Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2011
Sales And Use Tax Law
CHAPTER 1. GENERAL PROVISIONS AND DEFINITIONS
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.