Were transfers between the University of California and another California state agency taxable sales, and was the transferor's original purchase for resale?

Plain-English summary

California treated the University of California as a state agency under Attorney General Opinion 10478 and cases describing UC as a constitutional department, function, or branch of the state.

Transfers between UC and other California state agencies therefore were not sales, and sales tax did not apply to the transferor agency's receipts from the transferee agency.

The transferor agency's original purchase remained taxable. It did not buy the property for resale because its later transfer to another part of the state was not a sale.

What this means for you

Public institutions and tax professionals

Distinguish the initial vendor sale from the later interagency movement. A transfer within the state may not be a sale, while that same characterization prevents the first agency from claiming it bought the property for resale.

Common questions

Q: Was UC treated as a California state agency?

A: Yes, under the authorities cited in the memorandum.

Q: Was a transfer between UC and another state agency a taxable sale?

A: No.

Q: Could the first agency buy the property for resale?

A: No. Its later interagency transfer was not a sale, so the original purchase was taxable at retail.

Citations and references

• California Attorney General Opinion 10478 (February 3, 1936)
• Williams v. Wheeler, 23 Cal. App. 619
• Pennington v. Bonelli, 15 Cal. App. 2d 316

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 530.0320
• Original supporting memorandum: 530.0320 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. Ray W. Lenau
Legislative Bill Room

From:

E. H. Stetson, Tax Counsel

530.0320

March 13, 1967

Confirming our recent telephone conversations, this is to inform you that we have taken the position that the University of California is a state agency within the meaning of Opinion of Attorney General 10478, dated February 3, 1936, copy enclosed. Accordingly, transfers between the University of California and other state agencies are not “sales” and sales tax does not apply to the receipts of the transferor agency from the transferee agency. The tax would apply to the sale to the agency which makes the transfer to the other agency. The sale to the first agency is taxable as a retail sale because the agency is not buying the property for “resale” to another agency. Our position that the University of California is a state agency is based upon Williams v. Wheeler, 23 Cal. App. 619, in which the court said: “By the Constitution of 1879, the University of California was raised to the dignity of a constitutional department or function of the state government, by the provisions of section 9 of article IX thereof.” In the more recent case of Pennington v. Bonelli, 15 Cal. App. 2d 316, the court described the University as “a branch of the state itself”, citing the Williams case.

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