Did California tax a truck lease that began with delivery to an out-of-state lessee outside California for use there?

Plain-English summary

A California truck dealer proposed a 36-month pure lease to an Idaho customer. The truck would be manufactured in Portland, delivered to the lessee there when the lease began, and then taken to Idaho for the entire lease term. The historical letter found no California sales or use tax.

It also considered a second arrangement in which a truck chassis would go to a California company for installation of a body and trailer under the lessee contract, after which that company would transport the completed truck and trailer to the out-of-state customer for use outside California. The letter likewise found no California sales or use tax with respect to the chassis under those facts.

The source was later marked obsolete and points readers to Regulation 1661.

Common questions

Did the first lease begin in California?

No. It became effective when the lessee took delivery in Portland, Oregon.

Does the 1962 no-tax answer remain current guidance?

The source itself says no: it was marked obsolete in 1997 with a direction to see Regulation 1661.

Why does this page use 1962 when the PDF header says 1952?

The letter discusses a July 26, 1962 request, and the official annotation dates the opinion August 10, 1962. The header's 1952 date conflicts with both.

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/570-1540.pdf

Original ruling text

570.1540

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

August 10, 1952

F--- W--- & A--- Sales
XXXX S. --- Avenue
---, California
Attention:

• • XXXXXX

Mr. G--- L. H---

Gentlemen:
In your letter of July 26, 1962, you state that you are the Central California Dealers for W--- and A--- trucks. You propose to enter into a transaction whereby you will lease a truck to an Idaho customer for 36 months under a pure lease. The truck will be manufactured in Portland, Oregon, and the lease will be effective upon delivery of the truck to the customer in Portland. Thereafter, the customer will transport the truck to Idaho where it will be located until the termination of the lease. We think, under the circumstances, the truck will not be subject to California Sales or Use tax. You also requested that we advise you whether tax would apply to a transaction entered into as follows: You lease a truck to an out-of-state customer with the lease being effective upon delivery of the truck to the customer at an out-of-state location. Your purchase order to the manufacturer will require it to transport the truck to a California company which under the contract with the lessee will install a truck body and attach a trailer. Thereafter, the California company under its original contract, will transport the truck and trailer to the out-of-state customer. Thereafter, the truck and trailer will be used outside the State of California. Under these circumstances, we think there is no California Sales and Use Tax with respect to the chassis which you have ordered from the California manufacturer. Obsolete. See 1661 DHL 5/7/97

Very truly yours,

E. H. Stetson
Tax Counsel
EHS:cw