Did a card issuer owe California use tax on credit cards it retained title to and mailed from New York to California members?

Plain-English summary

A credit-card issuer mailed cards from New York to members throughout the United States. Each card said it remained the issuer's property and had to be surrendered on demand.

California concluded that the issuer was the consumer of the cards sent to members in California. Because the cards were bought from out-of-state manufacturers for the issuer's California use, the issuer owed use tax measured by its cost of those cards.

Common questions

Did mailing the card to a member make the member the taxable purchaser?

Not under the stated facts. The issuer retained ownership and the right to demand the card's return, so the memorandum treated the issuer as the consumer.

What was the tax measure?

The issuer's cost of the cards purchased from out-of-state manufacturers and mailed to California members.

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/570-0080.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Out-of-State – Auditing (JDD)

From:

Tax Counsel (GAT)

570.0080

Date:

Feb. 13, 1968

This is in regard to your memo of February 6, 1968.
It is our understanding that “C” credit cards are mailed from New York to its members all over the United States. Printed on the back of each card is the statement, “This card is the property of “C” and must be surrendered on demand.” In reply to your inquiry, it is our opinion that the “C” is the consumer in this state of those cards which are sent to members in this state. Accordingly, “C” is subject to use tax with respect to its cost of the credit cards purchased from out-of-state manufacturers which were mailed to “C” members in California.

GAT:ab

[lb]