistently with the above approach in prior audits of X-------------- but that should not affect the proper application of tax.

TPP:kc
cc:

Mr. R. Nunes
Mr. J. D. Paulson
Out-of-State Auditing (DMA)
San Mateo Auditing (CPL)