Did a co-owner resell materials by contributing them to a jointly owned out-of-state construction project?

Plain-English summary

California said materials bought by the claimant as a principal and co-owner of the out-of-state project were not purchased for resale to that project. Paying sales-tax reimbursement on those purchases therefore did not create a tax-paid purchases resold credit for the claimant.

The result could differ for property drawn from general inventory if the claimant proved it actually resold that property to the project. A corresponding credit could then apply to the extent the resale occurred in interstate commerce or was otherwise exempt. Any vendor-side refund under the cited exemption sections had to be claimed by the vendors.

Common questions

Did moving materials to an out-of-state jointly owned project establish a resale?

No, not for purchases made in the claimant's role as co-owner.

Could general inventory qualify?

Only if the claimant proved an actual resale to the project.

Why did interstate-commerce evidence matter?

The letter said an actual resale could support the corresponding credit to the extent it was made in interstate commerce or otherwise exempt.

Who could claim refunds under sections 6383 or 6386 for the original vendor transactions?

The vendors that paid the tax.

Citations and references

• California Revenue and Taxation Code section 6386 — exemption theory raised for materials installed outside California; vendor claim route described
• California Revenue and Taxation Code section 6383 — exemption theory raised for other inventory purchases; vendor claim route described

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/545-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/545-0200.pdf

Original ruling text

545.0200

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
May 21, 1971

This is in response to your April 28, 1971 letter to me wherein you requested that we review further the December 3, 1969 claim for refund of California state and local sales taxes and that we advise as to why section 6386 is not considered as germane and paramount thereto. In this regard, you advised that the materials as to which the refund is being claimed were ultimately installed in a construction project outside the State of California, and you asserted that under Section 6386 they would be exempt from state and local sales taxes. With regard to purchases made by __, as principal in its own behalf, and as agent for
_ and section 6386 has not been considered since any refund which might be allowable as the result of that section would be due the vendors. Thus, any claims for refund with respect to such transactions would properly originate from them. As we previously advised, as for California sales/purchases, if paid sales tax reimbursement to the vendors, it would not be entitled to a tax-paid purchases resold credit because its purchases were made by it as a co-owner of the rather than by it for resale to the . With regard to property requisitioned from inventory which was not specifically purchased for the again, section 6383 has not been considered since any refund which might be allowable as the result of that section would be due its vendors. Again, any claims for refund with respect to such transactions would properly originate from them. We previously advised that if paid sales tax reimbursement to its vendors at the time of those purchases, it would not be entitled to a tax-paid purchases resold credit unless it actually resold the property to the . In the event that resold all or part of this property to the
___ it would be entitled to a corresponding tax-paid purchases resold credit to the extent that its resales were made in interstate commerce or were otherwise exempt. Any evidence to this effect should be forwarded to us on or before July 1, 1971. Otherwise, we will have no alternative but to recommend to the board that this claim for refund be denied. Very truly yours,

J. Kenneth McManigal
Tax Counsel
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