Were postal uniforms exempt when employees ordered them but the Post Office paid vendors from each employee's uniform allowance?

Plain-English summary

Postal employees ordered uniforms from a retailer and submitted the invoice to the Post Office Department's disbursement officer. The Department deducted the charge from the employee's authorized uniform allowance and paid the retailer by Department check.

California treated the sale as a sale to the United States to the extent the Department paid the vendor directly. Tax did not apply to that portion.

Any amount paid by the employee was different. That amount was not a sale to the United States and remained taxable even if the Department later reimbursed the employee.

What this means for you

Uniform vendors, government employees, payroll teams, and tax advisers

Split mixed payments by who pays the seller directly. An agency allowance or later reimbursement does not convert an employee-paid charge into a direct government purchase.

Common questions

Q: Did the employee placing the order make the whole sale taxable?

A: No. The Department-paid portion was treated as a federal purchase.

Q: Were employee-paid amounts exempt after reimbursement?

A: No.

Q: What fact controlled the split?

A: Whether the Department or the employee paid the vendor.

Citations and references

• The letter cited no numbered statute, regulation, or case.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 505.0356
• Original supporting opinion: 505.0356 PDF

Original ruling text

505.0356

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 21, 1970

--- --- ----- --- ----- --- --Gentlemen:
This is in response to your letter dated August 28, 1970.
From your letter, we understand that you are a retail seller of uniforms, and that in the course of your business, you contract to sell uniforms to United States Post Office Department employees in California. Such employees are authorized uniform allowances by the Department. Thus, when an employee needs to acquire or supplement his uniform, he orders the necessary item or items from you, and upon receipt of the item or items ordered, he presents the accompanying invoice to the Department’s disbursement officer. The disbursement officer then deducts the amount of the invoice from the employee’s allowance and pays invoice amounts to you bi-weekly by means of a Department check. You ask whether such sales are taxable under the Sales and Use Tax Law. We have taken the position that sales of uniforms to Department employees in California are sales to the United States to the extent that payment therefore is made by the Department. Thus, tax does not apply to any amounts paid to you by the Department. Sales of uniforms to employees for which they make payment are not sales to the United States, however, and tax applies to any amounts paid to you by employees, even if they are subsequently reimbursed for their expenditures by the Department. Very truly yours,

J. Kenneth McManigal
Tax Counsel

JKM:smb
bc:

Out-of-State – Dist. Admin
New York