Were supplies bought by a California agency exempt when the federal government allotted the money for the purchase?
Apply this to your situation
This page answers the general question as of 1952. Ask about yours and see what current California tax law says, with citations.
Plain-English summary
California considered sales of supplies to state agencies when the federal government allotted the purchase money.
The authorities described in the letter treated California sales tax as legally imposed on the retailer. From the purchaser's perspective, the tax became part of the price rather than a direct tax on the governmental buyer.
The state agency's use of federal funds therefore did not exempt the sale. The letter said the issue had been settled by the cited California Attorney General and U.S. Comptroller General authorities.
What this means for you
State agencies, grant administrators, vendors, and tax advisers
Do not equate federal funding with a federal purchaser. Determine who buys the supplies and where the legal incidence of the tax falls.
Common questions
Q: Did federal funding exempt the purchase?
A: No.
Q: Who was the purchaser?
A: The state agency.
Q: How did the letter characterize the vendor's sales tax?
A: As part of the price from the purchaser's perspective.
Citations and references
- California Attorney General Opinions NS2129, NS4618, and NS4717
- U.S. Comptroller General Decision A-88689 (January 31, 1942), as identified in the source
Source
- Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
- Annotation page: Annotation 505.0680
- Original supporting opinion: 505.0680 PDF
Original ruling text
1925
State agencies purchase supplies with federal funds
505.0680
STATE OF CALIFORNIA
STATE BOARD OF EQUALIZATION
July 28, 1952
REDACTED TEXT
Dear Mr. REDACTED TEXT:
In accordance with our recent telephone discussion I am enclosing herewith Opinions of Attorney General NS2129, November 21, 1939, NS4618, November 27, 1942, and NS4717, February 8, 1943, all dealing with the application of the State sales tax with respect to sales to State agencies to which Federal funds were allotted for the purchase of supplies. Opinion NS4717 deals particularly with the right of the retailer to obtain reimbursement for the tax. In Opinion NS2l29 note particularly the next to the last paragraph. Also enclosed is an additional copy of Decision A-88689, January 31, 1942, Comptroller General of the United States. These opinions cite the various decisions holding the California sales tax to be imposed upon the retailer and, therefore, in so far as the purchaser is concerned, a part of the price and nothing else. Other decisions are also cited in support of the position of the State that the tax is applicable notwithstanding that the State agency making the purchase used Federal funds allotted to it for that purpose. There have been no cases since those cited in the enclosed opinions that I could mention which I believe would be of further assistance to you. The matter having been quite definitely settled by the authorities mentioned in these opinions, there seems to have been no further litigation in which the particular point in question has been discussed. If, however, I can be of any further assistance to you, I shall be glad to do so in any way that I can. Very truly yours
E. H. Stetson
Tax Counsel
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