Could a federal contractor issue resale certificates when title to merchandise passed to the United States upon acquisition?

Plain-English summary

A corporation held a California seller's permit and bought merchandise under federal contracts that passed title to the United States when the corporation acquired the property.

For merchandise actually purchased for resale to the government, the corporation could issue customary resale certificates to its vendors.

The exception was property used to perform contracts improving real property. Section 6384 required sales tax on the vendor's sale of that property to the contractor despite the federal title arrangement.

Common questions

Could the contractor issue resale certificates for federal resales?

Yes.

Did immediate government title make every purchase a resale?

No. Property used to improve real property remained taxable to the contractor.

What current source did the later editorial note identify?

Regulation 1521.

Citations and references

• Cal. Rev. & Tax. Code section 6384 — taxable sale of real-property construction inputs to the federal contractor
• Cal. Code Regs., tit. 18, reg. 1521 — identified by the source's July 30, 2001 editorial note

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/565-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/565-0160.pdf

Original ruling text

565.0160

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
December 1, 1950
Gentlemen:
In answer to your letter of November 28, we advise you that REDACTED TEXT Corporation holds seller’s permit REDACTED TEXT, issued under the Sales and Use Tax Law, and is, therefore, entitled to give you the customary resale certificates for property which it purchases for the purpose of resale. We understand that it holds certain Government contracts pursuant to which it purchases merchandise, title to which passes to the Government upon acquisition of the property by the Corporation. As to such property, REDACTED TEXT Corporation is regarded as purchasing it for resale to the Government and properly issues resale certificates to its vendors covering such purchases, except as to property used in performing contract for improving real property. As to property used for this purpose, Section 6384 of the Revenue and Taxation Code requires payment of sales tax upon the sale thereof to the contractor. Very truly yours, E. H. Stetson Tax Counsel

See now also Reg. 1521. SPJ 7/30/01