Did a credit-card issuer remain the California consumer when it could revoke the card and demand its return but did not expressly retain title?

Plain-English summary

California treated credit-card issuers as the consumers of physical cards mailed from outside the state to California users when the issuers retained enough control over the cards.

An express statement that the issuer retained title already supported use-tax liability under the prior annotation. The memorandum reached the same result when three issuers did not expressly retain title but reserved the right to revoke or withdraw the credit privilege and require the customer to surrender the card on demand.

Those conditional-transfer terms preserved sufficient control for the issuer to remain the consumer of cards used in California. The memorandum applied the same reasoning previously used for a company's conditionally transferred displays.

Common questions

Was an express retained-title statement required?

No. Revocation and surrender-on-demand rights were enough under the memorandum.

Whose California use created the tax consequence?

The memorandum treated the issuer as the consumer of the physical cards sent to California users.

Citations and references

• Business Taxes Law Guide Annotation 570.0080 — express retained-title treatment followed
• February 9, 1972 display-control memorandum — conditional-transfer reasoning applied by analogy; attached to the original but absent from the published PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/570-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/570-0070.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Out-of-State District (DMA)

From:

Headquarters – Tax Counsel (GLR)

Subject:

P--- P--- Company
---, Oklahoma

570.0070

Date:

September13, 1972

SZ OH XX XXXXXX

In your memo of September 8, 1972 you ask our opinion as to whether use tax would apply to credit cards purchased ex tax out of state by P--- and other major --- companies and mailed from out-of-state points to California users who use the cards here. You point out that where the --- company retains title to the credit cards by a specific statement on the back of the card, annotation 570.0080 supports the conclusion that use tax is due. We agree. However, you have some reservation about extending this annotation to the case of P---, S---, and T--- where they do not make a specific statement regarding their retention of title to the cards but instead make a conditional transfer of the card reserving the right to demand its return upon the happening of a certain event. The respective companies provide: “P--- reserves the right to withdraw this credit privilege at any time and the card shall be surrendered upon demand.” “S--- O--- Company may revoke this card at any time without notice and customer agrees to surrender this card on demand.” “T--- reserves the right to cancel or modify this authorization of credit at any time and to demand surrender of this card.” As you are no doubt aware, a similar problem arose with A--- C--- Company concerning their conditional transfers of displays. In a memo of February 9, 1972, copy attached, we concluded that under these circumstances [A---] C--- retained sufficient control over the displays to be considered the consumers of the displays in California.

Out-of-State (DMA)
(SZ OH XX XXXXXX)

-2-

We feel that the same conclusions are equally applicable here.

GLR:lb
Attachment
cc:

Mr. T. P. Putnam
Mr. Donald J. Hennessy

September 13, 1972
570.0070