Were fees for transferring human cadaveric tissue to surgeons taxable, and did nonprofit status create a general exemption?

Plain-English summary

A nonprofit charitable organization supplied human cadaveric tissues to surgeons for transplantation and asked for exemption based on its federal and California income-tax status.

The letter said California did not provide a general sales-tax exemption merely because an organization was nonprofit, charitable, religious, educational, scientific, or income-tax exempt. Its purchases and sales could therefore remain taxable, and section 6381's cited exemption was specific to the American National Red Cross.

The source separately concluded that fees charged for transferring cadaveric tissues to surgeons for transplantation were not subject to sales tax because those transactions were not regarded as sales of tangible personal property.

Citations and references

• California Revenue and Taxation Code § 6381

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 540.0110
• Original supporting opinion: 540.0110 PDF

Original ruling text

540.0110

STATE OF CALIFORNIA

JOHAN KLEHS
First District, Hayward

STATE BOARD OF EQUALIZATION
LEGAL DIVISION - MIC: 82
450 N STREET, SACRAMENTO, CALIFORNIA
(P. O. BOX 942879, SACRAMENTO, CA 94279-0082)
TELEPHONE: (916) 445-3723
FAX: (916) 323-3387

DEAN F. ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles
KATHLEEN CONNELL
Controller, Sacramento

E. L. SORENSEN, JR.
Executive Director

April 3, 1996

Mr. J--- -. L--Chief Financial Officer
---/T--- B--- I--XXX --- Avenue
---, -- XXXXX

Dear Mr. L---:
This is in response to your letter of March 14, 1996.
We understand that T--- B--- I--- is a not-for-profit voluntary health welfare charitable organization dedicated to the mission of restoring sight and physical reconstruction through providing human cadaveric tissues to surgeons for transplantation. You operate in many locations throughout the United States, including four locations in California. You asked for exemption from payment of California sales and use tax, on the basis that your organization has been determined to be a 501(c)(3) organization, exempt from income taxation by the Internal Revenue Service, and has been determined to be exempt from income taxation by the California Franchise Tax Board. You understand that some national organizations have received exemption from California sales tax obligations. California sales tax applies to sales made to your organization and to sales made by your organization. Unlike many other states, California does not have a sales tax exemption available to nonprofit, charitable, religious, educational, scientific, or similar organizations exempted from income tax. California Revenue and Taxation code section 6381 does provide a specific exemption for sales of tangible personal property to the American National Red Cross. That exemption is specific to that organization however.

Mr. J--- -. L---

-2-

April 3, 1996
540.0110

We do note that California sales tax would not apply to fees charged by your organization with respect to transfers of cadaveric tissues to surgeons for transplantation. Such transactions are not regarded for California sales and use tax purposes as sales of tangible personal property. Very truly yours,

Gary J. Jugum
Assistant Chief Counsel
GJJ:sr