Did withdrawing disposable blood bags from California resale inventory for a company-controlled out-of-state plasma program trigger use tax?

Plain-English summary

A blood-products company withdrew disposable blood-collection bags from its California resale inventory and furnished them to out-of-state plasma suppliers. Most agreements provided the equipment without charge and restricted its use to collecting plasma for the company; title remained with the company.

California therefore rejected the company's claim that it sold all of the bags in interstate commerce. Even so, the withdrawal did not create taxable California use because the company exercised power over the property in California solely to transport it outside the state for use there.

The letter recommended deleting the disputed audit item from the determination.

Common questions

Were the bags treated as sold to the plasma suppliers?

Generally no. They were furnished without charge, restricted to the company's plasma program, and remained company property. The source notes limited agreements under which a supplier paid per set.

Why was there no use tax if the company consumed the bags?

Section 6009.1 excluded the California exercise of power when it occurred solely to send the property outside California for use there.

Does the official PDF have conflicting metadata?

Yes. Its continuation header displays a 1992 date and another annotation number, while the first page and official index identify this as the January 31, 1966 source for Annotation 570.1140.

Citations and references

• Cal. Rev. & Tax. Code § 6009.1 — California handling solely for subsequent out-of-state use

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/570-1140.pdf

Original ruling text

570.1140

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

January 31, 1966

C--- L---, Inc.
--- and --- Streets
---, CA XXXXX
SY CH XX-XXXXXX

Gentlemen:
Your petition for redetermination of sales and use taxes, dated December 26, 19XX, has been referred to this office for reply. You have protested Item E, Self-Consumed Merchandise Understated – plastic materials withdrawn from California Resale Inventory, and not sold, used in out-of-state blood program measure $XXX,XXX. We understand your contention to be that you did not consume the plastic materials (disposable blood collecting bags), but rather that you sold them in interstate commerce to blood collecting companies outside this state. We have examined the copies of the agreements, purchase orders, and correspondence concerning the conditions under which B--- F---, Inc., B--- C---, Inc., --- & ---., Inc., O--- B--- of P--- A---, the University of O--- Medical Center, and M--- Blood Center, agreed to supply blood plasma to “C--- L---.” As you have pointed out in your letter of October 27, 19XX, to Mr. Robert L. Matlean, Supervising Auditor, ---, the agreements with B--- F---, Inc., B--- C---, Inc., --- & ---, Inc., the amended purchase agreement with the B--- of P--- A--- in --- ---, and the letter to the M--- Blood Center, dated August 21, 19XX, all provided that C--- L--- would furnish the disposable bloodcollecting equipment to them without charge. On the other hand, the original purchase order agreement with the B--- of P--- A--- indicated that C--- would furnish such equipment for $X per set, and the letter to M--- Blood Center indicated that subsequent to August 16, 19XX, “M---” would pay C--- $X.X per set. It appears to us, from the foregoing and from the provisions on the “B--- F---” and “B--- C---” agreements, that they were not authorized to use the disposable equipment furnished by C--- when collecting plasma not being sold by them to C---, that title to the disposable equipment

C--- L---, Inc.

-2-

January 31, 1992
330.0008

furnished by C--- for no charge remained at all times in C---. It is, therefore, our opinion that C--L--- did not sell such disposable equipment to such entities. Notwithstanding the foregoing, however, it appears to us that C---’s withdrawal of such disposable equipment from resale inventory for its own use outside this state constituted the exercising of power over tangible personal property in this state for the purpose of subsequently transporting it outside this state for use thereafter solely outside this state. As indicated in section 6009.1, such exercise of power over tangible personal property is not a use which is subject to tax. In view of the foregoing, we are recommending that Item E, Plastic Materials withdrawn from California Resale Inventory, and not sold, used in out-of-state blood program, be deleted from the determination. Very truly yours,

George A. Trigueros
Tax Counsel

GAT:smk
bc:

--- – Dist. Admin.