Were the sale of a shuttle van to a service subcontractor and its later repurchase taxable?

Plain-English summary

A shuttle operator sold a van to its service subcontractor because the subcontractor needed title to assume insurance responsibility. When the shuttle contract was not renewed, the original operator needed to buy the van back.

The letter found no statutory exemption for either transfer. The original sale was taxable, and the repurchase also was taxable. Depending on whether the seller in the repurchase was licensed or certificated as a dealer or qualifying lessor-retailer, the applicable collection and payment mechanics could shift to use tax.

Citations and references

• California Revenue and Taxation Code sections 6006, 6007, 6051, and 6275 (as cited)
• California Vehicle Code section 11615.5 (as cited)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/580-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/580-0393.pdf

Original ruling text

580.0393
STATE OF CALIFORNIA
WILLIAM M. BENNETT
First District

STATE BOARD OF EQUALIZATION
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916)920-6563

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

August 19, 1992

GRAY DAVIS
Controller, Sacramento

BURTON W. OLIVER
Executive Director

Re:

Sales and Re-Purchase of Shuttle Van

Dear ______,

This letter is in response to your letter dated June 25, 1992 inquiring as to __ liability for state sales tax in the re-purchase of a shuttle van. You state in your letter that _ entered into a contract with by which subcontracted shuttle service (which it had previously operated) to . permitted to purchase one of its shuttle vans for use in the shuttle operation. You also state that, as part of the contractual agreement, assumed insurance liability for the shuttle operation so it was necessary for to acquire ownership of the vehicle. You further state that has decided not to renew its agreement with and it will be necessary for to re-purchase the shuttle van from. In California, a sales tax is imposed upon all retailers on the gross receipts from the sale at retail of tangible personal property. (Rev. & Tax. Code § 6051.) A “retail sale” or “sale at retail” is defined as a sale for any purpose other than resale in the regular course of business in the form of tangible personal property. (Rev. & Tax. .Code § 6007.) “Sale” is defined as any transfer of title or possession, exchange, or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration. (Rev. & Tax. Code § 6006.) Every person making any retail sale … of a vehicle required to be registered under the Vehicle Code … is a retailer for the purposes of this part … regardless of whether he or she is a retailer by reason of other provisions of this part …” (Rev. & Tax. Code § 6275.) Since there are no statutory exemptions applicable to this particular situation which would treat the same and re-purchase of the shuttle van as a tax-exempt transaction, it is our opinion that was subject to state tax in its sale of the vehicle to and will be subject to state tax when re-purchases the vehicle unless is licensed or certificated pursuant to the Health and Safety Code or the Vehicle Code as a dealer or lessorretailer, subject to section 11615.5 of the Vehicle Code, in which case ___ will be

responsible for the payment of use tax on the re-purchase. In each case, sales tax reimbursement may be collected from the purchaser pursuant to an agreement between the parties. Very truly yours,

Thomas J. Cooke
Tax Counsel
TJC:wk