Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2010
 

Sales And Use Tax Law

CHAPTER 1. GENERAL PROVISIONS AND DEFINITIONS

Sales And Use Tax Law

CHAPTER 1. GENERAL PROVISIONS AND DEFINITIONS

(Part 1, Division 2, Revenue and Taxation Code *)

Enacted Statutes 1941, Chapter 36; amended Statutes 1941, Chapters 247, 681, 767; Statutes 1943, Chapters 699, 781, 822, 889, 1004; Statutes 1945, Chapters 416, 500, 646, 926, 1050, 1094; Statutes 1947, Chapters 24, 139, 567, 659, 780, 854, 855, 941; Statutes 1948, Chapter 12; Statutes 1949, Chapters 309, 667, 668, 669, 727, 728, 1204; Statutes 1951, Chapters 798, 870, 1007, 1171; Statutes 1953, Chapters 359, 691, 972, 1201, 1202, 1656; Statutes 1954, Chapter 5; Statutes 1955, Chapters 70, 126, 794, 795, 833, 1106, 1505; Statutes 1956, Chapter 13; Statutes 1957, Chapters 155, 372, 592, 733, 807, 1482, 1483; Statutes 1959, Chapters 416, 1070, 1180, 1311, 1738, 1840, 1968; Statutes 1960, Chapter 10; Statutes 1961, Chapters 17, 149, 493, 866, 869, 872, 2193; Statutes 1962, Chapters 3, 7; Statutes 1963, Chapters 612, 613, 716, 749, 1005, 1134, 1264, 1325, 1527, 1824, 1858, 1951, 1968, 1985; Statutes First Extra Session 1964, Chapters 56 and 88; Statutes 1965, Chapters 342, 369, 667, 671, 679, 830, 863, 864, 1188, 1257, 1292, 1480, 1920, 1960; Statutes First Extra Session 1965, Chapter 2; Statutes 1966, Chapters 2, 5, 7; Statutes 1967, Chapters 321, 556, 693, Y32, 881, 925, 963, 964, 1086, 1209, 1632; Statutes 1968, Chapters 279, 408, 501, 540, 940, 1005, 1034, 1061, 1299, 1336, 1365; Statutes First Extra Session 1968, Chapter 1; Statutes 1969, Chapters 24, 180, 368, 447, 676, 710, 915, 1153, 1533, 1587; Statutes 1970, Chapters 547, 548, 826, 935, 1135, 1215, 1457, 1507, 1511, 1546, 1624; Statutes 1971, Chapters 284, 1400, 1634, 1741, 1777, 1816; Statutes First Extra Session 1971, Chapters 1 and 2; Statutes 1972, Chapters 19, 44, 103, 402, 640, 877, 973, 1002, 1176, 1273, 1336, 1351, 1406, 1408; Statutes 1973, Chapters 67, 296, 458, 746, 1019, 1206, 1207, 1212; Statutes 1974, Chapters 156, 259, 610, 687, 709, 827, 1010, 1108, 1406, 1421, 1516; Statutes 1975, Chapters 661, 711, 1116, 1130; Statutes 1976, Chapters 1079, 1284; Statutes 1977, Chapters 329, 481, 607, 921, 1245, 1252; Statutes 1978, Chapters 26, 39, 229, 827, 878, 959, 1010, 1019, 1117, 1182, 1211, 1383; Statutes 1979, Chapters 125, 161, 260, 322, 400, 765, 863, 1048, 1150, 1160, 1161, 1180; Statutes 1980, Chapters 91, 285, 546, 600, 645, 849, 908, 994, 1068, 1077, 1149, 1194, 1246, 1248, 1290, 1326, 1348, 1352; Statutes 1981, Chapters 35, 337, 541, 714, 781, 947, 975; Statutes 1982, Chapters 5 (First Extra Session), 301, 327, 406, 454, 664, 665, 708, 951, 1168, 1223, 1274, 1423, 1589, 1591; Statutes 1983, Chapters 10 (First Extra Session), 143, 184, 323, 337, 377, 605, 844, 1050, 1059, 1092, 1102, 1158, 1286, 1321.


6001. Title. This part is known and may be cited as the "Sales and Use Tax Law."

6002. Construction. Except where the context otherwise requires the definitions given in this chapter govern the construction of this part.

6003. "Sales Tax." "Sales tax" means the tax imposed by Chapter 2 of this part.

6004. "Use Tax." "Use tax" means the tax imposed by Chapter 3 of this part.

6005. "Person." "Person" includes any individual, firm, partnership, joint venture, limited liability company, association, social club, fraternal organization, corporation, estate, trust, business trust, receiver, assignee for the benefit of creditors, trustee, trustee in bankruptcy, syndicate, the United States, this state, any county, city and county, municipality, district, or other political subdivision of the state, or any other group or combination acting as a unit.

History.— Stats. 1945, p. 1722, operative July 1, 1945, added "trustee," and "the United States," substituted "joint venture," for "joint adventure," and "of the State" for "thereof." Stats. 1951, p. 2389, operative July 1, 1951, added "assignee for the benefit of creditors" and "trustee in bankruptcy." Stats. 1994, Ch. 1200, in effect September 30, 1994, substituted "partnership" for "copartnership" after "firm", added "limited liability company" after "venture", and substituted "state" for "State" after "this" and after "of the".

School districts.—A school district is a "person" as that term is used in the Sales and Use Tax Law, Los Angeles City High School District v. State Board of Equalization (1945) 71 Cal.App.2d 486.

Trustee in bankruptcy.—The amendment of this section in 1945 did not have the effect of imposing the sales tax on sales by a trustee in bankruptcy in liquidation of the bankrupt estate pursuant to court order. California State Board of Equalization v. Goggin (19514) 191 F.2d 726, cert. den. (1952) 342 U.S. 909. But see Debtor Reorganizers, Inc. v. State Board of Equalization (1976) 58 Cal.App.3d 691, summary following Section 6201.

Liquidation sales by trustees in bankruptcy.—A nondiscriminatory tax on a bankruptcy liquidation sale is not barred by the now discredited intergovernmental tax immunity doctrine, and there is no longer any constitutional impediment to imposition of a sales tax or a use tax on a bankruptcy liquidation sale. The sales and use tax does not discriminate against a bankruptcy trustee or those that they deal with, and the bankruptcy trustee is not so closely connected to the federal government that the two cannot be viewed as separate entities. California State Board of Equalization v. Sierra Summit, Inc. (1989) 490 U.S. 844.

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6006. "Sale." "Sale" means and includes: (a) 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. "Transfer of possession" includes only transactions found by the board to be in lieu of a transfer of title, exchange, or barter.

(b) The producing, fabricating, processing, printing, or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing, or imprinting.

(c) The furnishing and distributing of tangible personal property for a consideration by social clubs and fraternal organizations to their members or others.

(d) The furnishing, preparing, or serving for a consideration of food, meals, or drinks.

(e) A transaction whereby the possession of property is transferred but the seller retains the title as security for the payment of the price.

(f) A transfer for a consideration of the title or possession of tangible personal property which has been produced, fabricated, or printed to the special order of the customer, or of any publication.

(g) Any lease of tangible personal property in any manner or by any means whatsoever, for a consideration, except a lease of:

(1) Motion pictures or animated motion pictures, including television, films, and tapes.

(2) Linen supplies and similar articles when an essential part of the lease agreement is the furnishing of the recurring service of laundering or cleaning the articles.

(3) Household furnishings with a lease of the living quarters in which they are to be used.

(4) Mobile transportation equipment for use in transportation of persons or property as defined in Section 6023.

(5) Tangible personal property leased in substantially the same form as acquired by the lessor or leased in substantially the same form as acquired by a transferor, as to which the lessor or transferor has paid sales tax reimbursement or has paid use tax measured by the purchase price of the property. For purposes of this paragraph, "transferor" shall mean the following:

(A) A person from whom the lessor acquired the property in a transaction described in subdivision (b) of Section 6006.5.

(B) A decedent from whom the lessor acquired the property by will or the laws of succession.

(6) A mobilehome, as defined in Sections 18008 and 18211 of the Health and Safety Code, other than a mobilehome originally sold new prior to July 1, 1980, and not subject to local property taxation.

(7) Paragraphs (1) and (5) and Section 6094.1 shall not apply to rentals or leases of video cassettes, video tapes, and video discs for private use under which the lessee or renter does not obtain or acquire the right to license, broadcast, exhibit, or reproduce the video cassette, video tape, or video disc.

History.—Stats. 1945, p. 1722, operative July 1, 1945, rearranged wording for clarification. Stats. 1953, p. 3384, in effect September 9, 1953, deleted former (b) relating to a withdrawal for delivery to a point in this state and relettered remaining subdivisions. Stats. 1965, p. 5444 (First Extra Session) operative August 1, 1965, added "or" and deleted "lease or rental" from the first sentence and " lease or rental " from the second sentence, and added (g). Stats. 1966, p. 190, in effect April 26, 1966, operative as to all transactions occurring after July 1, 1965 (except that retroactive operation shall not affect the states right to any tax which vested prior to the effective date), added "or leased in substantially the same form as acquired by a transferor," "or transferor", and the definition of transferor to (g) (4). Stats. 1967, p. 2720, in effect November 8, 1967, renumbered former (g) (4) as (g) (5) and added new (g) (4). Stats. 1970, p. 2132, in effect November 23, 1970, reworded (g) (4). Stats. 1971, p. 590, in effect July 7, 1971 operative October 1, 1971, added the phrase commencing with "except when such food, meals, or drinks . . ." to (d). Stats. 1971, p. 3832 in effect December 16, 1971 operative January 1, 1972 amended the former section as follows: Deleted the words "for hire" following "equipment for use in", made reference to section 6023 and deleted examples of mobile transportation equipment under (g) (4). Stats. 1971, p. 5142 (First Extra Session), operative January 1, 1972, repealed and re-enacted the section. Section 53(d) of that act provided that it is the intent of the Legislature in enacting sections 19 and 20 of the act [appliable to section 6006] that the provisions of Stats. 1971, Ch. 284, and Stats. 1971, Ch. 1777, of the regular session both be given effect as they amended section 6006 of the Revenue and Taxation Code. Stats. 1974, Ch. 709, effective September 6, 1974, deleted a provision in (d) relating to certain mentally retarded persons. Stats. 1978, Ch. 1211, effective January 1, 1979, in subdivision (g) (5) deleted "or transferor has paid sales tax reimbursement pursuant to Section 6052 or" following "as to which the lessor" and substituted "establishes to the satisfaction of the board that the lessor or his transferor acquired the property in a transaction that was a retail sale with respect to which the retailer has reported and paid the sales tax to the board or as to which the lessor or the transferor". Stats. 1980, Ch. 285, operative July 1, 1980, added (g) (6). Stats. 1980, Ch. 1068, effective September 26, 1980, deleted "establishes to the satisfaction of the board that the lessor" following "transferor, as to which the lessor" and substituted "lessor or transferor has paid the sales tax" for "retailer has reported and paid the sales tax to the board" following "with respect to which the" in (g) (5). Stats. 1982, Ch. 1589, in effect January 1, 1983, substituted "transferor has paid sales tax reimbursement" for "his transferor . . . the transferor" before "has paid use tax" in subsection (5) of subdivision (g). Stats. 1983, Ch. 323, in effect July 21, 1983, operative September 1, 1983, added subsection (7) to subdivision (g). Stats. 1983, Ch. 1102, in effect September 27, 1983, added the balance of the first sentence after "videodiscs" to subdivision (g)(7). Stats. 1987, Ch. 915, in effect September 21, 1987, in subdivision (a), deleted comma after "Transfer of possession"; in subdivision (g)(1), deleted "picture" following "Motion" and substituted "pictures or animated motion pictures"; in subdivision (g)(5), deleted "hereof, transferor" following "For purposes" and substituted "of this paragraph, transferor "; and in subdivision (g)(7), inserted spaces after "video".

Note.Stats.—1976, Ch. 1384, operative September 30, 1976, provides in part: "Sale" and "purchase", for the purposes of Part 1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation Code, do not include any transfer of title of tangible personal property constituting any project or pollution control facility to the California Pollution Control Financing Authority by any participating party, nor any lease or transfer of title of tangible personal property constituting any project or pollution control facility by the authority to any participating party, when the transfer or lease is made pursuant to Division 27 (commencing with Section 44500) of the Health and Safety Code. The terms "project", "pollution control facility", and "participating party" as used in this section have the meanings ascribed to them in Sections 44506 and 44508 of the Health and Safety Code.

Dyeing of fabrics.—The dyeing of new fabrics furnished to the dyer by the consumer is a "processing" within the meaning of (b) of this section, and the sales tax therefore applies to the gross receipts from such dyeing. Banken v. State Board of Equalization (1947) 79 Cal.App.2d 572.

Processing of radiographs by lay laboratory.—The taking and processing of radiographs for the use of doctors and dentists results in a sale within the meaning of this section despite the fact that the radiographs, after being used, are returned to and stored by the laboratory. Maranville v. State Board of Equalization (1950) 99 Cal.App.2d 841. See, however, Section 6020 under which producers of X-ray films are consumers on and after June 1, 1951.

Fixture.—The fabrication and installation by a contractor of a 521-ton turbine generator unit is a sale of tangible personal property although it becomes a part of the real property of the purchaser. General Electric Co. v. State Board of Equalization (1951) 111 Cal.App.2d 180.
The furnishing of fixtures by a contractor in the course of fabricating and installing an elevator system are retail sales of tangible personal property even though the property in the hands of the purchaser becomes a part of the real property. The distinctions made by the Board between materials and fixtures incorporated into elevator systems must be upheld in the absence of a showing that the action of the Board is arbitrary or unreasonable. Coast Elevator Company v. State Board of Equalization (1975) 44 Cal.App.3d 576.
Elevators are properly classified by the Board as fixtures pursuant to Regulation 1521, the manufacture and installation of which is a taxable sale. Oliver and Williams Elevator Corp. v. State Board of Equalization (1975) 48 Cal.App.3d 890.
The classification of air conditioning control devices by the Board as fixtures is neither arbitrary nor unreasonble. The installation of the devices by the manufacturer under a lump sum contract does not prevent an allocation of a part of that sum to the fixtures that are subject to tax. Honeywell, Inc. v. State Board of Equalization (1975) 48 Cal.App.3d 897.

Oil well drilling tools.—The use by the board of the "substantial consumption" test in determining whether a lease or rental is in lieu of a sale is reasonable and valid. Under that test, the rental to an oil well driller of a "rock bit" having an effective life of but one rental is a transaction in lieu of a transfer of title within the meaning of (a)of this section. Universal Engineering Co., Ltd. v. State Board of Equalization (1953) 118 Cal.App.2d 36. X-ray techniciansprior law.The furnishing of films to physicians by an X-ray technician for diagnostic purposes only, prior to June 1, 1951, was a sale under paragraph (f) of this section. People v. Grazer (1956) 138 Cal.App.2d 274. But see Section 6020.

Aircraft wings exchange.—Where the taxpayer modified aircraft wings, installed them on the customers aircraft, and took the aircrafts original wings in exchange as trade-ins, the court held that since the wings were the taxpayers property at all times prior to installation on the customers aircraft, the exchange was a retail sale and not repair. Aircraft Tank Service, Inc. v. State Board of Equalization (1964) 224 Cal.App.2d 582.

Sale of sand and gravel.—Where a supplier agreed to furnish sand and gravel to a highway contractor "f.o.b. job site," title did not pass until the goods reached the place agreed upon and the providing of asphaltic material by the supplier from its pit was a sale of tangible personal property and not a transfer of an interest in real property. Santa Clara Sand and Gravel Co. v. State Board of Equalization (1964) 225 Cal.App.2d 676.

Draftsmans drawings.—Since the true object of transactions, in which a draftsman makes detailed drawings based upon specifications furnished by the person placing the order, are the drawings and not the designs or specifications pictured therein, such transactions are sales of tangible personal property under subdivision (f). Albers v. State Board of Equalization (1965) 237 Cal.App.2d 494, cert. den. (1966) 383 U.S. 960.

Certain deep well agricultural pumps are not fixtures.—A pump company which sells and installs such pumps is not a construction contractor furnishing and installing fixtures, but is a retailer of machinery and equipment, with respect to the pumps which do not become an integral part of an irrigation system, have a useful life of only a few years, and are not affixed to the land in a permanent fashion but are set in open spaces, usually on timbers, held in place by gravity and are often moved from one well to another. City of San Joaquin v. State Board of Equalization (1970) 9 Cal.App.3d 365.

Electrical Power Transmission Lines.—See Section 6016.5. Revenue and Taxation Code Section 6006(g)(5) Not Discriminatory.On August 1, 1965, the definition of "sale" in the Sales and Use Tax Law was extended to include the lease of property rented in a form substantially different from that acquired by the lessor [Rev. & Tax. Code Sec. 6006(g)(5)]. Taxpayer thereafter paid a "use" tax measured by his receipts from the rental of powered houseboats constructed prior to August 1 of materials on which he had previously paid sales or use tax. Taxpayer sought a refund of the amounts paid by him subsequent to August 1, 1965, contending, on appeal, that Section 6006(g)(5) discriminated upon lessees who leased property in a different form from that in which it was acquired by the lessor. The court, in holding that there was a rational basis for the distinction drawn by the challenged section, stated that since the labor cost would not otherwise be includable within the measure of sales and use tax, the Legislature could properly conclude that the rental to the lessee, and not the cost of tangible items to the lessor, was the amount most likely to result in a measure of tax equitable with that paid by others under the statutory scheme. Ladd v. State Board of Equalization (1973) 31 Cal.App.3d 35.

Regulation 1521 is valid.—Regulation 1521 treating construction contractors as consumers of materials and as retailers of fixtures furnished and installed by them, is valid. Honeywell, Inc. v. State Board of Equalization (1975) 48 Cal.App.3d 907.

Timeliness of Reporting Tax on Purchase Price of Property Leased.—The Board may validly require a lessor of tangible personal property which is leased in substantially the same form as acquired by the lessor to pay tax measured by rental receipts if he does not, at the time the property is first placed in rental service, pay tax or tax reimbursement measured by the purchase price of the property. Action Trailer Sales, Inc. v. State Board of Equalization (1975) 54 Cal.App.3d 125.

Transactions between related entities.—Where a corporations sole function was to fabricate devices designed by its corporate parent using materials furnished by its corporate grandparent which retained title to all ideas, materials, and completed devices, and where the corporation served only as a conduit for the payment of salaries and acted solely on orders from the corporate grandparent, with a long-time employee of the corporate grandparent supervising the day-today operations, the transactions between the related entities did not constitute sales within the meaning of (b) of this section so as to justify imposition of sales tax. Mapo, Inc. v. State Board of Equalization (1975) 53 Cal.App.3d 245. Lease Renewals.Tax applies to leases executed before August 1, 1965, if such leases are extended or modified, either through action or inaction, subsequent to that date. International Business Machines v. State Board of Equalization (1980) 26 Cal.3d 923.

Materials Consumed by Construction Contractor.—Where a contractor supervises and directs the installation of the materials that he furnishes on a construction job and is responsible for necessary corrections, he is the consumer rather than the seller of such materials under Regulation 1521, even though the employees supervised and directed are employed by the general contractor or by a subcontractor of the general contractors. Western Concrete Structures, Inc. v. State Board of Equalization (1977) 66 Cal.App.3d 543.

Sale Occurs When Security for Goods Retained by Seller.—A taxable sale takes place notwithstanding the fact that a contract provides for retention of legal titles to tooling by the seller as security for the purchase price of the parts sold, when provisions of the sale agreement give the buyer substantially absolute control over the use and disposition of the tooling including an irrevocable power of attorney from the seller to execute in its name any documents appropriate to transfer of the tooling. Northrop Corporation v. State Board of Equalization (1980) 110 Cal.App.3d 132.

Fabrication of keypunch cards.—Computer service bureaus transfer of data by keypunch cards is taxable fabrication of property to special order of customer, and is not a service, despite minimal cost of blank cards. Intellidata, Inc. v. State Board of Equalization (1983) 139 Cal.App.3d 594.

Mobile transportation equipment purchased.—Leasing companies purchased mobile transportation equipment, not just existing leases of the equipment, when all indicia of ownership were transferred. Newco Leasing, Inc. v. State Board of Equalization (1983) 143 Cal.App.3d 120.

Alterations of new clothing.—Where taxpayer altered new clothing for customers who purchased the clothing elsewhere, alteration charges were taxable under section 6006(b) as a step in fabricating a product. Transfer of title to tangible property is not necessary to constitute a taxable sale. Fabrication labor is taxable even though customer does not furnish all the material necessary to fabricate a product. Board regulation using words "new clothing" not unconstitutionally vague. Duffy v. State Board of Equalization (1984) 152 Cal.App.3d 1156.

Transfer to PartnershipAssumption of Indebtedness.—A general partner in a commencing partnership made a taxable sale when it transferred equipment to the partnership. The taxable measure was the partnerships assumption of indebtedness on the equipment. Cal-Metal Corp. v. State Board of Equalization (1984) 161 Cal.App.3d 759.

Regeneration of water purification tanks.—The replacement of depleted tanks with regenerated tanks constitutes a taxable "sale" as defined under 6006. A taxable sale includes the reconditioning of tangible personal property by delivery to the customer of reconditioned property which has been commingled with the same kind of property as the customer originally delivered to the reconditioner. Continental Water Conditioning Company of the Bay Area, Inc. v. State Board of Equalization (1989) 207 Cal.App.3d 783.

Assumption of liabilities by a commencing partnership.—A taxable sale occurs when a commencing partnership assumes the liabilities of its partners in exchange for tangible personal property. Industrial Asphalt, Inc. v. State Board of Equalization (1992) 5 Cal.App.4th 1237.

Sales and LeasebacksFinancing Transactions.—No taxable sale occurred, despite transfer of title to equipment, where the object of transactions between equipment owner and leasing companies was to obtain financing for the purchase of the equipment, not to make sales and leasebacks. Cedars-Sinai Medical Center v. State Board of Equalization (1984) 162 Cal.App.3d 1182.

Marketing aids not sold if no consideration is received.—Board regulation 1670(c) was valid in requiring evidence that supplier received consideration of at least 50% of purchase price of marketing aids from its customers, in order to prove sales of marketing aids occurred. Wallace Berrie & Co. v. State Board of Equalization (1985) 40 Cal.3d 60. Cranes affixed to buyers real property was a sale.In the hands of seller, cranes were personal property, and transfer to buyer was a sale, even though sale occurred after affixation of cranes to buyers real property. U. S. Lines, Inc. v. State Board of Equalization (1986) 182 Cal.App.3d 529.

Promotional displays used as marketing aids.—Where seller packaged displays with merchandise and sold both for a single price, seller was the consumer of the marketing aids since there was no clear evidence of a sale. Parfums- Corday, Inc. v. State Board of Equalization (1986) 187 Cal.App.3d 630.

Unpaid rental receipts included in sales price.—When buyer wanted to own equipment outright rather than lease it for the remainder of the lease term, the resulting sale terminated the original lease and brought about a redetermination of the value of the equipment. The sales price included the unpaid rental receipts balance paid by buyer for the transfer of title. Framingham Acceptance Corp. v. State Board of Equalization (1987) 191 Cal.App.3d 461.

Assumption of indebtednessjoint liability.—Where taxpayer transferred assets and liabilities of its divisions to existing subsidiaries, but remained jointly liable for those liabilities, there was no consideration and thus no sale. Macrodyne Industries, Inc. v. State Board of Equalization (1987) 192 Cal.App.3d 579 [disapproved in Beatrice Co. v. State Board of Equalization (1993) 6 Cal.4th 767].

Identical but different property.—Leases of duplicates of master tapes and acetate tapes are not tax exempt as property leased in substantially the same form as acquired. The court agreed with the Board that the Sec. 6006(g)(5) exemption does not include identical but different property. A & M Records, Inc. v. State Board of Equalization (1988) 204 Cal.App.3d 358.

Power system is a taxable fixture.—Taxpayer, an electrical contractor, furnished and installed an emergency standby uninterruptible power system for the military. The court rejected the taxpayers contention that the equipment it purchased should be classified as machinery or equipment for which no tax need be paid holding that a system so essential and integral to the operation of the facility must be classified as a taxable fixture. Overhead Electric Co. v. State Board of Equalization (1991) 227 Cal.App.3d 1230.

Telephone paging services.—Taxpayer, who provided paging service, was the consumer, and not the seller, of paging devices provided as part of the service where there was no separate charge for the devices and taxpayer maintained ownership and responsibility for maintenance, because the devices were provided only incidentally to the paging service. MCI Airsignal, Inc. v. State Board of Equalization (1991) 1 Cal.App.4th 1527.

Assumption of liabilities is consideration.—The assumption of liabilities by a subsidiary was consideration as between the transferor (the plaintiff) and the transferee (the subsidiary) even if the plaintiff remained primarily and jointly liable for debts and obligations assumed by its subsidiary. Since the transfer was for consideration, it was a sale subject to sales tax. Beatrice Co. v. State Board of Equalization (1993) 6 Cal.4th 767.

Transfer of drawings and designs.—Taxpayer sold drawings and designs embodying technology as well as manuals and procedures for use as technical guides. A sale does not become nontaxable simply because its principal purpose is to transfer intellectual content of a physical object. Here, there was a taxable sale because the transfer was not incidental to the providing of a service and the purchaser acquired the physical items for their own sake and not only for their intangible value. Navistar Internat. Transportation Corp. v. State Board of Equalization (1994) 8 Cal.4th 868.

Supplies consumed in repairs.—Sales of supplies to repair shops were taxable retail sales even when the repair shops made a separate charge itemized as "paints and materials" for the purpose of recovering their costs of supplies consumed during the repairs. The repair shops did not furnish the supplies to their customers but consumed them in making the repairs and thus did not purchase the supplies for resale. Modern Paint & Body Supply, Inc. v. State Board of Equalization (2001) 87 Cal.App.4th 703.

Fixtures.—The Board properly applied Regulation 1521 in determining that the signs at issue were fixtures. Richard Boyd Industries, Inc. v. State Board of Equalization (2001) 89 Cal.App.4th 706.

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6006.1. Continuing sale. The granting of possession of tangible personal property by a lessor to a lessee, or to another person at the direction of the lessee, is a continuing sale in this state by the lessor for the duration of the lease as respects any period of time the leased property is situated in this state, irrespective of the time or place of delivery of the property to the lessee or such other person.

History.—Added by Stats. 1965, p. 5445, operative August 1, 1965.

6006.3. "Lease." "Lease" includes rental, hire and license. "Lease" does not include a use of tangible personal property for a period of less than one day for a charge of less than twenty dollars ($20) when the privilege to use the property is restricted to use thereof on the premises or at a business location of the grantor of the privilege. Where a contract designated as a lease binds the lessee for a fixed term and the lessee is to obtain title at the end of the term upon the completion of the required payment or has the option at that time to purchase the property for a nominal amount, the contract shall be regarded as a sale under a security agreement from its inception and not as a lease. In the case of a contract designated as a lease with any state or local governmental body, or any agency or instrumentality thereof, the lessee shall be treated as bound for a fixed term notwithstanding any right of the lessee to terminate the contract in the event that sufficient funds are not appropriated to pay amounts due under the contract.

History.—Added by Stats. 1965, p. 5445, operative August 1, 1965. Stats. 1967, p. 2257, in effect November 8, 1967, deleted former subdivision (b). Stats. 1969, p. 1390, in effect November 10, 1969, added the second sentence. Stats. 1978, Ch. 1383, operative January 1, 1979, substituted "twenty dollars ($20)" for "ten dollars ($10)" in the third sentence. Stats. 1986, Ch. 825, in effect September 15, 1986, added the third and fourth sentences.

Note.—Stats. 1986, Ch. 825, Section 1.5, as amended by Stats. 1987, Ch. 38, Section 11 specified that if a transaction entered into prior to January 1, 1987 has been treated by the seller as a lease, the full term of which has not expired or has not been earlier terminated, then that transaction shall be classified as a sale on January 1, 1987, and shall be classified as a lease for all earlier periods. Any sales or use tax previously paid on a transaction described in the preceding sentence, but not interest on that sales or use tax previously paid, shall be credited against any sales or use tax due on that transaction.

Furnishing of Water Conditioning "Exchange Units."—The furnishing for a periodic charge of water conditioning "exchange units" which are replaced periodically is a lease of tangible personal property and subject to tax rather than a nontaxable service of softening water for the customer. Culligan Water Conditioning v. State Board of Equalization (1976) 17 Cal.3d 86.

Furnishing of Beverage Dispensers.—The furnishing of beverage dispensers together with maintenance and repairs for a monthly charge is a taxable lease of tangible personal property rather than a tax-exempt service, regardless of the fact that the charge was unreasonable if viewed from the standpoint of the cost of the dispensers only. Bar Master, Inc. v. State Board of Equalization (1976) 65 Cal.App.3d 408.

License feesmaster sound tapes.Licenses are taxable leases of master tapes when recordings are reproduced from master; taxpayer did not transfer or acquire solely intangible rights in the licenses. Capitol Records, Inc. v. State Board of Equalization (1984) 158 Cal.App.3d 582.

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6006.5. "Occasional sale." "Occasional sale" includes all of the following:

(a) A sale of property not held or used by a seller in the course of activities for which he or she is required to hold a sellers permit or permits or would be required to hold a sellers permit or permits if the activities were conducted in this state, provided the sale is not one of a series of sales sufficient in number, scope, and character to constitute an activity for which he or she is required to hold a sellers permit or would be required to hold a sellers permit if the activity were conducted in this state.

(b) Any transfer of all or substantially all the property held or used by a person in the course of those activities when after the transfer the real or ultimate ownership of the property is substantially similar to that which existed before the transfer. For the purposes of this section, stockholders, bondholders, partners, or other persons holding an ownership interest in a corporation or other entity are regarded as having the "real or ultimate ownership" of the property of the corporation or other entity.

(c) A sale of property, other than hay, by a producer of hay, provided that the sale is not one of a series of sales sufficient in number, scope, or character to constitute an activity for which the producer would be required to hold a sellers permit if the producer were not also selling hay.

History.—Added by Stats. 1947, p. 2030, in effect June 19, 1947. Stats. 1969, p. 998, in effect November 10, 1969, substituted "activities" for "an activity" in (a) and (b) and added "or permits or would be required to hold a sellers permit or permits if the activities were conducted in this state" and "or would be required to hold a sellers permit if the activity were conducted in this state" to (a). Stats. 1985, Ch. 1083, effective October 1, 1985, added "or she" after "he" and substituted "that the" for "such" in subdivision (a), substituted "the" and "those" for "such" throughout subdivision (b), and added subdivision (c). Stats. 1994, Ch. 903, in effect January 1, 1995, added ", other than hay," after "property" and deleted ", other than hay," after "producer of hay," in subdivision (c).

Liquidation sale.—Where there were a number of plant equipment sales prior to the termination of a business, a sale of plant equipment thereafter is one of the same series of sales and not an occasional sale. Sutter Packing Co. v. State Board of Equalization (1956) 139 Cal.App.2d 889.

Division of business.—An exchange of assets between two affiliated corporations to effect a territorial division of a business is a retail sale, and such sale and 19 other sales of similar kinds of used equipment to other persons are a series of sales sufficient in number, scope and character to constitute an activity requiring the holding of a sellers permit. Pacific Pipeline Construction Co. v. State Board of Equalization (1958) 49 Cal.2d 729.

Sale of a business not an occasional sale.—A manufacturer who customarily made sales at retail and held a sellers permit, is subject to the retail sales tax on the sale of all capital assets used in operating the business. Sale of the business assets in such a case is not an occasional sale. Each sale in question was one of a series of sales sufficient in number, scope and character to constitute an activity requiring the holding of a sellers permit. U.S. Industries, Inc. v. State Board of Equalization (1962) 198 Cal.App.2d 775.

Sale of a businessoccasional sale.—A manufacturer who had made sales for resale but no retail sales and whose product was not suitable for retail sale was not a "seller" and the sale of the manufacturers business assets was, therefore, an occasional sale. Glass-Tite Industries, Inc. v. State Board of Equalization (1968) 266 Cal.App.2d 691 (this case was overturned by a 1983 amendment to Section 6014).
A manufacturer who makes no retail sales but whose product is suitable for retail sale is a "seller" and sale of the manufacturers business assets was not an occasional sale. Davis Wire Corp. v. State Board of Equalization (1976) 17 Cal.3d 761.

Sale of hotel assets.—The sale by a hotel of all its furniture, fixtures, and other assets was not an "occasional sale" where the hotel operated a restaurant, bar, and smoke shop through which sales requiring the holding of a sellers permit were made and where the hotel had made numerous sales of property of the type disposed of in the final sale during the months prior to that sale. Hotel Del Coronado Corp. v. State Board of Equalization (1971) 15 Cal.App.3d 612.

Sale of Segment of Business Not an Occasional Sale.—An exchange of assets and name of a wholly owned subsidiary for common stock of, but not a controlling interest in, the transferees parent, was subject to the sales tax even though the sale of plaintiffs subsidiarys business to the transferees subsidiary business could have been effected by a tax free statutory merger. Simplicity Pattern Company v. State Board of Equalization (1980) 27 Cal.3d 900.

Hospital equipment.—Sale of hospital equipment used for medical and nursing services is an exempt occasional sale, even though hospitals held sellers permit for other activities. Board regulation applying unitary business concept conflicts with section 6006.5(a). Ontario Community Foundation, Inc. v. State Board of Equalization (1984) 35 Cal.3d 811.

Note.—See Sections 6275, 6281 and 6367 regarding vehicles, vessels and aircraft. Producer of Crude Oil is a Seller.A "seller" includes a producer of crude oil which made no retail sales of the crude oil. The sale of the producers assets was not an exempt occasional sale. Santa Fe Energy Co. v. State Board of Equalization (1984) 160 Cal.App.3d 176.

Series of sales includes sales by all divisions of seller.—Where seller sold the assets of a service division, all sales by all divisions may be considered in determining whether a series of sales required seller to hold sellers permit. Chemed Corp. v. State Board of Equalization (1987) 192 Cal.App.3d 967.

Assumption of liabilities by a commencing partnership.—A taxable sale occurs when a commencing partnership assumes the liabilities of its partners in exchange for tangible personal property. Industrial Asphalt, Inc. v. State Board of Equalization (1992) 5 Cal.App.4th 1237.

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6006.6. "Sale"; auction. "Sale" includes any sale at an auction in respect to tangible personal property which is sold to a successful bidder at the auction upon an agreement or understanding at the time of the sale that the property involved either will not be delivered to the successful bidder or that any amount which he may pay for the property pursuant to the sale will be returned to him. The tax shall be computed in such case upon the amount of the successful bid.

History.—Added by Stats. 1957, p. 2802, in effect September 11, 1957.

6007. "Retail sale." A "retail sale" or "sale at retail" means a sale for any purpose other than resale in the regular course of business in the form of tangible personal property.

When tangible personal property is delivered by an owner or former owner thereof, or by a factor or agent of that owner, former owner or factor to a consumer or to a person for redelivery to a consumer, pursuant to a retail sale made by a retailer not engaged in business in this state, the person making the delivery shall be deemed the retailer of that property. He or she shall include the retail selling price of the property in his or her gross receipts or sales price.

History.—Stats. 1955, p. 1396, in effect September 7, 1955, added "or agent of such owner, former owner or factor," and "or person for redelivery to a consumer,". Stats. 1992, Ch. 902, in effect September 25, 1992, operative January 1, 1993, substituted "When" for "The delivery in this State" before "tangible", added "is delivered" after "property", added a comma after "thereof", deleted comma after "factor", substituted "that" for "such" after "agent of", deleted ", if the delivery is" after "or factor", added "to a" after "comsumer or", substituted "state" for "State" after "business in this", deleted "is a retail sale in this State by" after "state,", added "shall be deemed . . . property" after "delivery" in the first sentence of the second paragraph; added "or she" after "He", added "or her" after "his", and added "or sales price" after "gross receipts" in the second sentence of the second paragraph.

Sales of breeding animals.—Sales of fur-bearing animals known as chinchillas for breeding purposes are not exempt from the sales tax as sales for the purpose of resale. Chapman Chinchilla Sales Co. v. Johnson (1942) 49 Cal.App.2d 195.

Sales of chemicals used in manufacture of alcohol.—Sales of chemicals for use in the manufacture of commercial alcohol, only a small and uncertain proportion of the chemicals remaining in the alcohol, are retail sales and, accordingly, the sales tax applies with respect thereto. American Distilling Co. v. State Board of Equalization (1942) 55 Cal.App.2d 799.

Sales of ice to packers and shippers of vegetables.—Sales of ice to packers and shippers of vegetables for the purpose of preserving the vegetables during shipment are retail sales and, therefore, taxable even though the purchasers of the vegetables may be billed separately for the ice. People v. Puritan Ice Co. (1944) 24 Cal.2d 645; People v. Monterey County Ice & Development Co. (1938) 29 Cal.App.2d 421.

Sales of dairy cows.—Sales of cows to dairymen for the primary purpose of producing milk are not sales for resale merely because the purchaser intends to market them as beef when their usefulness as dairy cows is ended. Kirk v. Johnson (1940) 37 Cal.App.2d 224. See, however, Section 6358, under which the receipts from such sales are now exempt.

Regular course of business.—A sale to be a "retail sale" need not be of the kind made in the regular course of business of the seller. Market Street Railway Co. v. State Board of Equalization (1955) 137 Cal.App.2d 87.

Dry ice.—Sales of dry ice are at retail when made to a retailer who places the dry ice with ice cream products in a cardboard container and delivers the entire package to a purchaser of the ice cream products. Good Humor Co. v. State Board of Equalization (1957) 152 Cal.App.2d 873.

Metal door frames.—The manufacturer was the retailer rather than the consumer of door frames furnished f.o.b. jobsite and installed by others. Overly Manufacturing Co. v. State Board of Equalization (1961) 191 Cal.App.2d 20. Operator of employee cafeterias. An independent contractor who operated employee cafeterias pursuant to contracts with employers was the retailer of meals which were not exempt from sales tax under section 6363 which, prior to September 20, 1963, exempted sales of meals to employees by employers and employees organizations. Automatic Canteen Co. v. State Board of Equalization (1965) 238 Cal.App.2d 372.

Furnishing and installing fixtures.—The furnishing and installation of fixtures for a lump sum price is a retail sale and not a sale to contractors for resale by them. Honeywell, Inc. v. State Board of Equalization (1975) 48 Cal.App.3d 897. Special Test Equipment Purchased for Resale by Government Contractors.Sales and use tax is restricted in its operation to the sale or use of property sold at retail. A sale for resale is not a retail sale. Lockheed Aircraft Corp. v. State Board of Equalization; Aerojet General Corp. v. State Board of Equalization (1978) 81 Cal.App.3d 257.

By-Products of Manufacturing Process.—An aid in the manufacturing process is taxable despite the fact that some portion remains in the finished product or that an incidental waste or by-product results. Kaiser Steel Corporation v. State Board of Equalization (1979) 24 Cal.3d 188.

"Primary Purpose" Test.—The primary intent of the purchaser or primary purpose of the purchase is the test for determining whether a sale is taxable as a retail sale or exempt as a sale for resale, and such test is applicable to the manufacturing industries. Kaiser Steel Corporation v. State Board of Equalization (1979) 24 Cal.3d 188.

Transfer of Master Film Negatives for Use in Manufacturing.—When the primary purpose of selling film negatives and master recordings was to use them in manufacturing the final product rather than to incorporate them into that product, the sale is not a sale for resale. Simplicity Pattern Company v. State Board of Equalization (1980) 27 Cal.3d 900.

Advertising Catalogs Marketing Aids.—A manufacturer which included with its video game cartridges, catalogs advertising its other games did not resell the catalogs as marketing aids. Atari, Inc. v. State Board of Equalization (1985) 170 Cal.App.3d 665.

Drop-ship rule is constitutional.—Drop-ship rule in second paragraph of section 6007 is constitutional and is an alternative definition of "retail sale" and under section 6091, a seller must overcome the presumption that its sale is at retail, including a "retail sale" as defined by the drop shipment rule. Lyon Metal Products, Inc. v. State Board of Equalization (1997) 58 Cal.App.4th 906, cert. denied (1998) 141 L.Ed.2d 158.

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6007.5. United States contractors. A sale of tangible personal property to a contractor or subcontractor for use in the performance of contracts with the United States for the construction of improvements on or to real property in this State is a retail sale. The gross receipts from such a sale or the sales price of property so sold shall be included in the measure of the taxes imposed by this part.

History.—Added by Stats. 1955, Ch. 795, Section 2, in effect September 7, 1955. Note.See also Section 6384.

Constitutionality.—California has the constitutional power to impose sales and use taxes on contractors in relation to work performed at Federal facilities located in California because Congress has expressly consented to such tax in the Buck Act (4 U.S. C. 105) and has thereby waived the sovereign immunity of the United States. C. R. Fedrick, Inc. v. State Board of Equalization (1974) 38 Cal.App.3d 385, cert. denied (1975) 42 L.Ed.2d 820.

6008. "Storage." "Storage" includes any keeping or retention in this State for any purpose except sale in the regular course of business or subsequent use solely outside this State of tangible personal property purchased from a retailer.

Property installed in this state.—Use tax applies to automatic control equipment which is purchased outside this state, brought to this state, and permanently attached in this state to a locomotive which operates in interstate commerce partly in this state, even though the only actual functional use of the equipment occurs while the locomotive is running in another state. Atchison, Topeka and Santa Fe Railway Co. v. State Board of Equalization (1955) 131 Cal.App.2d 677.

6009. "Use." "Use" includes the exercise of any right or power over tangible personal property incident to the ownership of that property, and also includes the possession of, or the exercise of any right or power over, tangible personal property by a lessee under a lease, except that it does not include the sale of that property in the regular course of business.

History.—Stats. 1965, p. 5445 operative August 1, 1965, added "and also includes the possession of, or the exercise of any right or power over, tangible personal property by a lessee under a lease." First substantial use.Substantial use of property in state provides a taxable moment subjecting property to use tax, disregarding formal use in other states. Western Pacific RR Co. v. State Board of Equalization (1963) 213 Cal.App.2d 20.

Sale outside state and leased back in state.—Where a California retailer sold two oil tankers with title and possession passing out of state and the vessels were immediately leased back to the retailer and were used in California in intrastate commerce, the leasing of the vessels in California was a taxable use by the lessor. Union Oil Co. v. State Board of Equalization (1963) 60 Cal.2d 441, appeal dismissed (1964) 377 U.S. 404.

Special Test Equipment Purchased for Resale by Government Contractor.—In order for tax to apply under this section, the taxable "use" must occur while the purchaser is the owner, since the taxable use is that which is incident to ownership of the property. Lockheed Aircraft Corp. v. State Board of Equalization; Aerojet General Corp. v. State Board of Equalization (1978) 81 Cal.App.3d 257.

Packing Materials.—A custom packer is the consumer of, rather than the seller of, packing materials used to package items for shipping where there is no express provision in the packers billings, invoices or other contract writings passing title of the materials to the customer prior to use. Sternoff v. State Board of Equalization (1980) 103 Cal.App.3d 828.

Primary purpose test.—Taxpayer failed to prove that its manufacture of computer components was for the primary purpose of selling the components, where it first used the components to test other components. Materials purchased under resale certificates but used to manufacture the components were subject to use tax. Burroughs Corp. v. State Board of Equalization (1984) 153 Cal.App.3d 1152.

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6009.1. "Storage" and "use"; 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.

History.—Added by Stats. 1943, p. 2569, operative July 1, 1943. Stats. 1953, p. 2460, in effect September 9, 1953, deleted "shipped or brought into this State" after "power over tangible personal property." Stats. 1965, p. 3004, in effect September 17, 1965, added the second paragraph. Stats. 1980, Ch. 546, operative January 1, 1980, deleted second paragraph.

Property installed in this state.—Use tax applies to automatic control equipment which is purchased outside this state, brought to this state, and permanently attached in this state to a locomotive which operates in interstate commerce partly in this state, even though the only actual functional use of the equipment occurs while the locomotive is running in another state. Atchison, Topeka and Santa Fe Railway Co. v. State Board of Equalization (1955) 131 Cal.App.2d 677.
Use tax applies to in-state installation of equipment previously tested and held at taxpayers out-of-state national base and scheduled to be substantially consumed in interstate commerce outside the state. American Airlines v. State Board of Equalization (1963) 216 Cal.App.2d 180.

1953 Amendment.—The 1953 amendment deleting the words "shipped or brought into the State" was a change rather than a clarification of previous law. Levine v. State Board of Equalization (1956) 142 Cal.App.2d 760. Containers for storage use only.Original cans filled and used in this state to store tomato paste until further processing in another state are not exempt from the sales and use tax as they are not purchased for resale and do not become an integral part of the finished product. H. J. Heinz Co. v. State Board of Equalization (1962) 209 Cal.App.2d 1.

Delivery of trucks.—Exclusion applies to trucks transported under their own power for out-of-state delivery. Board regulation requiring passive transportation abridged statutory exclusion. Stockton Kenworth, Inc. v. State Board of Equalization (1984) 157 Cal.App.3d 334.

Warehousing and assembling displays is functional purpose.—Where taxpayer first stored and then assembled promotional displays into prepacks, there was a functional purpose for the displays other than to move through the state for consumption elsewhere, and section 6009.1 does not preclude use tax on displays shipped out of state. Parfums- Corday, Inc. v. State Board of Equalization (1986) 187 Cal.App.3d 630.

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6010. "Purchase." "Purchase" means and includes:

(a) 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. "Transfer of possession" includes only transactions found by the board to be in lieu of a transfer of title, exchange, or barter.

(b) When performed outside this state or when the customer gives a resale certificate pursuant to Article 3 (commencing with Section 6091) of Chapter 2, the producing, fabricating, processing, printing, or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing, or imprinting.

(c) A transaction whereby the possession of property is transferred but the seller retains the title as security for the payment of the price.

(d) A transfer for a consideration of tangible personal property which has been produced, fabricated, or printed to the special order of the customer, or of any publication.

(e) Any lease of tangible personal property in any manner or by any means whatsoever, for consideration, except a lease of:

(1) Motion pictures or animated motion pictures, including television, films, and tapes.

(2) Linen supplies and similar articles when an essential part of the lease agreement is the furnishing of the recurring service of laundering or cleaning the articles.

(3) Household furnishings with a lease of the living quarters in which they are to be used.

(4) Mobile transportation equipment for use in transportation of persons or property as defined in Section 6023.

(5) Tangible personal property leased in substantially the same form as acquired by the lessor or leased in substantially the same form as acquired by a transferor, as to which the lessor or transferor has paid sales tax reimbursement or has paid use tax measured by the purchase price of the property. For purposes of this paragraph, "transferor" shall mean the following:

(A) A person from whom the lessor acquired the property in a transaction described in subdivision (b) of Section 6006.5.

(B) A decedent from whom the lessor acquired the property by will or the laws of succession.

(6) A mobilehome, as defined in Sections 18008 and 18211 of the Health and Safety Code, other than a mobilehome originally sold new prior to July 1, 1980, and not subject to local property taxation.

(7) Paragraphs (1) and (5) and Section 6094.1 shall not apply to rentals or leases of video cassettes, video tapes, and video discs for private use under which the lessee or renter does not obtain or acquire the right to license, broadcast, exhibit, or reproduce the video cassette, video tape, or video disc.

History.—Stats. 1945, p. 1723, operative July 1, 1945, rearranged wording for clarification. Stats. 1959, p. 3130, in effect September 18, 1959, added "of title or possession" and "lease or rental" to the first sentence of (a), added the second sentence to (a), added (b), and relettered (c) and (d). Stats. 1965, p. 5445 (First Extra Session) operative August 1, 1965, added "or" and deleted "lease or rental" from the first sentence and " lease or rental " from the second sentence, and added (e). Stats. 1966, p. 191, in effect April 26, 1966, operative as to all transactions occurring after July 1, 1965 (except that retroactive operation shall not affect the states right to any tax which vested prior to the effective date), added "or leased in substantially the same form as acquired by a transferor," "or transferor", and the definition of transferor to (e)(4). Stats. 1967, p. 2721, in effect November 8, 1967, renumbered former (e)(4) as (e)(5) and added new (e)(4). Stats. 1970, p. 2133, in effect November 23, 1970, reworded (e)(4). Stats. 1971, p. 3833, operative January 1, 1972, added parenthetical reference to section 6091 in (b). Deleted the words "for-hire" following "equipment for use in", made reference to section 6023 and deleted examples of mobile transportation equipment in (e)(4). Stats. 1978, Ch. 1211, effective January 1, 1979, in (e)(5) deleted "or transferor has paid sales tax reimbursement pursuant to Section 6052 or" following "as to which the lessor" and substituted "establishes to the satisfaction of the board that the lessor or his transferor acquired the property in a transaction that was a retail sale with respect to which the retailer has reported and paid the sales tax to the board or as to which the lessor or the transferor". Stats. 1980, Ch. 285, operative July 1, 1980, added (e) (6). Stats. 1980, Ch. 1068, effective September 26, 1980 deleted "establishes to the satisfaction of the board that the lessor" following "transferor as to which the lessor" and substituted "lessor or transferor has paid sales tax" for "retailer has reported and paid the sales tax to the board" following "with respect to which the" in (e) (5). Stats. 1982, Ch. 1589, in effect January 1, 1983, substituted "transferor has paid sales tax reimbursement" for "his transferor . . . the transferor" before "has paid use tax" in subsection (5) of subdivision (e). Stats. 1983, Ch. 323, in effect July 21, 1983, operative September 1, 1983, added subsection (7) to subdivision (e). Stats. 1983, Ch. 1102, in effect September 27, 1983, added the balance of the first sentence after "videodiscs" in subdivision (e)(7). Stats. 1987, Ch. 915, in effect September 21, 1987, in subdivision (a), deleted comma after "Transfer of possession"; in subdivision (b), deleted "of this part" after "Chapter 2"; in subdivision (e)(1), deleted "picture" after "Motion" and substituted "pictures or animated motion pictures"; in subdivision (e)(5), deleted "hereof, transferor" following "For purposes" and substituted "of this paragraph, transferor "; and in subdivision (e)(7), inserted spaces after "video.".

Note.—Stats. 1976, Ch. 1384, operative September 30, 1976, provides in part: "Sale" and "purchase", for the purposes of Part 1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation Code, do not include any transfer of title of tangible personal property consistituting any project or pollution control facility to the California Pollution Control Financing Authority by any participating party, nor any lease or transfer of title of tangible personal property constituting any project or pollution control facility by the authority to any participating party, when the transfer or lease is made pursuant to Division 27 (commencing with Section 44500) of the Health and Safety Code. The terms "project", "pollution control facility", and "participating party" as used in this section have the meanings ascribed to them in Sections 44506 and 44508 of the Health and Safety Code.

Supplies consumed in repairs.—Sales of supplies to repair shops were taxable retail sales even when the repair shops made a separate charge itemized as "paints and materials" for the purpose of recovering their costs of supplies consumed during the repairs. The repair shops did not furnish the supplies to their customers but consumed them in making the repairs and thus did not purchase the supplies for resale. Modern Paint & Body Supply, Inc. v. State Board of Equalization (2001) 87 Cal.App.4th 703.

Fixtures.—The Board properly applied Regulation 1521 in determining that the signs at issue were fixtures. Richard Boyd Industries, Inc. v. State Board of Equalization (2001) 89 Cal.App.4th 706.

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6010.1. Continuing purchase. The possession of tangible personal property by a lessee, or by another person at the direction of the lessee, is a continuing purchase for use in this state by the lessee as respects any period of time the leased property is situated in this state, irrespective of the time or place of delivery of the property to the lessee or such other person.

History.—Added by Stats. 1965, p. 5446, operative August 1, 1965.

6010.3. "Sale" and "purchase"; printing materials. "Sale" and "purchase," for the purposes of this part, do not include (a) the fabrication or transfer by a typographer of composed type or reproduction proofs thereof for use in the preparation of printed matter, or (b) the fabrication or transfer of such reproduction proofs or impressed mats when the fabrication is for, and the transfer is to, a printer or publisher for use in printing.
The foregoing provisions shall not apply to the fabrication or transfer of a "pasteup," "mechanical" or "assembly" of which a reproduction proof is a component part.

History.—Added by Stats. 1968, p. 2061, in effect November 13, 1968.

6010.4. "Sale" and "purchase"; motion picture production. If two or more persons engaged in the production and distribution of motion pictures for use in any media form a partnership for the purpose of reducing the cost of producing motion pictures through the sharing of the use of equipment, studio facilities and the services of personnel, the furnishing (without transferring title to tangible personal property) of such equipment, facilities and services by the partnership to its members for the purpose of the production of motion pictures by its members shall not constitute either a "sale" or "purchase."

History.—Added by Stats. 1972, p. 1191, operative October 1, 1972.

6010.5. Place of sale. For the purposes of this part, the place of the sale or purchase of tangible personal property is the place where the property is physically located at the time the act constituting the sale or purchase, as defined in this part, takes place.

History.—Added by Stats. 1965, p. 4488, in effect September 17, 1965.

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6010.6. "Sale" and "purchase"; motion pictures and motion picture property. (a) Except as provided in subdivision (c), "sale" and "purchase," for the purposes of this part, do not include any of the following:

(1) The performance of any qualified production services in connection with the production of all or any part of any qualified motion picture. Persons performing those qualified production services are consumers of paintings, models, and art work used by those filming special effects, titles, or credits, and of film, tape, or other embodiment upon which sound, visual images, or computer-generated graphics are created or recorded, notwithstanding that title to the property may be transferred pursuant to the qualified production services contract.

(2) Any transfer of all or any part of any qualified motion picture, or any interest therein or any rights relating thereto, under either of the following circumstances:

(A) The transfer is made prior to the date that the qualified motion picture is exhibited or broadcast to its general audience.

(B) The transfer is made to any person or persons holding, either directly or indirectly, or by affiliation, any exploitation rights obtained prior to the date that the qualified motion picture is exhibited or broadcast to its general audience.

(b) For purposes of this section:

(1) "Motion picture" means any audiovisual work (at any stage of the production thereof) consisting of a series of related images, either on film, tape, or other embodiment, whether photographic, or otherwise, and for these purposes, includes all physical materials comprising part of, or synchronized with, the motion picture, including the original, duplicate, and other negatives, intermediary film products, tapes, prints and original, duplicate, and other sound or visual recordings created to accompany the pictorial material depicted in the motion picture.

(2) "Produce or production of any qualified motion picture" means to originate, create, invent, design, devise, develop, photograph, edit, record, imprint, adapt, alter, make, process, fabricate, assemble, construct, or manufacture all or any part of that qualified motion picture by any means, method, or devise of any kind or character, whether before or after commencement of principal photography.

(3) "Qualified motion picture" means any motion picture, whether or not the production of that motion picture is completely finished, which is produced, adapted, or altered for exploitation in, on, or through any medium or by any device, including, but not limited to, a motion picture produced for exploitation in movie theaters, through any form of television, or videocassettes, videotapes, or videodiscs, in amusement parks, or on commercial carriers, for any purpose, including, but not limited to, for any entertainment, commercial, advertising, promotional, industrial, or educational purpose. Qualified motion picture includes, but is not limited to, all adapted versions thereof (whether adapted for exploitation in any language, for any media, or otherwise) creative advertising, and publicity materials, such as trailers, television spots, or featurettes. Qualified motion picture does not include motion pictures produced for private noncommercial use, such as weddings or graduations.

(4) "Qualified production services" means any fabrication performed by any person in any capacity (whether as an employee, agent, independent contractor, or otherwise) on film, tape, or other audiovisual embodiment in connection with the production of all or any part of any qualified motion picture, including, but not limited to, photography, sound, music, special effects, animation, adaptation (language, media, electronic, or otherwise), technological modifications, computer graphics, dubbing, mixing, editing, or cutting services. "Qualified production services" do not include services or other work to manufacture release prints or to duplicate tapes for exhibition or broadcast.

(5) "Transfer" means any change of title or possession in any manner or form by any means whatsoever, conditional or otherwise, including, but not limited to, any sale, assignment, exchange, lease, license, or barter.

(6) "Rights relating to any qualified motion picture" includes, but is not limited to, any and all rights to produce or exploit all or any part of the qualified motion picture by any means and in or through any medium.

(7) "Exploit" or "exploitation" with respect to any qualified motion picture includes, but is not limited to, exhibiting, broadcasting, telecasting, displaying, projecting, transmitting, duplicating, reproducing, distributing, promoting, advertising, commercializing, merchandising, marketing, or otherwise using all or any part of the qualified motion picture in any or all media markets and territories and by any or all means, methods, modes, processes, and devices or delivery systems of every kind and character. "Exploitation" includes each and every act comprising part of any phase of the process of exploiting all or any qualified motion picture, whether before or after commencement of principal photography.

(c) Subdivision (a) shall not apply to any of the following:

(1) Any sale or purchase of raw film or videotape stock.

(2) Any sale or purchase of release prints or tapes for exhibition or broadcast.

(3) Any rentals or leases of videocassettes, videotapes, or videodiscs for private use, as described in paragraph (7) of subdivision (g) of Section 6006 and paragraph (7) of subdivision (e) of Section 6010.

History.—Added by Stats. 1988, Ch. 1157, in effect September 22, 1988.

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6010.7. "Sale" and "purchase"; chemical toilet. Paragraph (5) of subdivision (g) of Section 6006, paragraph (5) of subdivision (e) of Section 6010, and Section 6094.1 shall have no application to a lease of a chemical toilet unit. Such a lease is a "sale" and "purchase" and the taxes imposed by this part apply measured by the lease or rental price accordingly, regardless of whether the unit is leased in substantially the same form as acquired and regardless of whether sales tax or use tax has been paid with respect to the chemical toilets at the time of their acquisition.

History.—Added by Stats. 1968, p. 1954, in effect August 6, 1968, operative October 1, 1968. Stats. 1978, Ch. 1211, effective January 1, 1979, in the last sentence deleted "reimbursement" following "sales tax" and added "with respect to the chemical toilets at the time of their acquisition." following "has been paid".

6010.8. "Sale" and "purchase"; alternative energy and advanced transportation project. "Sale" and "purchase," do not include any transfer of title of tangible personal property constituting any project to the California Alternative Energy and Advanced Transportation Financing Authority by any participating party, nor any lease or transfer of title of tangible personal property constituting any project by the authority to any participating party, when the transfer or lease is made pursuant to Division 16 (commencing with Section 26000) of the Public Resources Code. The terms "project" and "participating party" as used in this section have the same meanings as in Section 26003 of the Public Resources Code.

History.—Added by Stats. 1980, Ch. 908, operative January 1, 1981. Stats. 1994, Ch. 1218, in effect January 1, 1995, substituted "and Adanced Transportation" for "Source" after "Energy" in the first sentence.

6010.9. "Sale" and "purchase"; custom computer program. "Sale" and "purchase," for the purposes of this part, do not include the design, development, writing, translation, fabrication, lease, or transfer for a consideration of title or possession, of a custom computer program, other than a basic operational program (as defined in Section 995.2), either in the form of written procedures or in the form of storage media on which, or in which, the program is recorded, or any required documentation or manuals designed to facilitate the use of the custom computer program so transferred.

As used in this section:

(a) "Storage media" includes punched cards, tapes, discs, diskettes, or drums on which computer programs may be embodied or stored.

(b) "Computer" does not include tape-controlled automatic drilling, milling, or other manufacturing machinery or equipment.

(c) "Computer program" means the complete plan for the solution of a problem, such as the complete sequence of automatic data-processing equipment instructions necessary to solve a problem and includes both systems and application programs and subdivisions, such as assemblers, compilers, routines, generators, and utility programs.

(d) "Custom computer program" means a computer program prepared to the special order of the customer and includes those services represented by separately stated charges for modifications to an existing prewritten program which are prepared to the special order of the customer. The term does not include a "canned" or prewritten computer program which is held or existing for general or repeated sale or lease, even if the prewritten or "canned" program was initially developed on a custom basis or for in-house use. Modification to an existing prewritten program to meet the customers needs is custom computer programming only to the extent of the modification.

History.—Added by Stats. 1982, Ch. 1274, in effect September 22, 1982.

Note.—Stats. 1982, Ch. 1274, Sections 48 provided, "The Legislature finds and declares that sales and service of custom computer programs, as defined in Section 6010.9 of the Revenue and Taxation Code, other than basic operational programs, are service transactions not subject to sales or use taxes under any existing state law. The use of any storage media in the transfer of custom computer programs is only incidental to the true object of the transaction, which is the performance of a service. Therefore, the Legislature, consistent with the statement of intent in Chapter 165 of the Statutes of 1972, declares that Section 2 of this act is declaratory of, and not a change in, existing law. It is the intent of the Legislature in enacting this act to clarify the existing law and to affect all applicable pending proceedings."

"The Legislature further finds and declares that there presently is uncertainty in the application of sales and use tax to the sales and service of custom computer programs which this act is intended to clarify, and this uncertainty has resulted in incorrect payment of sales and use tax by some taxpayers and the incorrect assessment of deficiencies of sales and use tax against some taxpayers."

"For the public purpose of assuring equity in the payment of sales and use taxes among retailers selling and servicing custom computer programs, any outstanding and unpaid deficiency assessments are hereby canceled, and any sales and use taxes which have been incorrectly paid by retailers on or after July 1, 1972, shall be refunded in accordance with the provisions of this act, notwithstanding any other provision of law. Claims for refund by the retailer pursuant to this act shall only be submitted for, and shall distinguish between, the following:

(a) Taxes, interest, and any penalty incorrectly paid for which there was no customer reimbursement.

(b) Taxes incorrectly paid for which there was customer reimbursement and for which the retailer can and will return incorrectly paid taxes to customers who reimbursed the retailer.

(1) The retailer shall return to a customer reimbursement paid by that customer in proportion to the amount of refund received for those paid taxes.

(2) Any taxes refunded to the retailer that have not been returned to the customer within 60 days of the receipt of the refund shall be returned to the state."

"On or before December 15, 1982, any person claiming a refund of sales and use taxes as provided in Section 5 of this act shall file a claim for refund with the State Board of Equalization in such form as the board may prescribe. Any person who fails to file a claim by December 15, 1982, as provided in this section, shall have no right to a refund, notwithstanding any other provision of law."

"On or before July 1, 1983, the State Board of Equalization shall certify to the Controller the amount of refund due to each claimant pursuant to this act. The total amount of money to be available for refunds pursuant to this act shall not exceed one million two hundred thousand dollars ($1,200,000). If the total amount of claims exceeds one million two hundred thousand dollars ($1,200,000), the board shall determine the pro-rata share due each claimant based on the proportion each claim bears to the total amount of claims and shall report that amount for certification."

"No interest shall be paid on any refund of taxes made pursuant to this act."

"It is the intent of the Legislature in enacting this act that the refund provisions in this act shall supercede the provisions of Chapter 7 (commencing with Section 6901) of Part 1 of Division 2 of the Revenue and Taxation Code and to make the provisions of this act the exclusive procedure and remedy for the claim of, or action for, a refund of sales and use taxes on the sale or service of custom computer programming, as defined in Section 6010.9 of the Revenue and Taxation Code."

Note.—Section 148.5 of Stats. 1983, Ch. 323, in effect July 21, 1983, amended Section 7 of Stats. 1982, Ch. 1274, to provide "To the extent money is appropriated in the Budget Act of 1984, for the purposes of making the refunds pursuant to this act, the refunds pursuant to this act shall be paid by September 15, 1984." Custom Computer Programs on Punch Cards.Transfers of custom computer programs on punch cards were nontaxable services, as clarified by 1982 legislation. General Business Systems, Inc. v. State Board of Equalization (1984) 162 Cal.App.3d 50.

Custom computer programs not exempt when resold.Once a computer program has been created and is in possession of the original customer, a subsequent sale can no longer be characterized as a tax exempt service transaction. Touche Ross & Co. v. State Board of Equalization (1988) 203 Cal.App.3d 1057. Programs developed for in-house use not custom when sold.Taxpayer developed a program for its own in-house use, and the program was thereafter sold. It was not developed and sold as a custom program for the purchaser. Rather, this was a taxable sale of a pre-existing program. It is irrelevant that it was not a "canned" program. Navistar Internat. Transportation Corp. v. State Board of Equalization (1994) 8 Cal.4th 868.

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6010.10. "Sale" and "purchase"; pollution control facility. "Sale" and "purchase," for the purposes of this part, do not include any transfer of title of tangible personal property constituting any project or pollution control facility to the California Pollution Control Financing Authority by any participating party, nor any lease or transfer of title of tangible personal property constituting any project or pollution control facility by the authority to any participating party, when the transfer or lease is made pursuant to Division 27 (commencing with Section 44500) of the Health and Safety Code. The terms "project," "pollution control facility," and "participating party" as used in this section have the meanings ascribed to them in Sections 44506 and 44508 of the Health and Safety Code.

(b) This section shall only apply to a project or pollution control facility that is a "project" or "pollution control facility" as defined in Section 44508 of the Health and Safety Code as amended by Chapter 756 of the Statutes of 1999.

(c) This section shall not apply to a project for which the authority refunds bonds or evidences of indebtedness not originally issued by the authority, and the authority makes a finding that the project being refinanced qualifies as a project under Division 27 (commencing with Section 44500) of the Health and Safety Code.

History.—Added by Stats. 1982, Ch. 1589, in effect January 1, 1983. Stats. 2009, Ch. 643 (SB 832), in effect November 2, 2009, added subdivisions (b) and (c).

6010.11. "Sale" and "purchase"; qualified mass commuting vehicle. "Sale" and "purchase," for the purpose of this part, do not include any transfer of a qualified mass commuting vehicle pursuant to a safe harbor lease arrangement described in Section 168(f)(8) of the Internal Revenue Code of 1954, as amended by Section 208 of Public Law 97-248, Section 5 of Public Law 97-354, and Section 102 of Public Law 97-448, or pursuant to a sale-leaseback or lease-leaseback arrangement which includes a safe harbor lease arrangement. For purposes of this section, "qualified mass commuting vehicle" means a qualified mass commuting vehicle as defined in Section 103(b)(9) of the Internal Revenue Code of 1954.

History.—Added by Stats. 1984, Ch. 1511, effective September 28, 1984, operative October 1, 1984.

6010.30. "Sale" and "purchase"; art transferred at social gatherings. (a) "Sale" and "purchase," for the purpose of this part, do not include the transfer of original drawings, sketches, illustrations, or paintings by an artist or designer at a social gathering for entertainment purposes, if all of the following requirements are met:

(1) Substantially all of the drawings, sketches, illustrations, or paintings are delivered by the artist or designer to a person or persons other than the purchaser.

(2) Substantially all of the drawings, sketches, illustrations, or paintings are received by a person or persons, other than the purchaser, at no cost to the person or persons who become the owner of the drawings, sketches, illustrations, or paintings.

(3) The charge for the drawings, sketches, illustrations, or paintings is based on a preset fee.

(4) The fee charged for the drawings, sketches, illustrations, or paintings is contingent upon a minimum number of at least three drawings, sketches, illustrations, or paintings to be produced by the artist or designer at the social gathering.

(b) For purposes of this section, "substantially all" means 80 percent or more.

History.—Added by Stats. 1999, Ch. 799, (SB 330), in effect October 10, 1999, but operative April 1, 2000.

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6010.40. "Sale" and "purchase"; pet adoptions. "Sale" and "purchase," for the purpose of this part, do not include the transfer by a city, city and county, county, or other local government animal shelter or a nonprofit animal welfare organization of any animal to an individual for use as a pet, or any charges made by the government shelter or nonprofit organization for services in connection with the transfer of that animal, including, but not limited to, the spaying or neutering or future spaying or neutering of the animal, or any vaccination, future vaccination, or similar service. For purposes of this section, "nonprofit animal welfare organization" means any organization formed and operated for the primary purpose of prevention of abuse, neglect, or exploitation of animals and that qualifies for the exemption from taxation pursuant to Section 23701d.

History.—Added by Stats. 1999, Ch. 361, (AB 563), in effect September 7, 1999, but operative January 1, 2000.

6010.50. Trades and exchanges; endangered and threatened plants and animals. (a) For purposes of this part, "sale" and "purchase" do not include any transfer of an endangered or threatened animal or plant species acquired or disposed of through a trade or exchange between nonprofit zoological societies or between a member of the American Zoo and Aquarium Association (AZA) and a nonprofit zoological society.

(b) For purposes of this section and Section 6366.5, "endangered or threatened animal or plant species" means animals or plants that are any of the following:

(1) Listed in Appendix I, II, or III to the Convention for International Trade of Endangered Species.

(2) Listed as endangered or threatened by the United States Department of the Interior, Fish and Wildlife Service.

(c) For purposes of this section and Section 6366.5, a "nonprofit zoological society" includes both of the following:

(1) A zoological society operated for charitable, educational, or scientific purposes and qualified for exemption under Section 501(c)(3) of the Internal Revenue Code.

(2) A zoological park owned or operated by a city, county, or other instrumentality of any state or foreign government.

History.—Added by Stats. 1994, Ch. 771, in effect September 26, 1994, but operative January 1, 1995.

6010.65. "Sale" and "purchase"; acquisition sale and leaseback. (a) "Sale" and "purchase," for purposes of this part, do not include any transfer of title to, nor any lease of, tangible personal property pursuant to an acquisition sale and leaseback. An acquisition sale and leaseback is a sale by a person and leaseback to that person of tangible personal property where both of the following conditions are satisfied:

(1) That person has paid sales tax reimbursement or use tax with respect to that persons purchase of the property.

(2) The acquisition sale and leaseback is consummated within 90 days of that persons first functional use of the property.

(b) "Sale" and "purchase" include, for purposes of this part, the transfer of title to a lessee upon termination of an acquisition sale and leaseback.

(c) This section shall apply to acquisition sale and leaseback arrangements executed on or after the operative date of this section.

History.—Added by Stats. 1990, Ch. 558, in effect January 1, 1991. Stats. 1994, Ch. 286, in effect July 21, 1994, but operative January 1, 1995, deleted "and before January 1, 1995" after "section" in subdivision (c) and deleted former subdivision (d) which would have repealed the section effective January 1, 1995.

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6011. "Sales price." (a) "Sales price" means the total amount for which tangible personal property is sold or leased or rented, as the case may be, valued in money, whether paid in money or otherwise, without any deduction on account of any of the following:

(1) The cost of the property sold.

(2) The cost of materials used, labor or service cost, interest charged, losses, or any other expenses.

(3) The cost of transportation of the property, except as excluded by other provisions of this section.

(b) The total amount for which the property is sold or leased or rented includes all of the following:

(1) Any services that are a part of the sale.

(2) Any amount for which credit is given to the purchaser by the seller.

(3) The amount of any tax imposed by the United States upon producers and importers of gasoline and the amount of any tax imposed pursuant to Part 2 (commencing with Section 7301) of this division.

(c) "Sales price" does not include any of the following:

(1) Cash discounts allowed and taken on sales.

(2) The amount charged for property returned by customers when that entire amount is refunded either in cash or credit, but this exclusion shall not apply in any instance when the customer, in order to obtain the refund, is required to purchase other property at a price greater than the amount charged for the property that is returned. For the purpose of this section, refund or credit of the entire amount shall be deemed to be given when the purchase price less rehandling and restocking costs are refunded or credited to the customer. The amount withheld for rehandling and restocking costs may be a percentage of the sales price determined by the average cost of rehandling and restocking returned merchandise during the previous accounting cycle.

(3) The amount charged for labor or services rendered in installing or applying the property sold.

(4) (A) The amount of any tax (not including, however, any manufacturers or importers excise tax, except as provided in subparagraph

(B)) imposed by the United States upon or with respect to retail sales whether imposed upon the retailer or the consumer.

(B) The amount of manufacturers or importers excise tax imposed pursuant to Section 4081 or 4091 of the Internal Revenue Code for which the purchaser certifies that he or she is entitled to either a direct refund or credit against his or her income tax for the federal excise tax paid or for which the purchaser issues a certificate pursuant to Section 6245.5.

(5) The amount of any tax imposed by any city, county, city and county, or rapid transit district within the State of California upon or with respect to retail sales of tangible personal property, measured by a stated percentage of sales price or gross receipts, whether imposed upon the retailer or the consumer.

(6) The amount of any tax imposed by any city, county, city and county, or rapid transit district within the State of California with respect to the storage, use or other consumption in that city, county, city and county, or rapid transit district of tangible personal property measured by a stated percentage of sales price or purchase price, whether the tax is imposed upon the retailer or the consumer.

(7) Separately stated charges for transportation from the retailers place of business or other point from which shipment is made directly to the purchaser, but the exclusion shall not exceed a reasonable charge for transportation by facilities of the retailer or the cost to the retailer of transportation by other than facilities of the retailer. However, if the transportation is by facilities of the retailer, or the property is sold for a delivered price, this exclusion shall be applicable solely with respect to transportation which occurs after the purchase of the property is made.

(8) Charges for transporting landfill from an excavation site to a site specified by the purchaser, either if the charge is separately stated and does not exceed a reasonable charge or if the entire consideration consists of payment for transportation.

(9) The amount of any motor vehicle, mobilehome, or commercial coach fee or tax imposed by and paid the State of California that has been added to or is measured by a stated percentage of the sales or purchase price of a motor vehicle, mobilehome, or commercial coach.

(10) (A) The amount charged for intangible personal property transferred with tangible personal property in any technology transfer agreement, if the technology transfer agreement separately states a reasonable price for the tangible personal property.

(B) If the technology transfer agreement does not separately state a price for the tangible personal property, and the tangible personal property or like tangible personal property has been previously sold or leased, or offered for sale or lease, to third parties at a separate price, the price at which the tangible personal property was sold, leased, or offered to third parties shall be used to establish the retail fair market value of the tangible personal property subject to tax. The remaining amount charged under the technology transfer agreement is for the intangible personal property transferred.

(C) If the technology transfer agreement does not separately state a price for the tangible personal property, and the tangible personal property or like tangible personal property has not been previously sold or leased, or offered for sale or lease, to third parties at a separate price, the retail fair market value shall be equal to 200 percent of the cost of materials and labor used to produce the tangible personal property subject to tax. The remaining amount charged under the technology transfer agreement is for the intangible personal property transferred.

(D) For purposes of this paragraph, "technology transfer agreement" means any agreement under which a person who holds a patent or copyright interest assigns or licenses to another person the right to make and sell a product or to use a process that is subject to the patent or copyright interest.

(11) The amount of any tax imposed upon diesel fuel pursuant to Part 31 (commencing with Section 60001).

(12) (A) The amount of tax imposed by any Indian tribe within the State of California with respect to a retail sale of tangible personal property measured by a stated percentage of the sales or purchase price, whether the tax is imposed upon the retailer or the consumer.

(B) The exclusion authorized by subparagraph (A) shall only apply to those retailers who are in substantial compliance with this part.

History.—Stats. 1943, p. 2453, operative July 1, 1943, added (c) to first paragraph and (d) and former (e) to last paragraph. Stats. 1945, p. 1723, operative July 1, 1945, added "valued in money, whether paid in money or otherwise" to first paragraph and deleted same words from (a) in second paragraph; added a provision respecting return of property within 90 days from purchase. Stats. 1947, p. 506, in effect February 6, 1947, added present (e) and (f) to last paragraph and relettered former (e) in last paragraph as (g). Stats. 1953, p. 1957, in effect September 9, 1953, in (b) of last paragraph deleted "upon rescission of the contract of sale" and the provision respecting return of property within 90 days from purchase and added the language following "credit." Stats. 1957, p. 1687, in effect September 11, 1957, added last sentence to (b) of third paragraph. Stats. 1960, p. 17, in effect June 25, 1960, added (h). Stats. 1961, p. 4535, in effect September 15, 1961, added (c) to second paragraph. Stats. 1962, p. 5, in effect July 3, 1962, deleted "prior to its purchase" and added "except as excluded by other provisions of this section" in (c) of the first paragraph; and in (e) and (f) of the last paragraph deleted the words "On and after February 1, 1947," and completely revised paragraph (g). Stats. 1965, p. 5446 (First Extra Session), operative August 1, 1965, added in first paragraph "or leased or rented, as the case may be" and in the second paragraph "or leased or rented." Stats. 1968, p. 1791, in effect November 13, 1968, deleted (c) of second paragraph relating to a tax that is presumed to be on the consumer and added words "rapid transit district" in (e) and (f) of the last paragraph. Stats. 1971, p. 2780, operative July 1, 1972, relettered the section and added paragraph (b)(3). Stats. 1982, Ch. 1589, in effect January 1, 1983, added "mobilehome, or commercial coach" after each "vehicle" in subsection (8) of subdivision (c). Stats. 1983, Ch. 844, in effect September 16, 1983, operative January 1, 1984, added the third sentence in subdivision (c)(2). Stats. 1988, Ch. 500, in effect August 22, 1988, added "(A)" and ", except as provided in subparagraph (B))" in subdivision (c)(4) and added subparagraph (B). Stats. 1988, Ch. 1647, in effect October 1, 1988, operative January 1, 1989, added present subsection (8) and relettered former subsection (8) as subsection (9) in subdivision (c). Stats. 1993, Ch. 887, in effect October 8, 1993, but operative April 1, 1994, substituted "the" for "such" after "whether" in paragarph (6) of subdivision (c); substituted ". However," for "; provided, that" in paragraph (7) of subdivision (c); and added paragraph (10) to subdivision (c). Stats. 1994, Ch. 912, in effect September 28, 1994, but operative July 1, 1995, added "4081 or" after "Section" in subparagraph (B) of paragraph (4), substituted "that" for "such" after "consumption in" in paragraph (6) of subdivision (c), and added paragraph (11) to subdivision (c). Stats. 2000, Ch. 923 (AB 2894), in effect January 1, 2001, added "or for which . . . Section 6245.5" after "excise tax paid" in subparagraph (B) of paragraph (4) of subdivision (c). Stats. 2002, Ch. 593, (AB 2701), in effect September 16, 2002, but operative January 1, 2003, added paragraph (12).

Note.—Section 3 of Stats. 1987, Ch. 1280, added Section 1793.25 to the Civil Code to provide that the Board shall reimburse the manufacturer of a new motor vehicle for an amount equal to the sales tax which the manufacturer includes in making restitution to the buyer pursuant to subparagraph (d) (2) (B) of Section 1793.2 (commonly known as Californias "Lemon Law"), when satisfactory proof is provided that the retailer of the motor vehicle for which the manufacturer is making restitution has reported and paid the sales tax on the gross receipts from the sale of that motor vehicle. Section 1793.25 specifically states that this provision for reimbursement to manufacturers does not in any way change the general application of the sales and use tax to the gross receipts from the sale, and the storage, use or other consumption in this state of tangible personal property.

Note.—Section 4 of Stats. 1988, Ch. 500, adds an uncodified section as follows. (a) With respect to sales of diesel fuel made during the period of April 1, 1988, through September 30, 1988, a purchaser entitled to either a direct refund or credit against his or her income tax for the federal excise tax paid may so certify to the seller of the diesel fuel not later than December 31, 1988, in a form prescribed by the board.
(b) A seller receiving the certificate referred to in subdivision (a) may claim a refund or may claim credit on his or her return for the reporting period in which he or she receives the certificate with respect to sales or use tax reported by the seller which would not have been part of the sales price under subparagraph (B) of paragraph (4) of subdivision (c) of Section 6011 or part of the gross receipts under subparagraph (B) of paragraph (4) of subdivision (c) of Section 6012 if Sections 1 and 2 of this act had been in effect on and after April 1, 1988. The seller shall return the amount of the refund or credit to the purchaser.

Note.—Section 3 of Stats. 1993, Ch. 887, expressed the intent of the Legislature that the provisions of this act clarify the application of the Sales and Use Tax Law (commencing with Section 6001) to technology transfer agreements. It was also the intent not to create any inference regarding the application of the Sales and Use Tax Law to other transactions involving the transfer of both intangible rights and property and tangible personal property. Charges for Delivery to Sellers Agent are not Excluded From Sales Price.Where the sellers agent makes actual delivery to the buyer, a separately stated charge for transportation from the seller to the agent is subject to tax as a part of the sales price since only charges for transportation from the retailers place of business directly to the purchaser may be excluded from the sales price and the tax. Beeline Fashions, Inc. v. State Board of Equalizaton (1976) 56 Cal.App.3d 389.

Determining Sales Price of Fixtures.—When there is no prevailing price upon which to calculate sales tax, the cost price shall be deemed to be the amount stated in the price lists, bid sheets or other records of the contractor. Honeywell, Inc. v. State Board of Equalization (1982) 128 Cal.App.3d 739.

Establishing Sales Price.—It is not unreasonable for the board to establish a sales price for assembled components by taking into consideration the service costs incurred by taxpayer and relying on bid sheets and other records. The board could properly use contractors bid sheets and calculate all anticipated contract costs and profits to determine sales price of self-manufactured fixtures and components. Montgomery Elevator v. State Board of Equalization (1981) 118 Cal.App.3d 887.

Sales price of elevator includes preinstallation labor to assemble component fixtures.—Where taxpayer purchased components and, at its factory, assembled the components into elevator systems before installing the elevator systems at the jobsites, the taxpayer was the manufacturer of the elevator systems and the sales price included labor costs of assembling the components into the systems. Coast Elevator Co. v. State Board of Equalization (1986) 186 Cal.App.3d 206.

Technology transfer agreement.—The transfer of the right to reproduce an image subject to the transferors copyright in that image, along with tangible personal property, as part of a written agreement contemplating the making and selling of tangible personal property that incorporates a copy of the transferors copyrighted artwork constitutes a technology transfer agreement as defined in sections 6011 and 6012. Tax applies only to the charge attributable to the transfer of the tangible personal property as specified in sections 6011 and 6012 and not to the charge for the copyright interest. Preston v. State Board of Equalization (2001) 25 Cal.4th 197.

6011.1. "Sales price"; consumer cooperatives. (a) Notwithstanding Section 6011, "sales price" from the sale of tangible personal property by consumer cooperatives, as defined in subdivision (b), shall not include the value of initial or periodic membership fees and the value of labor performed in lieu of, or as part of, monthly membership fees; provided, the exclusion authorized by this section shall not be interpreted to permit consumer cooperatives to exclude from "sales price" the cost of the property sold.

(b) As used in this section, consumer cooperative means a corporation or group of persons composed of ultimate producers or consumers, or both, organized for the purpose of conducting any lawful business primarily for the mutual benefit of its shareholders who may be natural or legal persons, and the earnings, savings, or benefits of which are used for the general welfare of the shareholders or patrons or are distributed in the form of cash, stock, evidences of indebtedness, goods, or services, proportionately and equitably among the persons for which it does business upon the basis of the amount of their transactions or participation in production, or both. However, any such corporation may pay out of its net surplus earnings, savings, or benefits, not to exceed 5 percent interest upon its capital stock.

History.—Added by Stats. 1982, Ch. 406, in effect July 7, 1982.

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6012. "Gross receipts." (a) "Gross receipts" mean the total amount of the sale or lease or rental price, as the case may be, of the retail sales of retailers, valued in money, whether received in money or otherwise, without any deduction on account of any of the following:

(1) The cost of the property sold. However, in accordance with any rules and regulations as the board may prescribe, a deduction may be taken if the retailer has purchased property for some other purpose than resale, has reimbursed his or her vendor for tax which the vendor is required to pay to the state or has paid the use tax with respect to the property, and has resold the property prior to making any use of the property other than retention, demonstration, or display while holding it for sale in the regular course of business. If that deduction is taken by the retailer, no refund or credit will be allowed to his or her vendor with respect to the sale of the property.

(2) The cost of the materials used, labor or service cost, interest paid, losses, or any other expense.

(3) The cost of transportation of the property, except as excluded by other provisions of this section.

(4) The amount of any tax imposed by the United States upon producers and importers of gasoline and the amount of any tax imposed pursuant to Part 2 (commencing with Section 7301) of this division.

(b) The total amount of the sale or lease or rental price includes all of the following:

(1) Any services that are a part of the sale.

(2) All receipts, cash, credits and property of any kind.

(3) Any amount for which credit is allowed by the seller to the purchaser.

(c) "Gross receipts" do not include any of the following:

(1) Cash discounts allowed and taken on sales.

(2) Sale price of property returned by customers when that entire amount is refunded either in cash or credit, but this exclusion shall not apply in any instance when the customer, in order to obtain the refund, is required to purchase other property at a price greater than the amount charged for the property that is returned. For the purpose of this section, refund or credit of the entire amount shall be deemed to be given when the purchase price less rehandling and restocking costs are refunded or credited to the customer. The amount withheld for rehandling and restocking costs may be a percentage of the sales price determined by the average cost of rehandling and restocking returned merchandise during the previous accounting cycle.

(3) The price received for labor or services used in installing or applying the property sold.

(4) (A) The amount of any tax (not including, however, any manufacturers or importers excise tax, except as provided in subparagraph (B)) imposed by the United States upon or with respect to retail sales whether imposed upon the retailer or the consumer.

(B) The amount of manufacturers or importers excise tax imposed pursuant to Section 4081 or 4091 of the Internal Revenue Code for which the purchaser certifies that he or she is entitled to either a direct refund or credit against his or her income tax for the federal excise tax paid or for which the purchaser issues a certificate pursuant to Section 6245.5.

(5) The amount of any tax imposed by any city, county, city and county, or rapid transit district within the State of California upon or with respect to retail sales of tangible personal property measured by a stated percentage of sales price or gross receipts whether imposed upon the retailer or the consumer.

(6) The amount of any tax imposed by any city, county, city and county, or rapid transit district within the State of California with respect to the storage, use or other consumption in that city, county, city and county, or rapid transit district of tangible personal property measured by a stated percentage of sales price or purchase price, whether the tax is imposed upon the retailer or the consumer.

(7) Separately stated charges for transportation from the retailers place of business or other point from which shipment is made directly to the purchaser, but the exclusion shall not exceed a reasonable charge for transportation by facilities of the retailer or the cost to the retailer of transportation by other than facilities of the retailer. However, if the transportation is by facilities of the retailer, or the property is sold for a delivered price, this exclusion shall be applicable solely with respect to transportation which occurs after the sale of the property is made to the purchaser.

(8) Charges for transporting landfill from an excavation site to a site specified by the purchaser, either if the charge is separately stated and does not exceed a reasonable charge or if the entire consideration consists of payment for transportation.

(9) The amount of any motor vehicle, mobilehome, or commercial coach fee or tax imposed by and paid to the State of California that has been added to or is measured by a stated percentage of the sales or purchase price of a motor vehicle, mobilehome, or commercial coach.

(10) (A) The amount charged for intangible personal property transferred with tangible personal property in any technology transfer agreement, if the technology transfer agreement separately states a reasonable price for the tangible personal property.

(B) If the technology transfer agreement does not separately state a price for the tangible personal property, and the tangible personal property or like tangible personal property has been previously sold or leased, or offered for sale or lease, to third parties at a separate price, the price at which the tangible personal property was sold, leased, or offered to third parties shall be used to establish the retail fair market value of the tangible personal property subject to tax. The remaining amount charged under the technology transfer agreement is for the intangible personal property transferred.

(C) If the technology transfer agreement does not separately state a price for the tangible personal property, and the tangible personal property or like tangible personal property has not been previously sold or leased, or offered for sale or lease, to third parties at a separate price, the retail fair market value shall be equal to 200 percent of the cost of materials and labor used to produce the tangible personal property subject to tax. The remaining amount charged under the technology transfer agreement is for the intangible personal property transferred.

(D) For purposes of this paragraph, "technology transfer agreement" means any agreement under which a person who holds a patent or copyright interest assigns or licenses to another person the right to make and sell a product or to use a process that is subject to the patent or copyright interest.

(11) The amount of any tax imposed upon diesel fuel pursuant to Part 31 (commencing with Section 60001).

For purposes of the sales tax, if the retailers establish to the satisfaction of the board that the sales tax has been added to the total amount of the sale price and has not been absorbed by them, the total amount of the sale price shall be deemed to be the amount received exclusive of the tax imposed. Section 1656.1 of the Civil Code shall apply in determining whether or not the retailers have absorbed the sales tax.

(12) (A) The amount of tax imposed by any Indian tribe within the State of California with respect to a retail sale of tangible personal property measured by a stated percentage of the sales or purchase price, whether the tax is imposed upon the retailer or the consumer.

(B) The exclusion authorized by subparagraph (A) shall only apply to those retailers who are in substantial compliance with this part.

History.—Stats. 1943, p. 2454, operative July 1, 1943, added (c) to first paragraph and (d) and former (e) to third paragraph. Stats. 1945, p. 1724, operative July 1, 1945, added "valued in money, whether received in money or otherwise" to first paragraph and deleted same words from (a) in second paragraph; added last sentence to (a) in first paragraph; added to (b) in third paragraph a provision respecting return of property within 90 days from sale. Stats. 1947, p. 506, in effect February 6, 1947, added present (e) and (f) to third paragraph and relettered former (e) in third paragraph as (g). Stats. 1953, p. 1958, in effect September 9, 1953, in (b) of third paragraph deleted "upon rescission of the contract of sale" and the provision respecting return of property within 90 days from sale and added the language following "credit." Stats. 1957, p. 1688, in effect September 11, 1957, added last sentence to (b) of third paragraph. Stats. 1960, p. 18, in effect June 25, 1960, added (h). Stats. 1961, p. 4536, in effect September 15, 1961, added (d) to second paragraph. Stats. 1962, p. 6, in effect July 3, 1962, substituted "except as excluded by other provisions of this section" for "prior to its sale to the purchaser" in (c) of the first paragraph; and deleted "On and after February 1, 1947" from (e) and (f) of the last paragraph, and completely revised (g). Stats. 1968, p. 1792, in effect November 13, 1968, deleted (d) of second paragraph relating to a tax that is presumed to be on the consumer and added words "rapid transit district" in (e) and (f) of the last paragraph. Stats. 1971, p. 2781, operative July 1, 1972, relettered the section and added paragraph (a)(4). Stats. 1978, Ch. 1211, effective January 1, 1979, added new last sentence to (c) (8). Stats. 1982, Ch. 1589, in effect January 1, 1983 added "mobilehome, or commercial coach" after each "vehicle" in subsection (8) of subdivision (c). Stats. 1983, Ch. 844, in effect September 16, 1983, operative January 1, 1984, substituted "that entire amount" for "the full sale price" after "when" in the first sentence of, and added the third sentence to, subsection (2) of subdivision (c). Stats. 1988, Ch. 500, in effect August 22, 1988, added "A" and "except as provided in subparagraph (B)) in subdivision (c)(4) and added subparagraph (B). Stats. 1988, Ch. 1647, in effect October 1, 1988, operative January 1, 1989, added present subsection (8) and relettered former subsection (8) as subsection (9) in subdivision (c). Stats. 1993, Ch. 887, in effect October 8, 1993, but operative April 1, 1994, substituted "any" for "such" and added "or her" following "his" in the first sentence of, and substituted "that" for "such a" and added "or her" following "his" in the second sentence of, subdivision (a)(1), substituted "that" for "such" and substituted "the" for "such" following "whether," in subdivision (a)(6), deleted "; provided that" and added ". However," in subdivision (c)(7), and added paragraph (10) to subdivision (c). Stats. 1994, Ch. 912, in effect September 28, 1994, but operative July 1, 1995, added "4081 or" after "Section" in subparagraph (B) of paragraph (4) of subdivision (c) and added paragraph (11) to subdivision (c). Stats. 2000, Ch. 923 (AB 2894), in effect January 1, 2001, added "or for which . . . Section 6245.5" after "excise tax paid" in subparagraph (B) of paragraph (4) of subdivision (c). Stats. 2002, Ch. 593, (AB 2701), in effect September 16, 2002, but operative January 1, 2003, added paragraph (12).

Note.—Section 3 of Stats. 1987, Ch. 1280, added Section 1793.25 to the Civil Code to provide that the Board shall reimburse the manufacturer of a new motor vehicle for an amount equal to the sales tax which the manufacturer includes in making restitution to the buyer pursuant to subparagraph (d) (2) (B) of Section 1793.2 (commonly known as Californias "Lemon Law"), when satisfactory proof is provided that the retailer of the motor vehicle for which the manufacturer is making restitution has reported and paid the sales tax on the gross receipts from the sale of that motor vehicle. Section 1793.25 specifically states that this provision for reimbursement to manufacturers does not in any way change the general application of the sales and use tax to the gross receipts from the sale, and the storage, use or other consumption in this state of tangible personal property.

Note.—Section 4 of Stats. 1988, Ch. 500, adds an uncodified section as follows. (a) With respect to sales of diesel fuel made during the period of April 1, 1988, through September 30, 1988, a purchaser entitled to either a direct refund or credit against his or her income tax for the federal excise tax paid may so certify to the seller of the diesel fuel not later than December 31, 1988, in a form prescribed by the board.
(b) A seller receiving the certificate referred to in subdivision (a) may claim a refund or may claim credit on his or her return for the reporting period in which he or she receives the certificate with respect to sales or use tax reported by the seller which would not have been part of the sales price under subparagraph (B) of paragraph (4) of subdivision (c) of Section 6011 or part of the gross receipts under subparagraph (B) of paragraph (4) of subdivision (c) of Section 6012 if Sections 1 and 2 of this act had been in effect on and after April 1, 1988. The seller shall return the amount of the refund or credit to the purchaser.

Note.—Section 4 of Stats. 1988, Ch. 500, adds an uncodified section as follows. (a) With respect to sales of diesel fuel made during the period of April 1, 1988, through September 30, 1988, a purchaser entitled to either a direct refund or credit against his or her income tax for the federal excise tax paid may so certify to the seller of the diesel fuel not later than December 31, 1988, in a form prescribed by the board.
(b) A seller receiving the certificate referred to in subdivision (a) may claim a refund or may claim credit on his or her return for the reporting period in which he or she receives the certificate with respect to sales or use tax reported by the seller which would not have been part of the sales price under subparagraph (B) of paragraph (4) of subdivision (c) of Section 6011 or part of the gross receipts under subparagraph (B) of paragraph (4) of subdivision (c) of Section 6012 if Sections 1 and 2 of this act had been in effect on and after April 1, 1988. The seller shall return the amount of the refund or credit to the purchaser.

Credits.—The sales price at which a wholly owned subsidiary corporation sold property to its parent or to another subsidiary constituted "gross receipts" of the wholly owned subsidiary where the buyer and seller were operated as separate corporate entities and the buyer gave the seller credit on its books for the amount of the sales price. Northwestern Pacific Railroad Co. v. State Board of Equalization (1943) 21 Cal.2d 524.

Allowance for "trade-in."—The value fixed by agreement between seller and buyer of property exchanged as a part of the purchase price of other property, rather than the appraised or market value, constitutes "gross receipts" upon which the tax is imposed. The difference between the agreed and appraised values is not deductible from gross receipts as a cash discount. Hawley v. Johnson (1943) 58 Cal.App.2d 232.

Aircraft wings exchange.—Where the taxpayer modified aircraft wings, installed them on customers aircraft, and took the aircrafts original wings in exchange as trade-ins, the exchange was a retail sale, the gross receipts of which included the taxpayers charges for labor in modifying the wings. Aircraft Tank Service, Inc. v. State Board of Equalization (1964) 224 Cal.App.2d 582.

Trading Stamps.—Trading stamps issued by a retailer to customers who pay cash for their purchases and redeem the stamps in merchandise at the redemption office or store of the company furnishing the stamps to the retailer constitute a "cash discount" within the meaning of this section, and the retailer is not, therefore, required to pay sales tax upon the portion of gross receipts equivalent to the amount paid by him for the stamps so issued. Eisenbergs White House, Inc. v. State Board of Equalization (1945) 72 Cal.App.2d 8.

Tips.—To the extent of the minimum wages provided by law, tips received and retained by restaurant waitresses and which are credited to employer as payment of minimum wages, pursuant to the contract of employment, are a part of the employers gross receipts and subject to tax. Anders v. State Board of Equalization (1947) 82 Cal.App.2d 88.

Transportation charges.—Separately stated charges for transportation are included in gross receipts and subject to tax where the merchandise is consigned to the buyer and shipped f.o.b. cars at the destination point, transportation charges collect and allowed. Meyer v. State Board of Equalization (1954) 42 Cal.2d 376.
Where a contract obligated a retailer to deliver concrete blocks or decomposed granite to a point designated by the customer without any mutual understanding as to where title would pass, title passed at the destination, and separately stated charges for transportation are subject to sales tax, even though the same transportation charges were subject to tax under the Motor Vehicle Transportation License Tax Law. OKelley-Eccles Co. v. State of California (1958) 160 Cal.App.2d 60; Select Base Materials, Inc. v. State Board of Equalization (1959) 51 Cal.2d 640.

Returned merchandiseprior law.—Return of merchandise within 90 days pursuant to an agreement to credit customers with purchase price constitutes timely refund and rescission under (b) of the third paragraph prior to 1953 amendment, even though entries in records were not made until after the 90-day period. Youngstown Steel Products Co. v. State Board of Equalization (1957) 148 Cal.App.2d 205.

Lease of equipment with option to purchase.—When tangible personal property is leased with an option to purchase and, upon exercise of the option a charge is made for "interest on deferred balance" during the term of the lease, such charge is includable in gross receipts and is subject to sales tax. Peterson Tractor Company v. State Board of Equalization (1962) 199 Cal.App.2d 662.

Damages.—The sellers payments to the purchasers, termed "voluntary price adjustments" in the settlement of Clayton Act anti-trust actions, were damage payments rather than true price adjustments. No change occurred in the price on which the tax must be computed. Southern California Edison Co.; and San Diego Gas & Electric Co. v. State Board of Equalization (1972) 7 Cal.3d 652.

Board Classification of Drapes as Tangible Personal Property Upheld.—Plaintiff, L.A.J., Inc., sold and installed custom drapes to builders of apartment houses pursuant to lump-sum contracts, on the basis that the drapes were tangible personal property, with the tax being measured by the total sales price. Taxpayer asserted that the drapes were fixtures, in which case only the cost of the material used in the drapes would be subject to tax. The trial court classified the drapes as fixtures, ignoring the classification made by the Board. On appeal, the court held that the trial court had no authority to disregard the Boards classification of the drapes as tangible personal property in the absence of a finding that the classification was arbitrary or capricious, or had no reasonable or rational basis. The trial court had made no such finding, nor could it have done so in light of the testimony at the trial. Resolving the issues raised by plaintiffs suit, the court held that taxpayer had failed to carry its burden of proof that the classification was unreasonable since the uncontradicted evidence supported the conclusion that there was a reasonable basis for the Boards classification. The trial court was thus directed to enter judgment for the Board. L.A.J., Inc. v. State Board of Equalization (1974) 38 Cal.App.3d 549.

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6012.1. "Gross receipts"; consumer cooperatives. (a) Notwithstanding Section 6012, "gross receipts" from the sale of tangible personal property by consumer cooperatives, as defined in subdivision (b), shall not include the value of initial or periodic membership fees and the value of labor performed in lieu of, or as part of, monthly membership fees; provided, the exclusion authorized by this section shall not be interpreted to permit consumer cooperatives to exclude from "gross receipts" the cost of the property sold.

(b) As used in this section, consumer cooperative means a corporation or group of persons composed of ultimate producers or consumers, or both, organized for the purpose of conducting any lawful business primarily for the mutual benefit of its shareholders who may be natural or legal persons, and the earnings, savings, or benefits of which are used for the general welfare of the shareholders or patrons or are distributed in the form of cash, stock, evidences of indebtedness, goods, or services, proportionately and equitably among the persons for which it does business upon the basis of the amount of their transactions or participation in production, or both. However, any such corporation may pay out of its net surplus earnings, savings, or benefits, not to exceed 5 percent interest upon its capital stock.

History.—Added by Stats. 1982, Ch. 406, in effect July 7, 1982.

6012.2. Mobilehomes; current value. (a) For purposes of this part, "gross receipts" from the sale of a used mobilehome, as defined in Section 18014 of the Health and Safety Code, and the "sales price" of a used mobilehome, sold or stored, used, or otherwise consumed in this state shall be based on the current value of the used mobilehome as specified by a recognized value guide, whenever a registered or legal owner sells a used mobilehome through a person licensed under the Health and Safety Code as a dealer and not on the dealers own account or through a licensed real estate broker acting pursuant to Section 10131.6 of the Business and Professions Code, or whenever a purchaser of a used mobilehome is required to pay the use tax to the Department of Housing and Community Development. If the value guide does not specify the model or manufacturer of a used mobilehome, the value of the used mobilehome shall be established by reference to the highest value in the value guide according to age and size or the actual sales price, whichever is less. If the actual sales price of a used mobilehome is less than the current value specified in the value guide, the "sales price" and "gross receipts" shall be based on the actual sales price of the mobilehome as evidenced by the purchase documents. The State Board of Equalization shall approve the value guides for use within this state through regulation.

(b) For the purposes of this part, "gross receipts" from the sale of a mobilehome, whether new or used, shall exclude the amount of separately stated escrow fees on the sale of such mobilehome.

(c) For the purposes of this section, the "actual sales price" means the total contract price, including, but not limited to, the value of the mobilehome, in place location, awning, skirting, carport, patio, landscaping, shrubs, unattached furnishings, or other items not part of the mobilehome, and documentation fees.

History.—Added by Stats. 1979, Ch. 863, effective January 1, 1980. Stats. 1982, Ch. 1591, in effect September 30, 1982, operative January 1, 1983, substituted "Section 18014 of the Health and Safety Code" for "Sections 396 and 665 of the Vehicle Code" after "defined in," "be based on . . . value guide" for "exclude the . . . as a vehicle," before "when," and "Health and Safety Code" for "Vehicle Code" after "under the," in the first sentence of, and added the second sentence to, subdivision (a); and, added subdivision (C). Stats. 1984, Ch, 1707, effective January 1, 1985, substituted "determined" for "specified" after "Mobilehome as" in (a), deleted "If the value . . . purchase documents," before last sentence in (a). Stats. 1985, Ch. 1539, effective January 1, 1986, substituted "specified" for "determined", added "if the value . . . by purchase documents" in subdivision (a), deleted "and the . . . or used" before "shall exclude" in subdivision (b), deleted repeal language and added "for the . . . documentation fees" in subdivision (c).

6012.2. Mobilehomes; exclusions. [Repealed by Stats. 1985, Ch. 1539, effective January 1, 1986.]

6012.3. Car Buyers Bill of Rights; used vehicles. For purposes of this part, "gross receipts" and "sales price" do not include that portion of the sales price returned to the purchaser of a used motor vehicle or the purchase price for the purchase of a contract cancellation option pursuant to Section 11713.21 of the Vehicle Code.

History.—Added by Stats. 2005, Ch. 128 (AB 68), in effect January 1, 2006, but operative July 1, 2006.

6012.5. "Common carrier," sales to; exemption. Nothing in Sections 6011 and 6012 shall affect the exemption afforded under Section 6385 to sales of tangible personal property to a common carrier under the circumstances set forth in Section 6385.

History.—Added by Stats. 1962, p. 8, in effect July 3, 1962. Sec. 4 of the act provides it is not the intent of the Legislature in the enactment of this act to affect the application of the sales or use tax to any charges other than those for the final transportation of property to the purchaser.

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6012.6. Factory-built school building. (a) For the purposes of this part, "gross receipts" from the sale of a factory-built school building, and the "sales price" of a factory-built school building, sold or stored, used, or otherwise consumed in this state shall be 40 percent of the sales price of the factory-built school building to the consumer.

(b) For purposes of this section, "factory-built school building" means any building designed in compliance with state laws for school construction and approved by the structural safety section in the Office of the State Architect, which is either wholly manufactured or is in substantial part manufactured at an offsite location , to be assembled, erected, or installed on a site owned or leased by a school district or a community college district.

(c) For purposes of this section, the place of sale or purchase of a factorybuilt school building is the place of business of the retailer of the factorybuilt school building as provided in Section 7205, regardless of whether sale of the building includes installation or whether the building is placed upon a permanent foundation.

History.—Added by Stats. 1989, Ch. 816, in effect September 26, 1989. Stats. 1990, Ch. 763, in effect September 13, 1990, deleted "or intended for use as a school building, as defined in Sections 39214 and 81165 of the Education Code" and added "in compliance . . . State Architect" after "building designed", deleted "in accordance with standards prescribed by the Department of General Services or the Department of Housing and Community Development" after "offsite location", and substituted "site owned . . . district", for "school site", in subdivision (b), and deleted subdivision (d) which provided, "If a purchaser certifies in writing to the retailer that the factory-built school building purchased will be consumed in a manner or for a purpose entitling the retailer to exclude 60 percent of the gross receipts or sales price from the measure of tax, and uses the property in some other manner or for some other purpose, the purchaser shall be liable for payment of tax measured by 60 percent of the sales price."

6012.7. Factory-built housing. [Repealed by Stats. 1980, Ch. 1246, operative January 1, 1981.]

6012.7. Factory-built housing. (a) For the purposes of this part, "gross receipts" from the sale of factory-built housing, and the "sales price" of factory-built housing, sold or stored, used, or otherwise consumed in this state shall be 40 percent of the sales price of the factory-built housing to the consumer.

(b) For purposes of this section, "factory-built housing" includes:

(1) A residential building, dwelling unit or an individual dwelling room or combination of rooms thereof, or building component, assembly, or system manufactured in such a manner that all concealed parts or processes of manufacture cannot be inspected before installation at the building site without disassembly, damage, or destruction of the part, including units designed for use as part of an institution for resident or patient care, which is either wholly manufactured or is in substantial part manufactured at an offsite location to be wholly or partially assembled onsite in accordance with regulations adopted by the Commission of Housing and Community Development of the State of California pursuant to Section 19990 of the Health and Safety Code or in accordance with applicable local building requirements of such factory-built housing is inspected and approved by the local enforcement agency at the place of, and during the time of, manufacture.

(2) "Modular housing," which is a three-dimensional box or cube-shaped structure or structures making up one or more rooms of a residential building.

(3) "Sectionalized housing," which generally consists of two modules which form a total living unit.

(4) "Modular," "utility," or "wet cores," which are three-dimensional habitable rooms or modules and which are generally comprised of a kitchen or a bathroom or bathrooms.

(c) For purposes of this section, "factory-built housing" does not include:

(1) A "mobilehome," as defined in Section 18008 of the Health and Safety Code.

(2) "Precut housing packages" where more than 50 percent of the package consists of precut lumber only.

(3) "Panelized construction," such as walls or components that may become one or more rooms of a building, unless a complete housing package is provided by the builder or manufacturer, such as by providing wall panels, floors, and a roof which will form a complete housing structure.

(4) "Porches" or "awnings" which are not purchased as a part of the original housing package.

(d) If a purchaser certifies in writing to a retailer that the factory-built housing purchased will be consumed in a manner or for a purpose entitling the retailer to exclude 60 percent of the gross receipts or sales price from the measure of tax, and uses the property in some other manner or for some other purpose, the purchaser shall be liable for payment of tax measured by 60 percent of the sales price.

History.—Stats. 1980, Ch. 1246, repealed former section and added present section operative January 1, 1981.

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6012.8. Mobilehomes; installed as residences. [Repealed by Stats. 1980, Ch. 1160, effective July 1, 1980.]

6012.8. Mobilehomes; installed as residences. (a) For the purposes of this part, "gross receipts" from the sale of a new mobilehome, and the "sales price" of a new mobilehome sold or stored, used, or otherwise consumed in this state shall be 75 percent of the sales price of the mobilehome to the retailer, if the mobilehome is sold by the retailer to the purchaser for installation on a foundation system pursuant to Section 18551 of the Health and Safety Code for occupancy as a residence, and is thereafter subject to property taxation. The retailer shall be considered to be the consumer for purposes of this part if the sale by the retailer would otherwise have been subject to sales tax and if the retailer is not also the manufacturer of the mobilehome. If the retailer of the mobilehome is the manufacturer, tax shall be measured by an amount equal to 75 percent of the sales price at which a similar mobilehome ready for installation would be sold by the manufacturer to a retailer-consumer in this state.

Notwithstanding any other provision of this part, a retailer may give a resale certificate for the purchase by the retailer of such a mobilehome and shall report the gross receipts or sales price from the purchase with the return for the period during which the mobilehome is sold to the purchaser for installation for occupancy as a residence.

Notwithstanding any other provision of this part, any retailer who is a licensed mobilehome dealer under Section 18002.6 of the Health and Safety Code is a retailer-consumer regardless of whether or not it installs the mobilehome on a foundation system as an improvement to realty. The licensed dealer may give a resale certificate for the purchase of such a mobilehome, and shall report the gross receipts or sales price from the purchase with the return for the period during which the mobilehome is installed by the licensed dealer for occupancy as a residence.

(b) For purposes of this section, a "mobilehome" is defined in Sections 18008 and 18211 of the Health and Safety Code.

(c) If a purchaser certifies in writing to a retailer that the mobilehome purchased will be consumed in a manner or for a purpose entitling the retailer to exclude 25 percent of the gross receipts or sales price to the retailer from the measure of tax, and uses the property in some other manner or for some other purpose which would not be subject to any other exclusion or exemption under this part, the purchaser shall be liable for payment of tax measured by the amount of the sales price to the purchaser less an amount equal to 75 percent of the gross receipts or sales price of the mobilehome to the retailer.

(d) There are exempted from the taxes imposed by this part, the gross receipts from the sale of, and the storage, use, or other consumption in this state of any used mobilehome, the initial retail sale of which qualified for the partial exemption from tax provided for by this section.

History.—Added by Stats. 1979, Ch. 1160, operative July 1, 1980. Stats. 1980, Ch. 285, operative July 1, 1980, added "new" following "sale of a" and " sales price of a", substituted "75" for "60" deleted part of first sentence following "property taxation", added second and third sentences in (a), substituted "25" for "40", substituted "less" for "minus", substituted "75 percent of the gross receipts or" for "the" following "equal to" in (c), and reworded (d) and (e). Stats. 1980, Ch. 1149, operative January 1, 1981, added second paragraph of (a). Stats. 1985, Ch. 786, effective September 19, 1985, substituted "the" for "such" in first and second paragraph and added third paragraph in subdivision (a), and deleted subdivision (e). Stats. 1986, Ch. 608, effective January 1, 1987, substituted 18002.6 for 18006.2.

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6012.9. Mobilehomes; installed as residences subject to property tax. (a) For the purposes of this part, "gross receipts" from the sale of a new mobilehome, and the "sale price" of a new mobilehome sold or stored, used or otherwise consumed in this state shall be 75 percent of the sales price of the mobilehome to the retailer, if such mobilehome is sold by the retailer to the purchaser for installation for occupancy as a residence pursuant to the requirements of Section 18613 of the Health and Safety Code, and is thereafter subject to property taxation. The retailer shall be considered to be the consumer for purposes of this part if the sale by the retailer would otherwise have been subject to sales tax and if the retailer is not also the manufacturer of the mobilehome. If the retailer of the mobilehome is the manufacturer, tax shall be measured by an amount equal to 75 percent of the sales price at which a similar mobilehome ready for installation would be sold by the manufacturer to a retailer-consumer in this state.

Notwithstanding any other provision of this part, a retailer may give a resale certificate for the purchase by the retailer of such a mobilehome and shall report the gross receipts or sales price from such purchase with the return for the period during which the mobilehome is sold to the purchaser for installation for occupancy as a residence.

(b) For the purpose of this section, a "mobilehome" is defined in Sections 18008 and 18211 of th Health and Safety Code.

(c) If a purchaser certifies in writing to a retailer that the mobilehome purchased will be consumed in a manner or for a purpose entitling the retailer to exclude 25 percent of the gross receipts or sales price to the retailer from the measure of tax, and uses the property in some other manner or for some other purpose which would not be subject to any other exclusion or exemption under this part, the purchaser shall be liable for payment of tax measured by the amount of the sales price to the purchaser less an amount equal to 75 percent of the gross receipts or sales price of the mobilehome to the retailer.

(d) There are exempted from the taxes imposed by this part, the gross receipts from the sale of, and the storage, use, or other consumption in this state of any used mobilehome, the initial retail sale of which qualified for the partial exemption from tax provided for by this section.

History.—Added by Stats. 1979, Ch. 1180, applicable only to sale or use occurring on or after July 1, 1980. Stats. 1980, Ch. 285, operative July 1, 1980, added "new" following "sale of a" and " sales price of a", substituted "75" for "80", deleted part of first sentence following "property taxation", added second and third sentences in (a), substituted "25" for "20", substituted "less" for "minus", substituted "75 percent of the gross receipts or" for "the" following "equal to" in (c), and reworded (d). Stats. 1980, Ch. 1149, operative January 1, 1981, added second paragraph of (a).

6013. "Business." "Business" includes any activity engaged in by any person or caused to be engaged in by him with the object of gain, benefit, or advantage, either direct or indirect.

Social club as engaged in business.—Sales from the operations of a dining room and bar of a nonprofit corporation organized for social and political purposes are nevertheless subject to the sales tax. The fact that no profit, indeed a loss, was sustained is immaterial, because it was unquestioned that "gain," "benefit" or "advantage" was derived by the club, which was therefore engaged in "business" as defined in this section. Union League Club v. Johnson (1941) 18 Cal.2d 275.

School districts.—A school district which, over a period of several years, makes on the average of two or three retail sales per quarter of tangible personal property consisting of buildings and improvements and miscellaneous equipment no longer needed for school purposes, is engaged in "business" within the meaning of this section, and is required to pay the sales tax upon such sales. Los Angeles City High School District v. State Board of Equalization (1945) 71 Cal.App.2d 486.

Counties.—A county making 72 sales over a period of several years is required to pay sales tax on such sales, which constitute doing business and are not exempt because not made for profit. People v. Imperial County (1946) 76 Cal.App.2d 572.

Bank.—Sale of personalized checks to depositors by a bank was held a "business" within the purview of this section although the sales did not occur in the banks regular course of business. Bank of America v. State Board of Equalization (1962) 209 Cal.App.2d 780.

6014. "Seller." "Seller" includes every person engaged in the business of selling tangible personal property of a kind the gross receipts from the retail sale of which are required to be included in the measure of the sales tax.

For the purposes of this section, the phrase "tangible personal property of a kind the gross receipts from the retail sale of which are required to be included in the measure of the sales tax" includes all tangible personal property of a kind the gross receipts from the retail sale of which is, or would be, required to be included in the measure of the sales tax if sold at retail, whether or not the tangible personal property is ever sold at retail or is suitable for sale at retail.

History.—Stats. 1949, p. 1344, operative July 1, 1949, added "of a kind." Stats. 1983, Ch. 184, in effect July 11, 1983, operative January 1, 1984, added the second paragraph.

Manufacturer.—A manufacturer who had made sales for resale but no retail sales and whose product was not suitable for retail sale was not a "seller". Glass-Tite Industries, Inc. v. State Board of Equalization (1968) 266 Cal.App.2d 691 (this case was overturned by the 1983 amendment to Section 6014).
A manufacturer who makes no retail sales but whose product is suitable for retail sale is a "seller." Davis Wire Corp. v. State Board of Equalization (1976) 17 Cal.3d 761.

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6015. "Retailer." (a) "Retailer" includes:

(1) Every seller who makes any retail sale or sales of tangible personal property, and every person engaged in the business of making retail sales at auction of tangible personal property owned by the person or others.

(2) Every person engaged in the business of making sales for storage, use, or other consumption or in the business of making sales at auction of tangible personal property owned by the person or others for storage, use, or other consumption.

(3) Any person conducting a race meeting under the provisions of Chapter 4 of Division 8 of the Business and Professions Code, with respect to horses which are claimed during such meeting.

(b) When the board determines that it is necessary for the efficient administration of this part to regard any salesmen, representatives, peddlers or canvassers as the agents of the dealers, distributors, supervisors, or employers under whom they operate or from whom they obtain the tangible personal property sold by them, irrespective of whether they are making sales on their own behalf or on behalf of the dealers, distributors, supervisors, or employers the board may so regard them and may regard the dealers, distributors, supervisors, or employers as retailers for purposes of this part.

(c) Notwithstanding subdivision (b), a newspaper carrier is not a retailer and the retailer is the publisher or distributor for whom the carrier delivers the newspapers. The publisher or distributor is responsible for the tax measured by the price charged to the customer by the carrier.

History.—Stats. 1943, p. 2455, operative July 1, 1943, deleted provisions relating to meals served students and employees, related provisions being enacted as Section 6363. Stats. 1943, p. 2620, operative July 1, 1943, added (c). Stats. 1949, p. 1344, operative July 1, 1949, substituted "Every seller who makes any retail sale or sales of tangible personal property, and every person engaged" for "Every person engaged in the business of making sales at retail or" in (a) and "Chapter 4 of Division 8 of the Business and Professions Code" for "Chapter 769, Statutes of 1933, as amended" in (c). Stats. 1991, Ch. 85, in effect June 30, 1991, operative July 1, 1991, lettered the former first and second paragraphs as subdivisions (a) and (b), respectively; renumbered former subdivisions (a), (b), and (c) as paragraphs (1), (2), and (3), respectively; substituted "the" for "such" after "on behalf of", in subdivision (b); and added subdivision (c).

Note.—Section 14 of Ch. 88, Stats. 1991, states that the provisions of Section 6359.5 shall become operative on July 15, 1991.

Trustee in Bankruptcy as "retailer."—A trustee in bankruptcy who is selling the physical equipment of the bankrupt business, but is not conducting or continuing such business, is not a "retailer," and is not subject to payment of sales tax upon sales made by him in liquidation of the assets of the bankrupt estate. State Board of Equalization v. Boteler (1942) 131 F.2d 386; California State Board of Equalization v. Goggin (1951) 191 F.2d 726, cert. den. (1952) 342 U.S. 909. But see Debtor Reorganizers, Inc. v. State Board of Equalization (1976) 58 Cal.App.3d 691, summary following Section 6201.

Optometrists.—An optometrist who supplies glasses to his patients is a "retailer," and is required to pay sales tax on such portion of his charges as represents the fair retail value of the glasses. Kamp v. Johnson (1940) 15 Cal.2d 187. See, however, Section 6018, under which optometrists are consumers on and after September 19, 1947.

Contractor.—Sales and use tax ruling 11 (now regulation 1521), which provides that contractors are retailers of "fixtures" which they furnish and install, is valid. General Electric Co. v. State Board of Equalization (1952) 111 Cal.App.2d 180; Honeywell, Inc. v. State Board of Equalization (1975) 48 Cal.App.3d 907.
A subcontractor was a retailer of tangible personal property and not a consumer under ruling 11 (now regulation 1521) when he supplied completed door frames f.o.b. jobsite which were installed by others. Overly Manufacturing Co. v. State Board of Equalization (1961) 191 Cal.App.2d 20.

Possession by retailer.—Person who receives purchase order from consumer and who then places his own purchase order with supplier and requires supplier to ship directly to consumer is a retailer and not a broker when there is no contract between supplier and consumer. Meyer v. State Board of Equalization (1954) 42 Cal.2d 376.

Sales of equipment by a railroad.—A railroad is a "retailer" where it makes a total of 900 separate sales of tangible personal property between 1933 and 1944. Market Street Railway Co. v. State Board of Equalization (1955) 137 Cal.App.2d 87.

Installation assistance.—Sellers of precut or prefabricated materials who render some assistance to customers in installation are retailers rather than contractors. Greenblatt v. State Board of Equalization (1957) 148 Cal.App.2d 619.

Seller of building materials.—A manufacturer of wet mix concrete and asphalt, who transports such property to a jobsite and discharges it into forms, where it is spread and finished by a contractor, is the retailer of concrete and asphalt and tax applies to gross receipts of such sales. Hayward Building Material Co. v. State Board of Equalization (1958) 164 Cal.App.2d 607.

Seller of used trucks.—A manufacturer of food products for resale was the retailer of used delivery trucks and the tax applies to the gross receipts of such sales where it purchased the equity of the retiring salesmen in the used trucks and resold them to new salesmen. Frito Co. v. State Board of Equalization (1961) 192 Cal.App.2d 331.

National Bank.—A bank which sold to its depositors personalized checks was "engaged in the business" of making sales of such checks and thus was a "retailer" under this section. Bank of America v. State Board of Equalization (1962) 209 Cal.App.2d 780.

Distributor of Greeting Cards Held Retailer of Cards Sold Through Agents.—Plaintiff, a California corporation that distributed greeting cards to independent salesmen in California and other western states, sought a refund of taxes paid by it, contending that the salesmen were the actual retailers of the cards. The salesmen, who were solicited by an outof- state corporation associated with plaintiff, forwarded orders to that corporation who in turn forwarded them to plaintiff. Plaintiff mailed the cards, which were drawn from stocks acquired from its out-of-state parent corporation, directly to the salesmen. The Board had ordered that plaintiff, rather than the salesmen, be regarded as the retailer of the cards pursuant to Revenue and Taxation Code Section 6015 which provides that the Board may, for the efficient administration of the Sales Tax Law, regard salesmen as agents of the distributors ". . . under whom they operate or from whom they obtain the tangible personal property sold by them. . ." and the distributors as retailers. The trial court found that plaintiff distributed the cards to the salesmen, that the salesmen obtained the cards from plaintiff, and that the salesmen were so numerous that the Board could not effectively collect the tax directly from the salesmen. In affirming, the court held that plaintiff was not required to have an ownership interest in the cards to be a distributor. The fact that it was a subsidiary of the parent corporation and that the cards sent to the salesmen by plaintiff bore its identification in the form of a return address, and at times even contained sales literature inserted by it, was sufficient. The court noted that it was plaintiff which actually delivered the greeting cards to the salesmen, and that this act constituted the final service accorded to the salesmen by any of the tripartite entities. The court further held that plaintiff was not entitled to a refund with respect to sales which might have been made outside the state since it failed to offer any evidence as to which of its sales were made out of California. Sunshine Art Studios of California v. State Board of Equalization (1974) 39 Cal.App.3d 223.

Initial Sale.—The tax applies to the initial retail sale of a seller even though the seller was not a retailer prior to that sale. Davis Wire Corp. v. State Board of Equalization (1976) 17 Cal.3d 761.

Manufacturer of soft drinks sold through vending machines.—The court held that a manufacturer of soft drinks sold to vending machine owners and lessees was the retailer. Associated Beverage Company, Inc. v. State Board of Equalization (1990) 224 Cal.App.3d 192.

Liquidation sales by trustees in bankruptcy.—A nondiscriminatory tax on a bankruptcy liquidation sale is not barred by the now discredited intergovernmental tax immunity doctrine, and there is no longer any constitutional impediment to imposition of a sales tax or a use tax on a bankruptcy liquidation sale. The sales and use tax does not discriminate against a bankruptcy trustee or those that they deal with, and the bankruptcy trustee is not so closely connected to the federal government that the two cannot be viewed as separate entities. California State Board of Equalization v. Sierra Summit, Inc. (1989) 490 U.S. 844.

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6015.5. Commercial advertising. [Repealed by Stats. 1993, Ch. 257, effective January 1, 1994.]

6016. "Tangible personal property." "Tangible personal property" means personal property which may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses.

Sale of sand and gravel.—Where a supplier agreed to furnish sand and gravel to a highway contractor "f.o.b. jobsite" from its own pit, it was a sale of tangible personal property and not a transfer of interest in real property. Santa Clara Sand and Gravel Co. v. State Board of Equalization (1964) 225 Cal.App.2d 676.

Sale of equipment agreed by the parties to be personal property.—Equipment was tangible personal property where the parties agreed and intended that such equipment attached to real property would remain personal property with rights to removal, replacement and consumption. Standard Oil Co. v. State Board of Equalization (1965) 232 Cal.App.2d 91.

Transfer of Master Film Negatives.—Film negatives and master recordings used to make audiovisual materials for training medical personnel, which were transferred by plaintiff as part of a sale of the segment of its business devoted to producing and marketing such materials, were tangible personal property. Simplicity Pattern Co. Inc. v. State Board of Equalization (1980) 27 Cal.3d 900.

Printing of lottery tickets.—Sales of printed lottery tickets to the California Lottery Commission were subject to tax. The exemption of lottery tickets from state and local taxes, pursuant to Government Code 8880.68 applies to sales of lottery tickets to the public after the Lottery Commission has authorized the use of the tickets in lottery games. City of Gilroy v. State Board of Equalization (1989) 212 Cal.App.3d 589.

Sale of coal for electricity production.—The purchases of coal were not exempt from the use tax under Revenue and Taxation Code sections 6007 and 6008, as property purchased for resale in the regular course of business because the coal was not incorporated into a final product within the meaning of Sales and Use Tax Regulation 1525. Rather, the coal functioned as a catalyst in the manufacturing process. Searles Valley Minerals Operations Incorporated v. State Board of Equalization (2008) 160 Cal.App.4th 514.

6016.3. Leased fixtures. "Tangible personal property," for the purpose of this part, includes any leased fixtures if the lessor has the right to remove the fixtures upon breach or termination of the lease, unless the lessor is also the lessor of the realty.

History.—Added by Stats. 1965, p. 5447, operative August 1, 1965. Stats. 1971, p. 3834, in effect December 16, 1971, substituted "leased fixtures" for "leased property affixed to realty", and "remove the fixtures" for "remove the property", deleted "to which the property is affixed" from the end of the sentence.

6016.5. Tangible personal property; exclusion. Notwithstanding any other provision of law, "tangible personal property," for purposes of this part, does not include telephone and telegraph lines, electrical transmission and distribution lines, and the poles, towers, or conduit by which they are supported or in which they are contained.

History.—Added by Stats. 1965, p. 4488, in effect September 17, 1965. Section 3 of the act provides, "Section 2 of this act [6016.5] shall be for prospective application. The law as it existed prior to the effective date of Section 2 shall continue in full force and effect and as if Section 2 had not been enacted, as respects the application of sales and use taxes to sales of telephone and telegraph lines, electrical transmission and distribution lines, and the poles, towers, or conduit by which they are supported or in which they are contained, and as respects the application of sales and use taxes to tangible personal property sold or purchased and used in the performance of construction contracts for the construction of such lines, poles, towers or conduit, when the contract of salefor the lines, poles, tower or conduit or the contract for the construction thereof was validly entered into before the effective date of this act." Electrical Power Transmission Lines.A contract for the construction of an electrical power transmission line entered into before the effective date of section 6016.5 was a construction contract within the meaning established by ruling 11 (now regulation 1521). King v. State Board of Equalization (1972) 22 Cal.App.3d 1006; A.S. Schulman Electric Co. v. State Board of Equalization (1975) 49 Cal.App.3d 180.

Components.—This section does not extend to components, such as cable, purchased to be used in the construction or repair of transmission and distribution lines. Chula Vista Electric Co. v. State Board of Equalization (1975) 53 Cal.App.3d 445.

Film Negatives and Master Recordings.—Film negatives and master recordings are tangible personal property for sales tax purposes even though valued in part for their intellectual content. Simplicity Pattern Co. Inc. v. State Board of Equalization (1980) 27 Cal.3d 900.

6017. "In this State." "In this State" or "in the State" means within the exterior limits of the State of California and includes all territory within these limits owned by or ceded to the United States of America.

Note.—The application of the tax within federal areas subsequent to December 31, 1940, is authorized by act of Congress (4 U.S.C., Sections 105110; 61 Stat. 641).

6018. Oculists, optometrists and dispensing opticians. A licensed optometrist, physician and surgeon, pharmacist, or registered dispensing optician is a consumer of and shall not be considered a retailer within the provisions of this part as follows:

(a) In the case of a licensed optometrist or physician and surgeon with respect to the ophthalmic materials used or furnished by him or her, in the performance of his or her professional services in the diagnosis, treatment or correction of conditions of the human eye, including the adaptation of lenses or frames for the aid thereof.

(b) In the case of a licensed pharmacist only with respect to replacement contact lenses dispensed pursuant to Section 4124 of the Business and Professions Code.

(c) In the case of a registered dispensing optician with respect to the dispensing of ophthalmic materials.

History.—Added by Stats. 1947, p. 656, in effect September 19, 1947. Stats. 1970, p. 3433, operative July 1, 1971, deleted "or" after the first "optometrist"; added "or registered dispensing optician", "in the case of a licensed optometrist or physician and surgeon" and "or in the case of a registered dispensing optician." Stats. 1997, Ch. 184 (SB 13), in effect August 4, 1997, operative January 1, 1998, added "pharmacist," after "surgeon" and added "as follows:" after "this part" in the first paragraph; created new subdivision (a) with balance of the sentence beginning with "in the case of a licensed optometrist" and added "or her" after "him", added "or her" after "his" and deleted ", or" after "thereof" therein; added subdivision (b); created new subdivision (c) with the balance of the sentence beginning with "in the case of a registered dispensing optician".

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6018.1. Veterinarians. A licensed veterinarian is a consumer of, and shall not be considered a retailer within the provisions of this part with respect to, drugs and medicines used or furnished by him or her in the performance of his or her professional services. For the purposes of this section, "drugs and medicines" includes substances or preparations intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in animals and which is commonly recognized as a substance or preparation intended for this use. The term includes legend drugs, pills and capsules (other than vitamins), liquid medications, injected drugs, ointments, vaccines, intravenous fluids, and medicated soaps if those soaps are available only to veterinarians. The term does not include vitamins, shampoos, pet foods, prescription diet foods, artificial diets, flea powders, and flea sprays.

History.—Added by Stats. 1985, Ch. 1585, effective October 2, 1985.

6018.3. Itinerant veteran vendors. (a) A qualified itinerant vendor is a consumer of, and shall not be considered a retailer of, tangible personal property owned and sold by the qualified itinerant vendor, except alcoholic beverages or tangible personal property sold for more than one hundred dollars ($100).

(b) For purposes of this section, a person is a "qualified itinerant vendor" when all of the following apply:

(1) The person was a member of the Armed Forces of the United States, who received an honorable discharge or a release from active duty under honorable conditions.

(2) The person is unable to obtain a livelihood by manual labor due to a service-connected disability.

(3) For the purposes of selling tangible personal property, the person is a sole proprietor with no employees.

(4) The person has no permanent place of business in this state.

(c) For purposes of this section, "permanent place of business" means any building or other permanently affixed structure, including a residence, that is used in whole or in part for the purpose of making sales of, or taking orders and arranging for shipment of, tangible personal property. For purposes of this section, "permanent place of business" does not include any building or other permanently affixed structure, including a residence, used for any of the following:

(1) The storage of tangible personal property.

(2) The cleaning or the storage of equipment or other property used in connection with the manufacture or sale of tangible personal property.

(d) This section shall not apply to either of the following:

(1) A person engaged in the business of serving meals, food, or drinks to a customer at a location owned, rented, or otherwise supplied by the customer.

(2) A person operating a vending machine.

(e) This section shall remain in effect only until January 1, 2012, and as of that date is repealed.

History.—Added by Stats. 2009, Ch. 621 (SB 809), in effect October 11, 2009, but operative April 1, 2010.

6018.4. Chiropractors. A licensed chiropractor is a consumer of, and shall not be considered a retailer within the provisions of this part with respect to, vitamins, minerals, dietary supplements, and orthotic devices used or furnished by him in the performance of his professional services.

History.—Added by Stats. 1978, Ch. 1182, operative January 1, 1979.

6018.5. Podiatrists. A licensed podiatrist is a consumer of, and shall not be considered a retailer within the provisions of this part with respect to, the prosthetic materials and inlays used or furnished by him in the performance of his professional services in the diagnosis, treatment, or correction of conditions of the human foot, including the adaptation of arch supports or special footgear for the aid thereof.

History.—Added by Stats. 1961, p. 575, in effect September 15, 1961.

6018.6. Alteration, cleaning, or dyeing of garments. (a) Any person who receives no more than 20 percent of his or her total gross receipts from the alteration of garments during the preceding calendar year is a consumer of, and shall not be considered a retailer within the provisions of this part with respect to, property used or furnished by that person in altering new or used clothing, provided both of the following apply:

(1) That person operates a location or locations as a pickup and delivery point for garment cleaning, or provides spotting and pressing services on the premises but not garment cleaning, or operates a garment cleaning or dyeing plant on the premises.

(2) Seventy-five percent or more of that persons total gross receipts represent charges for garment cleaning or dyeing services.

(b) Sales tax shall not apply to the charges for alterations specified in subdivision (a). However, that person is a retailer of any other tangible personal property sold to consumers in the regular course of business and sales tax shall apply to the gross receipts from those sales.

(c) For the purpose of this section:

(1) "Cleaning" means wet cleaning and drycleaning.

(2) "Wet cleaning" means the process of cleaning a garment by immersion in water, or by applying manually or by any mechanical device, water, or any detergent and water, or by spraying or brushing the garment with water or water and any detergent, or water vapor, or steam, and includes self-service or coin-operated equipment in whole or in part.

(3) "Drycleaning" means the process of cleaning or renovating wearing apparel, feathers, furs, hats, fabrics, household items, or textiles by immersion and agitation, spraying, vaporization, or immersion only, in a volatile, commercially moisture-free solvent or by the use of a volatile or inflammable product, applied either manually or by means of a mechanical appliance and including self-service or coin-operated equipment in whole or in part.

(4) "Dyeing" means the process of coloring wearing apparel, feathers, furs, hats, fabrics, or textiles by the use of aniline dyes, mordants, or acids, with or without steam, excluding, however, the use of any dye or combination of dyes which is directly soluable or dispersible in water and which does not require chemical alteration of its structure for application, where that dye or combination of dyes is applied to cotton, viscose rayon, or cuprammonium rayon other than wearing apparel.

(5) "Spotting" means the process of removing spots or stains or localized areas of soil from a garment, either before or after, and with or without drycleaning or wet cleaning, by brushing, spraying, or other means of manual or mechanical application, other than immersion, with water, detergents, and volatile or inflammable solvents, chemicals, or any, or all of them.

(6) "Pressing" means the process of restoring the garment to the original shape, dimensions or contour thereof, or to those in which the same was received from the customer, or as directed by the customer, and the removal of wrinkles, stresses, bulges, and impressions, imprint marks and shine, from a garment by the application of pressure, heat, moisture, water vapor or steam, or all of them, whether applied manually, or by any mechanical means.

History.—Added by Stats. 1983, Ch. 605, in effect August 31, 1983, operative January 1, 1984. Stats. 1986, Ch. 308, added definitions for "cleaning", "wet cleaning", "drycleaning", "dyeing", "spotting", and "pressing".

Note.—Sec. 24, Stats. 1986, Ch. 308, states that the amendment to Section 6018.6 of the Revenue and Taxation Code does not constitute a change in, but is declaratory of, the existing law.

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6018.7. Licensed hearing aid dispenser. A licensed hearing aid dispenser is a consumer of, and shall not be considered a retailer within the provisions of this part with respect to hearing aids sold or furnished by him or her.

History.—Added by Stats. 1984, Ch. 1576, effective September 30, 1984, operative January 1, 1985.

6018.8. Department of Transportation. The Department of Transportation is a consumer of, and shall not be considered a retailer within the provisions of this part with respect to, passenger transportation vehicles, including, but not limited to, rail passenger cars, locomotives, other rail vehicles, bus and van fleets, and ferryboats, which it sells to and leases back from any person pursuant to Article 4 (commencing with Section 14060) of Chapter 1 of Part 5 of Division 3 of Title 2 of the Government Code.

History.—Added by Stats. 1984, Ch. 1510, effective September 28, 1984.

6018.9. Promotional items sold at cost. (a) An organization described in Section 501(c) of the Internal Revenue Code is a consumer of, and shall not be considered a retailer within the provisions of this part for purposes of any transfer of, tangible personal property to its members, as defined in Section 5056 of the Corporations Code, if the following requirements are met:

(1) The tangible personal property bears a logo or other identifying mark of the organization and is a promotional item or other item commonly associated with use by a member to demonstrate the member's association with, or membership in, the organization.

(2) The cost to the member of the organization for the acquisition of the tangible personal property is not more than the cost to the nonprofit organization to obtain and transfer to the member the tangible personal property, including any applicable sales or use tax paid by the nonprofit organization.

(3) Reasonable steps are taken by the organization to ensure that no member is allowed to acquire more than 30 identical items of tangible personal property or to resell the items to another person.

(4) The tangible personal property is not distributed for purposes of organized political campaigning or issue advocacy.

(b) This section shall remain in effect only until January 1, 2015, and as of that date is repealed.

History. —Added by Stats. 2009, Ch. 538 (AB 1486), in effect October 11, 2009, but operative April 1, 2010.

6019. "Retailer" further defined. Every individual, firm, copartnership, joint venture, trust, business trust, syndicate, association or corporation making more than two retail sales of tangible personal property during any 12-month period, including sales made in the capacity of assignee for the benefit of creditors, or receiver or trustee in bankruptcy, shall be considered a retailer within the provisions of this part in his or its individual, firm, copartnership, joint venture, trust, business trust, syndicate, associate or corporate capacity.

History.—Added by Stats. 1951, p. 2389, operative July 1, 1951.

Scope.—Section 6019 does not constrict the statutory definition of retailer; it enlarges it. Davis Wire Corp. v. State Board of Equalization (1976) 17 Cal.3d 761.

6020. Producers of X-ray films or photographs. Producers of X-ray films or photographs for the purpose of diagnosing medical or dental conditions of human beings, excluding use of those products for purely cosmetic purposes, are the consumers of materials and supplies used in the production thereof.

History.—Added by Stats. 1951, p. 2286, in effect June 1, 1951, as Section 6019. Renumbered by Stats. 1953, p. 2723, in effect September 9, 1953. Stats. 1982, Ch. 301, in effect June 22, 1982, operative October 1, 1982, added "or photographs" after "films" and substituted "diagnosing medical . . . purposes" for "diagnosis" after "purpose of" in the first sentence.

6021. Vending machine operators. Notwithstanding any other provision of law, the sale tax applies to the receipts of operators of vending machines located on Army, Navy or Air Force installations and dispensing tangible personal property of a kind the gross receipts from the retail sale of which are subject to tax. This section shall not be deemed to require payment of sales tax measured by receipts of such operators who lease the machines to exchanges of the Army, Air Force, Navy or Marine Corps which acquire title to and sell the merchandise through the machines to authorized purchasers from such exchanges.

The term "operator," as used herein, means any person who owns or possesses vending machines and who controls the operations of the machines, as by placing the merchandise therein or removing the coins therefrom, and who has access thereto for any purpose connected with the sale of merchandise through the machines, and whose compensation is based, in whole or in part, upon receipts from sales made through such machines.

History.—Added by Stats. 1959, p. 2357, in effect September 18, 1959.

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6022. "Vehicle"; "motor vehicle." "Vehicle" and "motor vehicle," as used in this part, shall have the meanings ascribed to them in Sections 415 and 670 of the Vehicle Code.

History.—Added by Stats. 1963, p. 3834, operative October 1, 1963.

6023. "Mobile transportation equipment." "Mobile transportation equipment" includes equipment such as railroad cars and locomotives, buses, trucks (except "one-way rental trucks"), truck tractors, truck trailers, dollies, bogies, chassis, reusable cargo shipping containers, aircraft and ships, and tangible personal property which is or becomes a component part of such equipment. "Mobile transportation equipment" does not include passenger vehicles as defined in Section 465 of the Vehicle Code, trailers and baggage containers designed for hauling by passenger vehicles, or "one-way rental trucks" as defined and identified pursuant to Section 6024.

History.—Added by Stats. 1971, p. 3834, in effect December 16, 1971, operative January 1, 1972.

6024. "One-way rental trucks." "One-way rental trucks" are motortrucks of a kind required to be registered under the Vehicle Code, not exceeding the manufacturers gross vehicle weight rating of 24,000 pounds, which are principally employed by a person in the rental business in being leased out for short-term periods of not more than 31 days to individual customers for one-way or local hauling of personal property of the customers, and which upon acquisition or being employed in this state by the person are identified to the board, in such manner as the board may prescribe, for employment in such one-way or local hauling. Upon the leasing of such a truck to a customer, the person shall make known to the customer the fact that the vehicle is designated as a one-way rental truck and any taxes imposed by this part which are payable measured by the rentals.

History.—Added by Stats. 1971, p. 3834, in effect December 16, 1971, operative January 1, 1972.

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