Did a lessor owe use tax when property first leased outside California later entered for the lessor's own operations?

Plain-English summary

The memorandum proposed a historical rule for non-mobile tangible property bought for resale, first leased outside California, and later brought here for the lessor's own business use after the first lease ended.

For property the lessor bought outside California, the memorandum said later California use was not taxable if the property did not enter within 90 days after the out-of-state lease began. For property bought inside California, it said later use was not taxable if the property did not reenter until more than six months after that lease began.

A later source note expressly added that none of the rule's property was mobile transportation equipment.

Common questions

Did the rule cover a second California lease?

No. The stated facts involved use in the lessor's own operations.

Did it cover mobile transportation equipment?

No.

Citations and references

• Cal. Rev. & Tax. Code § 6009.1 — historical six-month reentry analysis cited
• Business Taxes Law Guide Annotation 330.2290 — prior advice 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/570-1520.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. Gary J. Jugum

From:

Donald J. Hennessy

Subject:

New Annotation

570.1520

March 17, 1988

We recently again tangled with another variation on your “Z---” letter (Annotation 330.2290). We recommended that the tax not apply based on the advice we have given during the last few years. I wish to annotate this memorandum of mine to you, thereby giving such advice a current treatment and directing any questions to me. I request your approval to delete annotations 570.1120, 570.1140, and 570.1520, and then add a new annotation stating as follows: “Out-of-State Use of Leased Property. A lessor purchases tangible personal property* for resale from suppliers both inside and outside California. The first lease is at a location outside California. Following termination of this first lease, the lessor brings the property into California, not for lease to another lessee, but for use in the lessor’s own operations in California. “If the property was purchased by the lessor outside California, and does not enter California within 90 days of the start of the out-of-state lease, the lessor’s use of the property in the lessor’s own operations in California is not subject to use tax. “If the property was purchased by the lessor inside California, and did not reenter California until after six months from the start of the out-of-state lease (Section 6009.1), the lessor’s use of the property in the lessor’s own operations in California is not subject to use tax.”

*None of
which
constitutes
Mobile
Transportation
Equipment.
This will be
added to
ensure no one
misinterprets
the intent of
the annotation.
DHL 57/97

On receiving your approval, I will include this in the next Current Legal Digest, which Susan and I are now putting together. DJH:sr