Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2011
Sales And Use Tax Law
CHAPTER 3. THE USE TAX
Article 3. Presumptions and Resale Certificates
6244. Liability of purchaser; accommodation loans. (a) If a purchaser who gives a resale certificate or purchases property for the purpose of reselling it makes any storage or use of the property other than retention, demonstration, or display while holding it for sale in the regular course of business, the storage or use is taxable as of the time the property is first so stored or used.
(b) If such use is limited to the loan of the property to customers as an accommodation while awaiting delivery of property purchased or leased from the lender or while property is being repaired for customers by the lender, the measure of the tax is the fair rental value of the property for the duration of each loan so made.
(c) If the property is used frequently for purposes of demonstration or display while holding it for sale in the regular course of business and is used partly for other purposes, the measure of the tax is the fair rental value of the property for the period of such other use or uses.
(d) If the property is mobile transportation equipment as defined in Section 6023, and the use is limited to leasing the equipment, the purchaser may elect to pay his use tax measured by the fair rental value, if the election is made on or before the due date of a return for the period in which the equipment is first leased. The election must be made by reporting tax measured by the fair rental value on the return for that period, or in such other manner as the board may prescribe. Tax must thereafter be paid with the return for each reporting period, measured by the fair rental value, whether the equipment is within or without the state. The election may not be revoked with respect to the equipment as to which it is made.
(e) As used in subdivision (d), the term "fair rental value" means the rentals required by the purchaser under the lease except where the board determines that such rentals are nominal. The term shall not include any reimbursement payments made by the lessee to the purchaser for such use tax.
History.—Stats. 1965, p. 5448 (First Extra Session), operative August 1, 1965, deleted last sentence providing, "If the sole use of the property, other than retention, demonstration, or display in the regular course of business, is the rental of the property while holding it for sale, the purchaser may elect to pay the tax on the use measured by the amount of the rental charged rather than the sales price of the property to him." Stats. 1967, p. 2062, in effect November 8, 1967, added most of the language of (b). Stats. 1968, p. 2000, in effect November 13, 1968, divided the former section into subdivisions, added "or while property is being repaired for customers by the lender" to (b), and added (c). Stats. 1971, p. 3835, in effect December 16, 1971, operative January 1, 1972, added subdivision (d). Stats. 1978, Ch. 1211, effective January 1, 1979, deleted the last sentence in (d): "The purchaser's use tax liability may not be charged to the lessee as separately stated tax or tax reimbursement." Stats. 1980, Ch. 1352, effective September 30, 1980, added (e). 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.
Use Tax Due is the Price Paid by Taxpayer.—When a taxpayer uses tangible personal property for purposes other than retention, demonstration or display it must pay use tax based on the price paid by the taxpayer for the goods rather than the cost to the manufacturer of the raw material used in the manufacture of the property involved. Mercedes Benz v. State Board of Equalization (1982) 127 Cal.App.3d 871.