Did section 6009.1 exclude materials stored at a California dock before use on offshore rigs in federal waters?

Plain-English summary

Materials and consumables bought outside California could be stored at a California dock without taxable use when they were kept there only for later shipment to offshore rigs outside the state and used solely there. Any other California use would defeat the section 6009.1 exclusion.

The same exclusion did not shelter property bought in California. Those transactions were California sales subject to sales tax, and section 6009.1 excluded only storage or use from use tax.

Property shipped directly from an out-of-state purchase to the offshore rig also produced no California sales or use tax on the described facts.

Common questions

Did the California warehouse itself make the out-of-state purchase taxable?

No, if the property was stored only for shipment and sole use outside California.

Did section 6009.1 exempt a purchase made in California?

No. It was a use-tax exclusion, not a sales-tax exemption.

Citations and references

• Cal. Rev. & Tax. Code § 6009.1 — out-of-state-use storage exclusion applied
• Cal. Rev. & Tax. Code §§ 6007 and 6051 — California retail sales framework discussed
• Cal. Rev. & Tax. Code §§ 6201 and 6401 — use-tax framework discussed
• Cal. Code Regs. tit. 18, § 1620 — interstate sales and use-tax rules referenced

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/570-1168.pdf

Original ruling text

570.1168

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082)
Telephone: (916) 322-2976
FAX: (916) 323-3387

DEAN ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles

June 8, 1995

KATHLEEN CONNELL
Controller, Sacramento
────────
BURTON W. OLIVER
Executive Director

Ms. S--- L--B--- E--P. O. Box XXX
---, TX XXXXX-XXXX
Re:

S--- O--- P--- Company
(No Permit Number)

Dear Ms. L---:
This is in response to your letter dated February 14, 1995 regarding the application of tax to your purchases of items used to paint offshore rigs. You state: “Our company S--- O--- P--- Company (CA Corp # XXXXXXX) is headquartered in --- ---, Texas. We have several jobs in federal waters off the coast of California in which we perform painting on offshore rigs. The material and consumables (i.e., items used up at the job) are either transported directly to the rig or are shipped to a dock warehouse. If they are transported to the dock warehouse, the materials and consumables may remain at the warehouse until needed at the rig.” You indicate that you purchase materials and consumables both inside and outside of California, and you ask whether the items purchased and shipped to the dock warehouse inside California come within the storage and use exclusion provided in Revenue and Taxation Code section 6009.1. DISCUSSION Retail sales of tangible personal property in California are subject to sales tax, measured by gross receipts, unless specifically exempt by statute. (Rev. & Tax. Code § 6051.) A retail sale is a sale for any purpose other than resale in the regular course of business. (Rev. & Tax. Code § 6007.) When sales tax does not apply, such as when sales take place outside of California, the use tax, measured by the sales price of the property sold, applies to the use of

Ms. S--- L---

-2-

June 8, 1995
570.1138

property purchased from a retailer for storage, use, or other consumption in California. (Rev. & Tax. Code §§ 6201, 6401, Reg. 1620.)

Ms. S--- L---

-3-

June 8, 1995
570.1138

When you purchase property outside of California and the property is shipped directly to the rig located in waters outside of California, no sales or use tax applies. When you purchase the property inside of California, the applicable tax is sales tax owed by the retailer, for which it may collect reimbursement from you if the contract of sale so provides. (Civ. Code § 1656.1.) The storage and use exclusion provided in section 6009.1 is an exclusion from use tax, not from sales tax; therefore, when the sale takes place in California, the storage and use exclusion does not apply. If property is purchased outside this state for storage or use in California, use tax applies unless the storage or use is excluded or exempt from tax by statute. Section 6009.1 provides the relevant exclusion: “‘Storage’ and ‘use’ do not include the keeping, retaining, or exercising any right or power over tangible personal property for the purpose of subsequently transporting it outside the state for use thereafter solely outside the state, or for the purpose of being processed, fabricated, or manufactured into, attached to or incorporated into, other tangible personal property to be transported outside the state and thereafter used solely outside the state.” You state that property transported to the dock warehouse may remain at the warehouse until needed at the rig. The keeping of property at the warehouse for the purpose of subsequently transporting it to the rig outside California for use solely outside this state comes within the section 6009.1 exclusion. You will therefore not be regarded as making a taxable use of such property in California and will not owe use tax. However, you will owe use tax if you make any use of the property in California other than storage for the purpose of shipment outside this state for use solely outside this state. If you have further questions, please feel free to write again. Sincerely,

Kelly W. Ching
Staff Counsel
KWC:cl
cc:

Out-of-State District Administrator