Did Utah tax paid on a vehicle lease offset California use tax when Utah law exempted property used exclusively outside Utah?

Plain-English summary

The California vehicle dealer was entitled to a refund of the tax assessed on its sale to the Utah company. Even apart from the resale certificate, the later lease showed that the Utah buyer had actually resold the vehicle through a lease.

The Utah lessor nevertheless had to collect California use tax from the California-resident lessee because it derived rentals from tangible personal property located in California and was therefore engaged in business here under Regulation 1683(c). The memorandum also described the lessee, as consumer, as liable for the tax.

No California credit was allowed for Utah tax paid on the lease payments. The memorandum read Utah law and Regulation S32 as exempting leased property used exclusively outside Utah. Because Utah did not legally impose tax on the California lease use, section 6406 did not provide a credit. The memorandum said the lessor or lessee should instead seek a refund of the Utah tax paid in error.

Common questions

Was a resale certificate the only basis for the California dealer's refund?

No. The memorandum said the actual lease established resale even if the certificate's validity were disputed.

Did payment to another state automatically create a California credit?

No. The memorandum required the other state's tax to have been legally imposed on the property.

Citations and references

• Cal. Rev. & Tax. Code § 6091 — resale burden and certificate rule applied
• Cal. Rev. & Tax. Code § 6406 — other-state credit denied
• Cal. Code Regs. tit. 18, § 1683(c) — Utah lessor's California collection duty cited
• Utah Code § 59-15-4(h) and Utah Regulation S32 — exclusive out-of-state use exemption described

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/570-1677.pdf

Original ruling text

State of California

Memorandum
To

:

From

: Legal Counsel (HLC)

Board of Equalization
Legal Division

570.1677
Date :

August 25, 1975

Subject :

This is in reply to your memorandum dated August 13, 1975, concerning a petition for refund by subject taxpayer. We understand that taxpayer sold a vehicle to __ a holder of a Utah seller’s permit. Taxpayer originally collected sales tax reimbursement on the sale, but refunded it to _ when furnished a resale certificate. The sale was held not to be exempt during an audit of taxpayer and tax was assessed and collected. leased the vehicle to a California resident, . states that Utah tax was paid on the lease payments. Taxpayer has petitioned for a refund of the tax paid. You inquire whether a refund should be allowed, and, if it should be, whether tax applies to or , and if either or is entitled to a credit for tax paid to another jurisdiction. It is our opinion that taxpayer ix entitled to a refund. Section 6091 of the Revenue and Taxation Code provides that the burden of proving that a sale of tangible personal property is not a sale at retail is upon the person who makes the sale unless he takes a resale certificate from the buyer. The certificate is not absolutely necessary, and, regardless of the validity of the certificate accepted by taxpayer, it has been shown that the vehicle was actually resold (leased) by the purchaser. It is also our opinion that is required to collect use tax from since is a retailer deriving rentals from a lease of tangible personal property situated in this state and is thus engaged in business in this state. See Sales and Use Tax Regulation 1683(c). , as the consumer, is also liable for the use tax. We do not believe that any credit is due for tax collected and paid to Utah. The Utah Code, Section 59-15-4 (h) provides that tax need not be paid if the leased property is used exclusively in a forgein state. Utah Regulation S32 states that if the leased property is used exclusively outside Utah and an affidavit is furnished to the lessor to this effect, the tax does not apply. California Code Section 6406 provides for a credit for taxes imposed by any other state upon the property and paid by the consumer or retailer. The Utah law does not impose a tax on the retail to , so no credit applied under the Section 6406. or ___ should apply for a refund of the tax erroneously paid to Utah.