Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2012
 

Sales And Use Tax Law

CHAPTER 4. EXEMPTIONS


Chapter 4. Exemptions

Article 1. General Exemptions

6351. "Exempted from the taxes imposed by this part." "Exempted from the taxes imposed by this part," as used in this article, means, in case of the sales tax, exempted from the computation of the amount of tax imposed.

6352. Constitutional exemptions. 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 tangible personal property the gross receipts from the sale of which, or the storage, use, or other consumption of which, this State is prohibited from taxing under the Constitution or laws of the United States or under the Constitution of this State.

Gross receipts from sales to federal land bank not taxable.—Gross receipts from sales made by a retailer of tangible personal property to the Federal Land Bank, the Federal Intermediate Credit Bank, the Bank of Cooperatives, and the Production Credit Corporation are not subject to sales tax, as the sales are to instrumentalities of the federal government. M. G. West Co. v. Johnson (1937) 20 Cal.App.2d 95. But see Western Lithograph Co. v. State Board of Equalization (1938) 11 Cal.2d 156, 777.

Gross receipts from sales by national park concessionaire subject to tax.—A private corporation operating in Yosemite National Park as a lessee and consessionaire of the United States Government is required to pay sales tax with respect to its retail sales made within the park. Yosemite Park & Curry Co. v. Johnson (1938) 10 Cal.2d 770.

Gross receipts from sales to banks subject to tax.—Retailers are required to pay sales tax upon their receipts from retail sales of tangible personal property to national banks, even though it be assumed that such banks are instrumentalities of the United States Government, and notwithstanding the provisions of Section 16 of Article XIII of the State Constitution, limiting and prescribing the extent to which and the methods by which banks may be taxed. Western Lithograph Co. v. State Board of Equalization (1938) 11 Cal.2d 156, 777.

Sales of fuel oil to interstate railroad.—Sales to railroad companies of fuel oil delivered to the railroad companies in California and transported outside of California by the purchasers for use outside of California are intrastate transactions the receipts from which are subject to sales tax. Standard Oil Co. v. Johnson (1942) 56 Cal.App.2d 411. For previous opinion to the contrary, see Standard Oil Co. v. Johnson (1939) 33 Cal.App.2d 430. The sales tax is not applicable to receipts from sales of fuel oil to a railroad company pursuant to a contract requiring delivery of the oil at points outside this state, the oil being delivered to the railroad in this state and shipped to the out-of-state points f.o.b. destination under standard bills of lading specifying such out-of-state destination with the buyer named as consignee and with freight charges prepaid by the seller. Standard Oil Co. v. Johnson (1944) 24 Cal.2d 40.

Property purchased for use in interstate commerce.—The application of the use tax to the storage or installation of equipment purchased for use in carrying on an interstate commerce business does not violate the commerce clause of the Federal Constitution. Southern Pacific Co. vs. Gallagher (1939) 306 U.S. 167; Pacific Telephone & Telegraph Co. v. Gallagher (1939) 306 U.S. 182.

The imposition of the California use tax upon switch engines purchased outside of the state and brought into the state for ultimate use in interstate commerce does not violate the commerce clause of the Federal Constitution. Atchison, Topeka and Santa Fe Railway Co. v. State Board of Equalization (1956) 139 Cal.App.2d 411.

Property taxed in the state of the first substantial use will not constitute multiple taxation by reason of previous formal use in two states, neither of which imposed such a tax. Western Pacific RR Co. v. State Board of Equalization (1963) 213 Cal.App.2d 20.

Use of property shipped in interstate commerce.—The imposition of the use tax on materials shipped to California by an Illinois corporation engaged in the manufacture of tanks, the materials being shipped and stored here preparatory to their use in the assembly of such tanks in California, does not constitute an unconstitutional burden on interstate commerce nor a regulation thereof. Chicago Bridge and Iron Co. v. Johnson (1941) 19 Cal.2d 162.

Educational institutions.—Educational institutions of collegiate grade, not conducted for profit, which purchase and use property exclusively for purposes of education, are not exempted by this section or Section 1a of Article XIII of the California Constitution, from payment of the use tax. California Institute of Technology v. Johnson (1942) 55 Cal.App.2d 856.

Sales for export.—The sales tax does not apply to a sale of oil to a foreign purchaser for shipment abroad, delivered to a vessel furnished by the purchaser and actually carried to a foreign destination, title and control of the oil passing to the foreign purchaser upon delivery, and no portion of the oil being used or consumed in the United States. Richfield Oil Corp. v. State Board of Equalization (1946) 329 U.S. 69.

The sale of an ocean-going vessel of American registry docked in a California port to an alien purchaser, including the change of registry and flag, for use in foreign commerce is exempt from sales tax by virtue of the import-export clause of the Federal Constitution. Matson Navigation Co. v. State Board of Equalization (1955) 136 Cal.App.2d 577; Alaska Packers Ass'n v. State of California (1955) 136 Cal.App.2d 586; Pope and Talbot, Inc. v. State Board of Equalization (1960) 181 Cal.App.2d 721.

Political subdivisions.—A levy by the state of a sales tax or use tax upon one of its political subdivisions is not invalid as a levy on public money. People v. Imperial County (1946) 76 Cal.App.2d 572.

Sales tax on interstate shipment.—The commerce clause of the Federal Constitution does not prohibit the imposition of a sales tax on a sale by a California retailer to a California consumer where the merchandise is ordered by the retailer from an out-of-state supplier and the supplier ships from a point outside California directly to the consumer in California, title passing at the destination point. Meyer v. State Board of Equalization (1954) 42 Cal.2d 376.

Where an Ohio manufacturer, maintaining permanent office, shop and service facilities in California, sold vaults and equipment to banks in California, title passing after delivery to buyer in California, the sales occurred in California and were not immune from taxation under the commerce clause. Diebold, Inc. v. State Board of Equalization (1959) 168 Cal.App.2d 628.

Property installed in this state.—If automatic control equipment is stored in this state and installed in a locomotive in this state prior to being used in interstate commerce, the subsequent use of the equipment as a permanent part of the locomotive operating solely in interstate commerce, both within and outside this state, and actual functional use of the equipment solely outside this state affords no basis for exemption from use tax on constitutional grounds. Atchison, Topeka and Santa Fe Railway Co. v. State Board of Equalization (1955) 131 Cal.App.2d 677.

Out-of-state use.—The imposition of sales or use tax upon tangible personal property purchased for use outside of the state does not violate the commerce clause of the United States Constitution, where the property is purchased, stored, and fabricated in California. Levine v. State Board of Equalization (1956) 142 Cal.App.2d 760.

Aircraft.—Aircraft purchased by an airline from the Federal Government both in this state and outside this state and brought to the airline's home base in this state without carrying a payload and retained at the home base for an indefinite period of time prior to being placed in service in interstate commerce are subject to use tax. Flying Tiger Line Inc. v. State Board of Equalization (1958) 157 Cal.App.2d 85.

Imports.—The import-export clause of the Federal Constitution does not prohibit application of use tax to the use in this state of a yacht purchased abroad, after its original import packaging is removed and it is put to the use for which it was imported. Sugarman v. State Board of Equalization (1958) 51 Cal.2d 361.

Exports.—Where goods are sold to a purchaser for export to and use in a foreign country and pursuant to the contract the retailer delivers the goods by truck to an export packer hired, directed and paid by the purchaser and after packing the export packer delivers the goods by truck to a pier from which they are loaded on a ship and transported to the foreign country and used there by the purchaser, the export process begins when the goods leave the retailer's warehouse and the import-export clause of the Federal Constitution therefore prohibits the application of sales tax to the sale. Gough Industries, Inc. v. State Board of Equalization (1959) 51 Cal.2d 746, cert. den. (1959) 359 U.S. 1011.

Foreign purchaser.—A sale of repair parts in connection with a contract to overhaul an airplane for a foreign airline is subject to sales tax where the airplane is redelivered to the owner in this state and the owner's crew flies the airplane from this state. Flying Tiger Line, Inc. v. State Board of Equalization (1958) 157 Cal.App.2d 85.

Insurance companies not exempted.—An insurance company is not relieved from its duty to collect or pay a use tax by virtue of § 6352, when it sells automobiles belonging to it to private individuals, since the use tax is imposed on the ultimate purchaser, not the insurance company. Beneficial Standard Life Ins. Co. v. State Board of Equalization (1962) 199 Cal.App.2d 18.

Sale outside state and leased back instate.—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 imposition of use tax was not an undue burden on interstate commerce nor a violation of due process under the United States Constitution. Union Oil Co. v. State Board of Equalization (1963) 60 Cal.2d 441, appeal dismissed (1964) 377 U.S. 404.

Sales of bunker fuel to steamship lines.—Bunker fuel oil sold for consumption by vessels of foreign and domestic registry on voyages to foreign or domestic ports does not constitute an export or an interstate sale, and the application of sales tax is not prohibited by the export-import clause or the commerce clause of the United States Constitution. Shell Oil Co. v. State Board of Equalization (1966) 64 Cal.2d 713, appeal dismissed (1967) 386 U.S. 211.

Sales to national banks properly taxed.—The imposition of sales tax on sales to national banks was permitted by Congress when California did not impose another tax on a built-up rate in lieu of the sales tax. United States v. State Board of Equalization (1980) 639 F.2d 458.

Sales Tax Unconstitutional When Imposed on Nonprofit Religious Activities.—As a tax on privilege, sales tax could not constitutionally be imposed on nonprofit religious organization's sales of religious materials. However, use tax and collection of use tax may be imposed on the organization for those sales. Institute in Basic Youth Conflicts, Inc. v. State Board of Equalization (1985) 166 Cal.App.3d 1093.

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.

Religious books, tapes and records.—Application of sales and use tax to the sales of religious books, tapes and records did not violate the Free Exercise Clause or Establishment Clause of the First Amendment. Jimmy Swaggart Ministries v. Board of Equalization of California (1990) 493 U.S. 378; 107 L.Ed.2d 796.

Sales for export.—A sale of aircraft parts to a Mexican airline to serve its planes is not subject to tax where the parts are shipped by a common carrier to a location on the U.S. Mexican border where an independent freight forwarder, with the assistance of the airline's employees, processed the property through U.S. and Mexican Customs and the parts were moved on a continuous and unbroken journey to the foreign destination other than for unavoidable delays that were incidental to their journey. McDonnel Douglas Corporation v. State Board of Equalization (1992) 10 Cal.App.4th 1413.

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6353. Gas, electricity, and water. There are exempted from the taxes imposed by this part the gross receipts derived from the sales, furnishing, or service of and the storage, use, or other consumption in this state of, of all of the following:

(a) Gas, electricity, and water, including steam and geothermal steam, brines, and heat, when delivered to consumers through mains, lines, or pipes.

(b) (1) Liquefied petroleum gas, delivered to a qualified residence by the seller, that is sold for household use in the qualified residence, or liquefied petroleum gas that is purchased for use by a qualified person to be used in producing and harvesting agricultural products; provided, in either case, the liquefied petroleum gas is delivered into a tank with a storage capacity for liquefied petroleum gas that is equal to or greater than 30 gallons. This subdivision may not be construed to provide any exemption from any tax levied by a city, county, or city and county pursuant to Section 7284.3, or any successor to that section.

(2) For purposes of this subdivision:

(A) "Qualified residence" means a primary residence, not serviced by gas mains and pipes.

(B) "Qualified person" means any person engaged in a line of business described in Codes 0111 to 0291, inclusive, of the Standard Industrial Classification Manual published by the United States Office of Management and Budget, 1987 Edition, and any other person that assists that person in the lines of business described in this paragraph in producing and harvesting agricultural products.

(c) Water when sold to an individual in bulk quantities of 50 gallons or more, for general household use in his or her residence if the residence is located in an area not serviced by mains, lines or pipes.

(d) Exhaust steam, waste steam, heat, or resultant energy, produced in connection with cogeneraton technology, as defined in Section 25134 of the Public Resources Code.

(e) The exemptions provided by subdivision (b) shall be effective starting September 1, 2001deletion.

History.—Stats. 1972, Ch. 402, in effect October 1, 1972, added the household water exemption. Stats. 1978, Ch. 1010, effective January 1, 1979, added "and of exhaust steam, waste steam, heat, or resultant energy, produced in connection with cogeneration technology, as defined in Section 25134 of the Public Resources Code." to the last sentence. Stats. 1986, Ch. 420, in effect July 17, 1986, added reference to "steam and geothermal steam, brines, and heat". Stats. 2001, Ch. 156 (AB 426), in effect August 7, 2001, operative September 1, 2001, added "derived" after "gross receipts", added ", all of the following:" after "in this state of", in the first paragraph added subdivision letter designation (a) after "in this state of", substituted "Gas" for "gas" after "(a)" therein, added subdivision (b), added subdivision letter designation (c) after "or pipes, and" and substituted "Water" for "water" after "(c)" therein, added a comma after "gallons or more", added subdivision letter designation (d) after "or pipes, and of" therein, and substituted "Exhaust" for "exhaust" after "or pipes and of" therein, and added subdivision (e). Stats. 2011, Ch. 727 (AB 242), in effect January 1, 2012, deleted ", unless the State Board of Equalization determines that implementation by that date is not feasible, in which case the board shall, on or before that date, report to the Legislature regarding the reasons why it must delay implementation, and shall thereafter implement these exemptions no later than October 1, 2001" after "September 1, 2001" in subdivision (e).

Note.—Stats. 1986, Ch. 420 expressed the intent of the Legislature that the provisions of this act codify the longstanding administrative practice of the State Board of Equalization which interprets Section 6353 of the Revenue and

Taxation Code as exempting steam from sales and use taxation. Therefore, it is the intent of the Legislature that these provisions do not constitute a change in, but are declaratory of, the existing law.

Delivery of Liquefied Petroleum Gas by Hose from Vendor's Tank Truck to Buyer's Storage Tank is not Exempt. Delivery of Gas through Mains, Lines, or Pipes.—Plaintiff Standard Oil Company of California brought suit for refund of use tax which it had paid on liquefied petroleum gas (LPG) which it had used. The claim for refund was based on Revenue and Taxation Code Section 6353 which exempts from tax the use of "gas, electricity, and water when delivered to consumers through mains, lines, or pipes." The Board has long construed this section as not including within its exemption from taxation, sales or use of substances emptied from vendor's vehicles by means of hoses.

The LPG was transported by the vendor's tank truck to plaintiff's storage facility and delivered by passing it from the truck to plaintiff's container through the vendor's flexible high pressure tube or hose. Plaintiff claimed that LPG was a gas, even though delivered in liquid form, and that the delivery from the truck to the storage tank was through a main, line, or pipe. The trial court upheld plaintiff's contention.

The District Court of Appeal reversed the judgment and upheld the Board's construction of the statute. The court first observed that the Board's construction was entitled to great weight and was not to be overturned unless clearly erroneous or unauthorized. Using dictionary definitions the court found that mains, lines, and pipes did not necessarily include hoses and that a later amendment of the statute indicated that the Legislature, in its use of the words "mains, lines, or pipes," meant fixed "mains, lines, or pipes" as ordinarily service a geographical area with utility service. Further noting that statutes granting exemptions from taxation must be reasonably, but strictly, construed against the taxpayer, the court found that the Board's construction was neither clearly erroneous nor unauthorized.

The court distinguished a 1943 opinion of the Attorney General which exempted sales of gas through installations placed by a public utility on the premises of gas consumers. In that situation as many as 24 customers were connected with each installation by means of pipes owned by the customers, the tanks and their contents were owned by the utility, there was continuous "delivery" through the "pipes" from the tank, and the flow to the customer was through the utility's meter into the customer's pipe and gas consumption devices.

Since the court held that plaintiff's use of LPG, following its delivery under the circumstances of the appeal, was not exempted from taxation, it was unnecessary to determine whether the LPG, a liquid throughout its delivery by tank truck and hose, was a "gas" within the meaning of Secton 6353. Standard Oil Company of California v. State Board of Equalization (1974) 39 Cal.App.3d 765.

Geothermal steam exemption retroactive.—The 1986 legislation which expressly exempted geothermal steam was intended to have retroactive effect. The retroactive exemption was not a constitutionally prohibited gift of public funds since it served an important public purpose of promoting alternative energy. County of Sonoma v. State Board of Equalization (1987) 195 Cal.App.3d 982.

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6354. Gold. There are exempted from the taxes imposed by this part, the gross receipts from the sales of commemorative "California Gold" medallions produced and sold in accordance with Chapter 25 (commencing with Section 7551) of Division 7 of Title 1 of the Government Code, and the storage, use, or other consumption in this state of commemorative "California Gold" medallions so produced and sold.

History.—Added by Stats. 1985, Ch. 1082, effective September 27, 1985 until January 1, 1988, and as of such date is repealed unless a later enacted statute, which is enacted before that date deletes or extends that date. Stats. 1987, Ch. 1095, in effect September 25, 1987, deleted second paragraph which provided, "This section shall remain in effect only until January 1, 1988, and as of that date is repealed unless a later enacted statute, which is enacted before that date deletes or extends the date."

6355. Monetized bullion. [Repealed by Stats. 1993, Ch. 977, in effect October 11, 1993.]

6355. Monetized, nonmonetized bullion, and numismatic coins. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale in bulk of monetized bullion, nonmonetized gold or silver bullion, and numismatic coins that are substantially equivalent to transactions in securities or commodities through a national securities or commodities exchange and the storage, use, or other consumption in this state of monetized bullion, nonmonetized gold or silver bullion, and numismatic coins so sold.

(b) (1) A sale in bulk, for purposes of this section, shall be deemed to have occurred if the amount of monetized bullion, nonmonetized gold or silver bullion, and numismatic coins sold in the transaction totals, in market value, the sum of one thousand dollars ($1,000) or more, or its equivalent.

(2) The board shall adjust the one thousand dollar ($1,000) amount specified in paragraph (1) as follows:

(A) On or before September 1, 1994, and on or before each September 1 of each year thereafter, the board shall multiply the amount applicable for the current calendar year by the inflation factor adjustment determined by the Franchise Tax Board pursuant to subdivision (h) of Section 17041, the resulting amount to be the applicable amount for the succeeding calendar year. The applicable amount shall be operative as an adjustment of the amount specified in paragraph (1) only when the applicable amount computed is equal to or exceeds a new operative threshold, as defined in subparagraph (C).

(B) When the applicable amount equals or exceeds an operative threshold specified in subparagraph (C), the resulting applicable amount, rounded to the nearest multiple of five hundred dollars ($500), shall be operative for purposes of paragraph (1) beginning January 1 of the succeeding calendar year.

(C) For purposes of this paragraph, "operative threshold" means an amount that exceeds by a least five hundred dollars ($500), the greater of either the amount specified in paragraph (1) or the amount computed pursuant to subparagraphs (A) and (B) as the operative adjustment to the amount specified in paragraph (1).

(c) "Monetized bullion," for purposes of this section, means coins or other forms of money manufactured of gold, silver, or other metal and heretofore, now, or hereafter used as a medium of exchange under the laws of this state, the United States, or any foreign nation. "Monetized bullion," for purposes of this section, also means gold medallions struck under authority of the American Arts Gold Medallion Act (Title IV of Public Law 95-630).

(d) A sale of monetized bullion, nonmonetized gold or silver bullion, or numismatic coins, for purposes of this section, shall be deemed to be substantially equivalent to a transaction in securities or commodities through a national securities or commodities exchange, if the sale is by or through a person registered pursuant to the Commodity Exchange Act (7 U.S.C. Sec. 1 et seq.) or not required to be registered under the Commodity Exchange Act.

History.—Added by Stats. 1973, Ch. 1019, operative January 1, 1974. Stats. 1980, Ch. 849, operative January 1, 1980, substituted the part of (d) following "through a person" for former wording. Stats. 1983, Ch. 1158, in effect September 28, 1983, added the second sentence in subdivision (c). Stats. 1985, Ch. 1128, effective January 1, 1986, until January 1, 1991, and as of such date is repealed unless a later enacted statute, which is enacted before that date deletes or extends that date. Upon repeal, section as it existed prior to enactment of this temporary provision shall have the same force and effect as if this temporary provision had not been enacted. Added "nonmonetized gold . . . numismatic coins" after "monetized bullion" in subdivisions (a), (b), and (d), substituted "market value" for "face amount" in subdivision (b), and deleted subdivision (e) and added new subdivision (e). Stats. 1990, Ch. 1042, in effect September 19, 1990, operative January 1, 1991, substituted "1994" for "1991" in the first sentence of subdivision (e), and deleted second sentence of subdivision (e), which provided, "If that date is not deleted or extended, then, on and after January 1, 1991, pursuant to Section 9611 of the Government Code, Section 6355 of the Revenue and Taxation Code, as amended by Section 1 of Chapter 1158 of the Statutes of 1983, shall have the same force and effect as if this temporary provision had not been enacted." Stats. 1993, Ch. 977, in effect October 11, 1993, substituted "that" for "which" after "numismatic coins" in subdivision (9); added "(1)" after "(b)"; added paragraph (2) and subparagraphs (2)(A), (2)(B) and (2)(C) to subdivision (b); added subdivision (c); and deleted subdivision (e) which contained a sunset clause which would have repealed the section effective January 1, 1994. Stats. 1994, Ch. 146, in effect January 1, 1995, substituted "sale" for "sales" after "from the" in subdivision (a) .

Foreign Coins.—A sale of foreign coins is an exempt bulk sale if their market value is $1,000 or more in United States money. Alan Van Vliet Enterprises, Inc. v. State Board of Equalization (1977) 65 Cal.App.3d 964.

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6356. Vessels. There are exempted from the sales tax the gross receipts from sales of vessels of more than 1,000 tons burden by the builders thereof.

History.—Added by Stats. 1941, Ch. 36, effective January 1, 1942. Stats. 1985, Ch. 591, effective January 1, 1986, substituted "sales tax" for "taxes imposed by this part", and deleted "and the . . . this State" after "thereof."

Purchase in state of ship over 1000 tons burden.—A ship purchased outside California or in interstate commerce for use in the state may be constitutionally taxed. Hence, the sale of a ship of more than 1000 tons burden within the state is not with the conditional exemption from the use tax, which exemption is applicable if the imposition of a similar tax as respects a vessel purchased outside of California or in interstate commerce would be unconstitutional. In re Los Angeles Lumber Products Co., Ltd. (1942) 45 F.Supp. 77.

6356.5. Low-emission motor vehicles; retrofit devices. [Repealed. Became inoperative January 1, 1995 pursuant to the provisions of Ch. 990, Stats. 1989.]

6356.5. Farm equipment and machinery. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage and use of, or other consumption in this state of, farm equipment and machinery, and the parts thereof, purchased for use by a qualified person to be used primarily in producing and harvesting agricultural products.

(b) For purposes of this section, both of the following shall apply:

(1) "Qualified person" means any person engaged in a line of business described in Codes 0111 to 0291, inclusive, of the Standard Industrial Classification Manual published by the United States Office of Management and Budget, 1987 Edition, and any other person that uses farm equipment and machinery to assist this person in the lines of business described in this paragraph in producing and harvesting agricultural products.

(2) "Farm equipment and machinery" means implements of husbandry, as defined in Section 411.

(c) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section does not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of those laws.

(2) Notwithstanding subdivision (a), the exemption established by this section does not apply with respect to any tax levied pursuant to Sections 6051.2 and 6201.2, or pursuant to Section 35 of Article XIII of the California Constitution.

(d) The exemption provided by this section shall be effective starting September 1, 2001deletion.

History.—Added by Stats. 2001, Ch. 156 (AB 426), in effect August 7, 2001, operative September 1, 2001. Stats. 2011, Ch. 727 (AB 242), in effect January 1, 2012, deleted ", unless the State Board of Equalization determines that implementation by that date is not feasible, in which case the board shall, on or before that date, report to the Legislature regarding the reasons why it must delay implementation, and shall thereafter implement the exemption provided by this section no later than October 1, 2001" after "September 1, 2001" in subdivision (d).

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6356.6. Timber harvesting equipment. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage and use of, or other consumption in this state of, equipment and machinery designed primarily for off-road use in commercial timber harvesting operations, and the parts thereof, that is purchased for use by a qualified person to be used primarily in harvesting timber.

(b) The State Board of Equalization may adopt emergency regulations to specify equipment and machinery exempted by this section, and may revise those regulations from time to time.

(c) For purposes of this section, "qualified person" means any person engaged in commercial timber harvesting.

(d) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section does not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of those laws.

(2) Notwithstanding subdivision (a), the exemption established by this section does not apply with respect to any tax levied pursuant to Section 6051.2 and 6201.2, or pursuant to Section 35 of Article XIII of the California Constitution.

(e) The exemption provided by this section shall be effective starting September 1, 2001deletion.

History.—Added by Stats. 2001, Ch. 156 (AB 426), in effect August 7, 2001, operative September 1, 2001. Stats. 2011, Ch. 727 (AB 242), in effect January 1, 2012, deleted ", unless the State Board of Equalization determines that implementation by that date is not feasible, in which case the board shall, on or before that date, report to the Legislature regarding the reasons why it must delay implementation, and shall thereafter implement the exemption provided by this section no later than October 1, 2001" after "September 1, 2001" in subdivision (e).

6357. Motor vehicle fuel—aviation gasoline. 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 motor vehicle fuel used in propelling aircraft, except aircraft jet fuel, the distributions of which in this state are subject to the tax imposed by Part 2 (commencing with Section 7301) of this division and not subject to refund.

History.—Stats. 1957, p. 2020, in effect September 11, 1957, added "and the use tax when applicable to the storage, use or other consumption of such fuel" to second paragraph. Stats. 1959, p. 4570, operative October 1, 1959, added "and liquefied petroleum gas the use of which is subject to the tax imposed by Part 3 of this division,". Stats. 1969, p. 3226, in effect November 10, 1969, operative December 1, 1969, added ", except aircraft jet fuel," to the first paragraph. Stats. 1971, p. 2785, operative July 1, 1972, substituted "gross receipts from the sale of" for "gross receipts from the distributions of" in first sentence, added "used in propelling aircraft" in first sentence, deleted "and liquefied petroleum gas the use of which is subject to the tax imposed by Part 3 of this division", and limited the collection of sales and use tax by the controller to the tax on motor vehicle fuel used in propelling an aircraft which is subject to tax and refund under Part 2 of this division. Stats. 1972, Ch. 1408, effective December 27, 1972, rearranged the wording of the first paragraph and deleted the second paragraph.

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6357.1. Tax collection by Controller. [Repealed by Stats. 1989, Ch. 1027, effective September 29, 1989, but operative January 1, 1990.]

6357.1. Diesel fuel; farming business. (a) There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, diesel fuel used in

farming activities and food processing. This section shall be implemented as soon as possible, but in no case later than September 1, 2001.

(b) For purposes of this section, "farming activities" has the same meaning as "farming business" as set forth in Section 263A of the Internal Revenue Code. "Farming activities" also includes the transportation and delivery of farm products to the marketplace.

(c) The exemption established by this section does not apply with respect to either of the following:

(1) A tax imposed under the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or in accordance with the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)).

(2) A tax imposed under Section 6051.2 or 6201.2, or under Section 35 of Article XIII of the California Constitution.

History.—Added by Stats. 2001, Ch. 156 (AB 426), in effect August 7, 2001, operative September 1, 2001.

6357.2. Tax repayment by Controller. [Repealed by Stats. 1989, Ch. 1027, effective September 29, 1989, but operative January 1, 1990.]

6357.3. Diesel fuel: exemption from rate increase. [Repealed by Stats. 2011, Ch. 6 (AB 105), effective March 24, 2011.]

6357.3. Diesel fuel: exemption from rate increase. (a) On and after July 1, 2011, there are exempted from the taxes imposed by Sections 6051.8 and 6201.8, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of both of the following:

(1) Diesel fuel purchased for use or used in a manner that is exempt from the tax imposed pursuant to Part 31 (commencing with Section 60001) of Division 2 and not subject to the backup tax imposed by Section 60058 or the payment requirement specified in Section 60108.

(2) Diesel fuel subject to the payment requirement specified in Section 60502.2.

(b) No exemption from the tax imposed pursuant to Sections 6051.8 and 6201.8 shall be allowed under this section unless the purchaser furnishes the seller with an exemption certificate, completed in accordance with any instructions or regulations as the board may prescribe.

(c) If a purchaser certifies in writing to the seller that the diesel fuel purchased without payment of the tax imposed pursuant to Section 6051.8 or 6201.8 will be used in a manner entitling the seller to regard the gross receipts or sales price from the sale as exempt from that tax, and uses the diesel fuel in a manner that subjects the diesel fuel to the tax imposed pursuant to Section 60050, the purchaser shall be liable for payment of the sales tax imposed pursuant to Section 6051.8, with applicable interest, as if the purchaser were a retailer making a retail sale of the diesel fuel at the time the fuel is so used, and the sales price of the diesel fuel to the purchaser shall be deemed the gross receipts from that retail sale.

History.—Added by Stats. 2011, Ch. 6 (AB 105), in effect March 24, 2011.

Former § 6357.3, similar to the present section, was added by Stats. 2010, Ch. 9 (SB 70), in effect March 23, 2010; and repealed by Stats. 2011, Ch 6 (AB 105), in effect March 24, 2011.

6357.5. Gasohol. [Repealed. Became inoperative June 30, 1984 pursuant to the provisions of Ch. 1321, Stats. 1983.]

6357.5. Fuel and petroleum products sold to air common carriers. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage, use, or other consumption of, fuel and petroleum products sold to an air common carrier for immediate consumption or shipment in the conduct of its business as an air common carrier, on an international flight.

(b) To qualify for the exemption, the air common carrier shall furnish to the seller an exemption certificate in writing stating the quantity of fuel and petroleum products claimed as exempt. That certificate shall bear the purchaser's valid seller's permit number or valid fuel exemption registration number and shall be substantially in the form prescribed by the board. Acceptance in good faith of that certificate shall relieve the seller from liability for the sales tax.

(c) "Immediate consumption or shipment," as used in this section, means that the delivery of the fuel and petroleum products by the seller is directly into an aircraft for consumption or transportation outside the United States and not for storage by the purchaser or any third party.

(d) "International flight," as used in this section, is a flight whose final destination is a point outside of the United States.

(e) Any air common carrier claiming exemption under this section who is not required to hold a valid seller's permit, shall be required to register with the board and obtain a fuel exemption registration number, and shall be required to file returns as the board may prescribe, either if the board notifies the carrier that returns must be filed or if the carrier is liable for taxes based upon consumption or transportation of fuel or petroleum products erroneously claimed as exempt under this section. A common carrier required to hold a fuel exemption registration number shall be subject to all applicable provisions of this part, Part 1.5 (commencing with Section 7200), and Part 1.6 (commencing with Section 7251).

(f) An air common carrier claiming an exemption under this section upon request, shall make available to the board records, including, but not limited to, a copy of a log abstract, an air waybill, or a cargo manifest, documenting its consumption or transportation of the fuel or petroleum products on an international flight and the amount claimed as exempt. If the carrier fails to provide these records upon request, the board may revoke the carrier's fuel exemption registration number.

(g) The board may require any air common carrier claiming an exemption under this section and required to obtain a fuel exemption registration number, to place with it such security as the board may determine pursuant to Section 6701.

(h) Pursuant to this section, any use of the fuel and petroleum products by the purchasing carrier, other than that incident to the delivery of the fuel and petroleum products to the carrier and the consumption or transportation of the fuel and petroleum products by the carrier on an international flight for use in the conduct of its business as a common carrier, or a failure of the carrier to document its consumption or transportation of the fuel and petroleum products on an international flight, shall subject the carrier to liability for payment of sales tax as if it were a retailer making a retail sale of the property at the time of that use or failure, and the sales price of the property to it shall be deemed to be the gross receipts from the retail sale.

(i) In the event that the federal exemption provided in Section 1309 of Title 19 of the United States Code, relating to supplies for certain vessels and aircraft, is repealed, this section is repealed as of that date.

History.—Added by Stats. 1988, Ch. 1227, in effect September 23, 1988. Stats. 1991, Ch. 1091, in effect January 1, 1991, substituted "January 1, 1994" for "that date" after "which is chaptered before" in the first sentence and added "However," to the second sentence. Stats. 1992, Ch. 905, in effect September 25, 1992, operative January 1, 1993, substituted "an international flight" for "a flight whose first destination is a foreign destination" in subdivision (a); deleted former subdivision (c) which defined "Foreign destination"; relettered former subdivision (d) as subdivision (c); added subdivision (d); substituted "on an international flight" for "to a foreign destination" in subdivision (f) and for "to the foreign destination" twice in subdivision (h); deleted the former first and second sentences which provided operative and repeal dates, substituted "In" for "However, in" before "the event", deleted "prior to January 1, 1994" after "is repealed", deleted "also" after "this section is", and substituted "that" for "the", in subdivision (i).

6357.7. Motor vehicle fuel. [Repealed by Stats. 2011, Ch. 6 (AB 105), effective March 24, 2011.]

6357.7. Motor vehicle fuel. (a) On and after July 1, 2010, there are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, motor vehicle fuel, as defined in Section 7326.

(b) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section shall not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of those laws.

(2) The exemption established by this section shall not apply with respect to any tax levied pursuant to Section 6051.2, 6051.5, 6201.2, or 6201.5, or pursuant to Section 35 of Article XIII of the California Constitution.

(c) On and after July 1, 2010, the State Board of Equalization and the Department of Finance shall recognize that the state no longer receives state sales and use tax revenues from the sale of, and the storage, use, or other consumption of, motor vehicle fuel for purposes of any estimates required to be performed under paragraphs (1) and (2) of subdivision (a) of Section 7102, and Section 7104.2.

History.—Added by Stats. 2011, Ch. 6 (AB 105), in effect March 24, 2011.

Former § 6357.7, similar to the present section, was added by Stats. 2010, Ch. 11, Eighth Extraordinary Session (ABx8 6), in effect March 22, 2010; and repealed by Stats. 2011, Ch 6 (AB 105), in effect March 24, 2011.

6358. Animal life; feed; seeds; plants; fertilizer. There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of:

(a) Any form of animal life the products of which ordinarily constitute food for human consumption.

(b) Feed for any form of animal life the products of which ordinarily constitute food for human consumption, or are to be sold in the regular course of business.

(c) Seeds and plants the products of which ordinarily constitute food for human consumption or are to be sold in the regular course of business.

(d) Fertilizer to be applied to land the products of which are to be used as food for human consumption or are to be sold in the regular course of business.

(e) On or after January 1, 1997, drugs or medicines, including oxygen, the primary purpose of which is the prevention or control of disease, that are administered to animal life the products of which ordinarily constitute food for human consumption.

History.—Stats. 1943, p. 2456, operative July 1, 1943, added (b), (c), and (d). Stats. 1947, p. 2028, operative July 1, 1947, substituted "Any form of animal life" for "Livestock and poultry" in (a) and (b). Stats. 1996, Ch. 954, in effect September 26, 1996, but operative January 1, 1997, substituted "the sale in this state of," for "sales of" after "receipts from", and added "in this state" after "consumption" in the first paragraph, and added subdivision (e). Stats. 1998, Ch. 323, in effect August 20, 1998, but operative January 1, 1999, deleted "annual" after "seeds and" in subdivision (c), and added "are to be" after "consumption or" in subdivision (d). Stats. 1999, Ch. 289, (SB 963), in effect September 1, 1999, but operative January 1, 2000, deleted "of a kind" after "animal life" in subdivisions (a), (b) and (e), and added "including oxygen" after "medicines" in subdivision (e).

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6358.1. Fuel; organic products and waste byproducts. (a) There are exempted from taxes imposed by this part the gross receipts from the sale of and the storage, use, or other consumption in this state of either of the following:

(1) Organic products grown expressly for fuel purposes.

(2) Waste byproducts from agricultural or forest products operations, municipal refuse, or manufacturing, which are used in an industrial facility as a fuel source in lieu of the use of either oil, natural gas or coal.

(b) In addition to subdivision (a), the exemption under this section shall include the use of still gas produced in the refining process from purchased crude oil.

History.—Added by Stats. 1980, Ch. 1248, operative January 1, 1981 until December 31, 1986 and as of such date is repealed, unless a later enacted statute, chaptered before December 31, 1986, deletes or extends such date. Stats. 1983, Ch. 1059, in effect January 1, 1984, deleted "delivered in bulk and are" after "which are" in subdivision (b) and added subdivision (c). Stats. 1986, Ch. 254, effective July 3, 1986, deleted the expiration date of the exemption.

Note.—Section 2 of Stats. 1983, Ch. 1059, provided, "Section 1 of this act, which amends Section 6358.1 of the Revenue and Taxation Code, does not constitute a change in, but is declaratory of, the existing law. It is the intent of the Legislature in enacting this act to clarify existing law.

Petroleum coke is waste by product.—The court agreed with the taxpayer that fuel-grade petroleum coke was tax exempt as a waste by product despite the fact that the coke was sold for use as fuel in a chemical manufacturing facility. The coke was a solid by product of taxpayer's crude oil refinery. Union Oil v. State Board of Equalization (1990) 224 Cal.App.3d 665.

6358.2. Poultry litter. 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 wood shavings, sawdust, rice hulls, or other products that are used as litter in poultry and egg production and that are ultimately resold as, or incorporated into fertilizer products.

History.—Added by Stats. 1993, Ch. 568, in effect September 28, 1993, but operative January 1, 1994. Stats. 1994, Ch. 146, in effect January 1, 1995, added "as," after "resold".

6358.4. Medicated feed and drinking water. There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, drugs or medicines administered to animal life as an additive to feed or drinking water, the primary purpose of which is the prevention and control of disease of food animals, or of nonfood animals which are to be sold in the regular course of business.

History.—Added by Stats. 1995, Ch. 620, in effect October 5, 1995, operative April 1, 1996.

6358.5. Racehorse breeding stock. (a) (1) There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, any racehorse breeding stock.

(2) For purposes of this section "racehorse breeding stock" means a horse that is capable of reproduction and for which the purchaser states that it is the purchaser's sole intent to use the horse for breeding purposes.

(b) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section does not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of those laws.

(2) The exemption established by this section does not apply with respect to any tax levied pursuant to either Section 6051.2 or 6201.2, or pursuant to Section 35 of Article XIII of the California Constitution.

(c) The exemption provided by this section shall be effective starting September 1, 2001deletion.

History.—Added by Stats. 2001, Ch. 156 (AB 426), in effect August 7, 2001, operative September 1, 2001. Stats. 2011, Ch. 727 (AB 242), in effect January 1, 2012, deleted ", unless the State Board of Equalization determines that implementation by that date is not feasible, in which case the board shall, on or before that date, report to the Legislature regarding the reasons why it must delay implementation, and shall thereafter implement the exemption provided by this section no later than October 1, 2001" after "September 1, 2001" in subdivision (c).

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6359. Food products. (a) 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, food products for human consumption.

(b) For the purposes of this section, "food products" include all of the following:

(1) Cereals and cereal products, oleomargarine, meat and meat products, fish and fish products, eggs and egg products, vegetables and vegetable products, fruit and fruit products, spices and salt, sugar and sugar products, candy, gum, confectionery, coffee and coffee substitutes, tea, and cocoa and cocoa products.

(2) Milk and milk products, milkshakes, malted milks, and any other similar type beverages which are composed at least in part of milk or a milk product and that require the use of milk or a milk product in their preparation.

(3) All fruit juices, vegetable juices, and other beverages, whether liquid or frozen, including bottled water, but excluding spirituous, malt, or vinous liquors or carbonated beverages.

(c) For purposes of this section, "food products" do not include medicines and preparations in liquid, powdered, granular, tablet, capsule, lozenge, and pill form sold as dietary supplements or adjuncts.

(d) None of the exemptions in this section apply to any of the following:

(1) When the food products are served as meals on or off the premises of the retailer.

(2) When the food products are furnished, prepared, or served for consumption at tables, chairs, or counters or from trays, glasses, dishes, or other tableware whether provided by the retailer or by a person with whom the retailer contracts to furnish, prepare, or serve food products to others.

(3) When the food products are ordinarily sold for immediate consumption on or near a location at which parking facilities are provided primarily for the use of patrons in consuming the products purchased at the location, even though those products are sold on a "take out" or "to go" order and are actually packaged or wrapped and taken from the premises of the retailer.

(4) When the food products are sold for consumption within a place, the entrance to which is subject to an admission charge, except for national and state parks and monuments, marinas, campgrounds, and recreational vehicle parks.

(5) When the food products are sold through a vending machine.

(6) When the food products sold are furnished in a form suitable for consumption on the seller's premises, and both of the following apply:

(A) Over 80 percent of the seller's gross receipts are from the sale of food products.

(B) Over 80 percent of the seller's retail sales of food products are sales subject to tax pursuant to paragraph (1), (2), (3), or (7).

(7) When the food products are sold as hot prepared food products.

(e) "Hot prepared food products," for the purposes of paragraph (7) of subdivision (d), include a combination of hot and cold food items or components where a single price has been established for the combination and the food products are sold in combination, such as a hot meal, a hot specialty dish or serving, a hot sandwich, or a hot pizza, including any cold components or side items. Paragraph (7) of subdivision (d) does not apply to a sale for a separate price of bakery goods or beverages (other than bouillon, consommé, or soup), or where the food product is purchased cold or frozen; "hot prepared food products" means those products, items, or components that have been prepared for sale in a heated condition and that are sold at any temperature that is higher than the air temperature of the room or place where they are sold.

(f) Notwithstanding paragraph (6) of subdivision (d), if the seller elects to separately account for sales of food products specified in subdivision (b), then the gross receipts from the sale of those food products shall be exempt under subdivision (a), provided that the separate accounting is fully documented in the seller's records. However, if the seller's records do not reflect the separate accounting of the gross receipts from sales of nontaxable food products, the seller's election under this subdivision shall be revoked.

History.—Stats. 1953, p. 1629, in effect September 9, 1953, added the former last paragraph. Stats. 1963, p. 4046, in effect September 20, 1963, deleted "milk and milk products" from first paragraph and completely revised the former next to last paragraph, making it the last paragraph; and the former last paragraph was made the third paragraph, with the words "milk and milk products" added and "which are purchased for consumption off the premises of the retailer" deleted. Stats. 1965, p. 2427, in effect September 17, 1965, added in the last paragraph "whether" and "or by a person withwhom the retailer contracts to furnish, prepare, or serve food products to others." Stats. 1969, p. 3127, in effect January 1, 1970, revised the fourth paragraph and added the fifth paragraph, and added (d) to the sixth paragraph. Stats.

1970, p. 1057, in effect November 23, 1970, rearranged wording of fourth paragraph. Stats. 1971, p. 3711, in effect December 14, 1971, operative January 1, 1972, deleted "other than candy and confectionery" from and added "non-medicated chewing gum", to second paragraph, and added (e). Stats. 1983, Ch. 323, in effect July 21, 1983, operative August 1, 1983, added a new subdivision "(e)" in the sixth paragraph, changed previous subdivision "(e)" to "(f)", and changed all references to previous subdivision "(e)" to "(f)". Stats. 1984, Ch. 930, effective January 1, 1985, changed subdivision letter and number designations, added all text in paragraph (6) of subdivision (d). Stats. 1985, Ch. 1197, by Section 1 of chapter, effective January 1, 1986, added "marinas, campgrounds, and recreational vehicle parks" in subdivision (d)(4), and substituted "paragraph" for "paragraphs" in subdivision (d)(5)(B). Stats. 1991, Ch. 85, in effect June 30, 1991, operative July 1, 1991, in subparagraph (b)(1) added "other than candy or confectionery" after "sugar and sugar products" and after "cocoa and cocoa products", deleted "and nonmedicated chewing gum" after "cocoa and cocoa products", added "any of the following:" after "do not include", "(1)" before "Medicines", and paragraph (2), in subdivision (c) and added subdivision (f). Stats 1991, Ch. 88, in effect June 30, 1991, operative July 15, 1991, substituted "July 15" for "July 1" in subdivision (f). Prop. 163, Sec. 2, in effect December 1, 1992, deleted "other than" after "sugar and sugar products,", added ", gum," after "candy", deleted "or" before "confectionery", added "and" after "tea,", and deleted ", other than candy or confectionery" after "cocoa products" in subdivision (b)(1); substituted "including" for "except" after "liquid or frozen," and added "but excluding" after "bottled water," in subdivision (b)(3); substituted "do not include medicines" for "do not include any of the following: (1) Medicines"; deleted former subdivision (c)(2) which defined snack foods; inserted a comma after "items" in the second sentence of subdivision (e); and deleted former subdivision (f) which stated that "The amendments to this section by the act adding this subdivision shall become operative on July 15, 1991.". Stats. 1995, Ch. 647, in effect October 6, 1995, operative April 1, 1996, added commas after "sale of" and "state of" in subdivision (a); substituted "that" for "which" after "product and" in paragraph (2) and added a comma after "malt" in paragraph (3) of subdivision (b); deleted "such" after "are sold in", deleted "or" after "serving," and added a comma after "sandwich" in the first sentence and substituted "that" for "which" throughout the second sentence of subdivision (e); and added subdivision (f). Stats. 1996, Ch. 124, in effect January 1, 1997, deleted "provided for" after "exemptions" in subdivision (d); substituted "those" for "such" after "even though" in paragraph (3) of subdivision (d); and substituted "does" for "shall" after "subdivision (d)" in the first sentence of subdivision (e).

Sandwiches as "meals"; "paper napkins" as facilities.—The sale of hot dog and hamburger sandwiches, even when served with beverages, from sandwich stands or booths where neither chairs nor tables are provided for customers, does not constitute a "meal" within this section. A "paper napkin" is not "tableware" within this section, since the rule of ejusdem generis is applicable. Treasure Island Catering Co., Inc. v. State Board of Equalization (1941) 19 Cal.2d 181.

Skinless sausage casings.—Cellulose sausage casings used in manufacture of skinless wieners but removed and destroyed prior to sale are not food or food products nor do they become an integral part of food products within the meaning of this section. Luer Packing Co. v. State Board of Equalization (1950) 101 Cal.App.2d 99.

Cardboard trays.—The trial court was sustained in its finding that the serving of sandwiches and beverages on nonreturnable cardboard trays constitutes serving meals and furnishing food for consumption from trays. Hart's Drive-In Corp. v. State Board of Equalization (1956) 145 Cal.App.2d 657.

Glacéd Fruits.—Glacéd fruits were properly classified as "candy or confectionery" under this section as operative prior to January 1, 1972. Mission Pak Co. v. State Board of Equalization (1972) 23 Cal.App.3d 120.

Revenue and Taxation Code Section 6359(c) Held Constitutional.—Certain restaurant owners, operators of drive-ins providing carhop services, sought to recover sales and use taxes paid by them on sales of "take out" orders. Such orders are taxable under subparagraph (c) of Section 6359 of the Revenue and Taxation Code when the food is purchased at a drive-in type of operation, whether it is consumed on the premises or not, although "take out" orders at conventional restaurants are exempt. The drive-in operators argued that subparagraph (c), and the Board's administration thereof, was unconstitutionally vague, and arbitrarily discriminated between drive-ins and conventional restaurants. The court, in holding the provision constitutional, found that the distinctions made in the statute had a rational basis in the Legislature's desire to equalize competition and tax burdens between conventional restaurants and newly evolving forms of eating establishments where food was consumed in a similar manner, whether inside one's own car or inside a restaurant. The court also found that the statute prescribed a standard sufficiently definite to be understandable to the average person desiring to comply therewith. Henry's Restaurants of Pomona, Inc. v. State Board of Equalization (1973) 30 Cal.App.3d 1009, hearing in Sup. Ct. den. May 16, 1973.

Subsidies to Cafeteria Operators.—Subsidies paid by employers to operators of employee cafeterias are not includable within the operators' gross receipts and not subject to tax. Szabo Food Service, Inc. of California v. State Board of Equalization (1975) 46 Cal.App.3d 268.

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6359.1. Hot prepared food products sold to air carriers. There are exempted from the taxes imposed by this part, the gross receipts from the sale of, and storage, use, or other consumption in this state, of hot prepared food products sold by caterers, or other vendors, to air carriers engaged in interstate or foreign commerce for consumption by passengers on such air carriers, and the gross receipts from the sale of and the storage, use or other consumption of hot prepared food products sold or served to passengers by air carriers engaged in interstate or foreign commerce for consumption by passengers on such air carriers.

History.—Added by Stats. 1974, Ch. 156, effective April 4, 1974.

6359.2. Food products sold through vending machines. [Repealed by Stats. 1983, Ch. 323, in effect July 21, 1983, operative August 1, 1983.]

6359.2. Food products sold through vending machines. (a) Except as otherwise provided in Sections 6359.4, 6359.45, 6363, and 6370, for the year beginning on January 1, 1988, and ending on December 31, 1988, 77 percent of the gross receipts of any retailer from the sale at retail of food products shall be subject to the tax imposed by Section 6051, when those food products are actually sold through a vending machine.

(b) Except as otherwise provided in Sections 6359.4, 6359.45, 6363, and 6370, for the year beginning on January 1, 1989, and ending on December 31, 1989, 55 percent of the gross receipts of any retailer from the sale at retail of food products shall be subject to the tax imposed by Section 6051, when those food products are actually sold through a vending machine.

(c) Except as otherwise provided in Sections 6359.4, 6359.45, 6363, and 6370, for the year beginning on January 1, 1990, and thereafter, 33 percent of the gross receipts of any retailer from the sale at retail of food products shall be subject to the tax imposed by Section 6051, when those food products are actually sold through a vending machine.

(d) The Legislature finds that 33 percent represents the statewide average of food products sold through vending machines which are subject to the tax imposed under this part. Therefore, the Legislature establishes this average as the measure of the tax with respect to vending machine sales to simplify tax auditing procedures and to provide for uniformity in the taxation of gross receipts derived from the sale of food products through vending machines.

The Legislature also finds that due to fiscal constraints, it is necessary to phase in the partial exemption for sales made through vending machines in the 1988 and 1989 calendar years.

(e) For purposes of this section, "food products" includes hot coffee, hot tea, and hot chocolate, when those hot beverages are actually sold through a vending machine for a separate price. "Food products" does not include other hot prepared food products, as defined in Section 6359.

History.—Added by Stats. 1987, Ch. 1300, in effect September 28, 1987, operative January 1, 1988. Stats. 1988, Ch. 1029, in effect January 1, 1989, deleted "(other than hot prepared food products, as defined in Section 6359)" following "sale at retail of food products" in subdivisions (a), (b) and (c); deleted "cold" following "average of" in subdivision (d); and added subdivision (e).

6359.3. Nonprofit veterans' organization not retailer of flags. Any nonprofit veterans' organization is a consumer of, and shall not be considered a retailer within the provisions of this part with respect to flags of the United States of America which it sells, where the profits are used solely and exclusively in furtherance of the purposes of the nonprofit organization.

History.—Added by Stats. 1961, p. 1157, in effect September 15, 1961. Stats. 1963, p. 2790, in effect September 20, 1963, completely revised this section. Stats. 1964, p. 193 (First Extra Session), in effect May 8, 1964, again revised this section. Stats. 1970, p. 2012, operative October 1, 1970, added paragraph (c). Stats. 1971, p. 3712, in effect December 14, 1971, operative January 1, 1972, deleted all reference to other nonprofit organizations as consumers of candy or other confectionery.

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6359.4. Vending machine operator. [Repealed by Stats. 1983, Ch. 323, in effect July 21, 1983, operative August 1, 1983.]

6359.4. Vending machine operator. (a) Any vending machine operator is a consumer of, and shall not be considered a retailer of, food products which sell at retail for fifteen cents ($0.15) or less and which are actually sold through a vending machine.

(b) Notwithstanding subdivision (a), any vending machine operator is a consumer of, and shall not be considered a retailer of, food products, other than beverages or hot prepared food products, which are sold through a coin-operated bulk vending machine if the amount of each sale is twenty-five cents ($0.25) or less. For purposes of this subdivision, "bulk vending machine" means a vending machine containing unsorted food products, other than beverages or hot prepared food products which, upon insertion of a coin, dispenses those food products, including candy and confectionery, in approximately equal portions, at random, and without selection by the customer.

History.—Added by Stats. 1985, Ch. 1424, effective January 1, 1986. Stats. 1987, Ch. 1300, in effect September 28, 1987, operative January 1, 1988, added "(a)" before first paragraph and added paragraph (b). Stats. 1991, Ch. 236, in effect July 29, 1991, added ", including candy and confectionery," after "food products" in subdivision (a), added "including candy and confectionery" after "food products" in the first sentence and after "food products" in the second sentence of subdivision (a). Stats. 1993, Ch. 257, in effect January 1, 1994, deleted "including candy and confectionery" following "food products" in Subdivision (a) and in the first two references to food products in subdivision (b), and added commas preceding and following "including candy and confectionery" in the third reference in (b).

Paper cups in vending machines.—Although under Section 6359.4, plaintiff was a consumer of tangible property sold through its vending machines, plaintiff's paper cups containing beverages dispensed through its vending machines were nevertheless exempt nonreturnable containers under Section 6364(a). Canteen Corp. v. State Board of Equalization (1985) 174 Cal.App.3d 952.

6359.45. Nonprofit, charitable, or education organization vending machine operator; photocopy machine in library. (a) Any vending machine operator which is a nonprofit, charitable, or educational organization is a consumer of, and shall not be considered a retailer of, tangible personal property which sells at retail for fifteen cents ($0.15) or less and which is actually sold through a vending machine.

(b) any library district, municipal library, or county library and any vendor making sales pursuant to a contract with a library district, municipal library, or county library is a consumer of, and shall not be considered a retailer of, photocopies which it sells at retail and which are actually sold through a coin-operated copy machine located at a library facility.

History.—Added by Stats. 1983, Ch. 323, in effect July 21, 1983. Stats. 1984, Ch. 1468, effective January 1, 1985, added (a) and (b) designations, added all text of (b).

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6359.5. Candy, confectionery, and snack foods; nonprofit youth organizations. [Repealed by Stats. 1993, Ch. 257, effective January 1, 1994.]

6359.7. Ice or dry ice. As incidental to the exemption provided for in Section 6359, 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 ice or dry ice used or employed in packing and shipping or transporting food products for human consumption when the food products are shipped or transported in intrastate, interstate, or foreign commerce by common carriers, contract carriers, or proprietary carriers.

History.—Added by Stats. 1985, Ch. 1045, effective September 27, 1985, operative January 1, 1986.

6359.8. Carbon dioxide. When fruits or vegetables are shipped or transported in intrastate, interstate, or foreign commerce by common carriers, contract carriers, or proprietary carriers, as an incident to the exemption provided for in Section 6359, 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, all of the following:

(a) Carbon dioxide used or employed in packing and shipping or transporting fruits or vegetables for human consumption, when those fruits or vegetables are not sold to the ultimate consumer in a package that contains the carbon dioxide.

(b) Any nonreturnable materials containing the carbon dioxide atmosphere.

History.—Added by Stats. 1994, Ch. 624, in effect September 19, 1994, but operative January 1, 1995.

6360. Bracelets commemorating American prisoners of war. Any organization formed and operated for charitable purposes and qualifying for the welfare exemption from property taxation under Section 214 is a consumer of, and shall not be considered a retailer within the provisions of this part with respect to bracelets designed to commemorate American prisoners of war, which it distributes, whether or not a contribution is made to such organization, where the profits are used solely and exclusively in furtherance of the purposes of such organization.

History.—Added by Stats. 1972, Ch. 1176, operative April 1, 1973.

6360.1. "Buddy Poppy." There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, a "Buddy Poppy" or any other symbolic, impermanent lapel pin that memorializes United States military veterans killed in foreign wars of the United States, by any corporation established by the Congress of the United States pursuant to Chapter 2301 (commencing with Section 23101) of Title 36 of the United States Code, or any of that corporation's subordinate state or territorial subdivisions, local chapters, posts, or auxiliaries.

History.—Added by Stats. 1995, Ch. 316, in effect August 3, 1995. Stats. 2006, Ch. 364 (AB 3076), in effect January 1, 2007, substituted "2301 (commencing with Section 23101" for "7A (commencing with Section 111" after "pursuant to Chapter."

Note.—Stats. 1995, Ch. 316, expressed the Legislature's findings and declarations stating that the sale or use of Buddy Poppies is worthy of an exemption from sales and use taxation in recognition of the work done by the Veterans of Foreign Wars and others on behalf of disabled veterans. The Legislature also finds and declares that the "Buddy Poppy" program is one of the most successful and widely known fundraisers for disabled veterans. During 1993–94, 8,000,000 of the handcrafted flowers were sold, raising $1.6 million for veterans' rehabilitation, and children and youth programs nationwide.

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6361. Nonprofit youth organization. (a) Any organization listed or described in subdivision (b) is a consumer and shall not be considered a retailer within the provisions of this part, of food products, nonalcoholic beverages, or other tangible personal property made or produced by members of the organization provided, however, that the organization's sales are made on an irregular or intermittent basis, and that the organization's profits from those sales are used exclusively in furtherance of the purposes of the organization.

(b) For purposes of this section, "organization" includes any of the following:

(1) Any nonprofit organization which meets all of the following conditions:

(A) The organization qualifies for tax-exempt status under Section 501(c) of the Internal Revenue Code.

(B) The organization's primary purpose is to provide a supervised program of competitive sports for youth, or to promote good citizenship in youth.

(C) The organization does not discriminate on the basis of race, sex, nationality, or religion.

(2) (A) Any youth group sponsored by or affiliated with a qualified educational institution, including, but not limited to, any student activity club, athletic group, or musical group.

(B) For purposes of this section, "qualified educational institution" means any of the following:

(i) Any public elementary, secondary or vocational-technical school providing education for kindergarten, grades 1 to 12, inclusive, and college undergraduate programs, or any part thereof, operated by state or local government.

(ii) Any nonprofit private educational institution providing education for kindergarten, grades 1 to 12, inclusive, and college undergraduate programs, or any part thereof, that meets the requirements of the State Department of Education for a school. "Private educational institution" means any entity providing education which satisfies the requirements of state and local laws pertaining to private educational institutions in effect on January 1, 1990, and which does not discriminate on the basis of race, sex, nationality, or religion.

(3) Little League, Bobby Sox, Boy Scouts, Cub Scouts, Girl Scouts, Campfire Inc., Young Men's Christian Association, Young Women's Christian Association, Future Farmers of America, Future Homemakers of America, 4-H Clubs, Distributive Education Clubs of America, Future Business Leaders of America, Vocational Industrial Clubs of America, Collegiate Young Farmers, Boys' Clubs, Girls' Clubs, Special Olympics, Inc., American Youth Soccer Organization, California Youth Soccer Association, North, California Youth Soccer Association, South, and Pop Warner football.

(c) For purposes of this section, "irregular or intermittent," means associated directly with a particular event, such as fairs, galas, parades, scout-a-ramas, games, and similar activities. That term includes refreshment stands or booths that are utilized at scheduled events of organized leagues, but does not include storefront or mobile retail outlets which ordinarily require local business licenses.

History.—Added by Stats. 1974, Ch. 1421, operative January 1, 1975. Stats. 1985, Ch. 1153, effective January 1, 1986, added "youth group . . . in youth", deleted "whose primary . . . trustworthy adults", added "which qualifies . . . Revenue Code," deleted "and" before "nonalcoholic beverages", deleted "which it sells" and added "or other . . . intermittent basis" after "nonalcoholic beverages," and substituted "those" for "such" in the first paragraph, added second and third paragraphs, substituted "does" for "shall", and deleted "be construed to" before "include" in the last paragraph. Stats. 1986, Ch. 967 effective January 1, 1987, added the "Distributive Education Clubs of America, Future Business Leaders of America, Vocational Industrial Clubs of America, Collegiate Young Farmers, Boys' Clubs, and Girls' Clubs". Stats. 1988, Ch. 710, in effect August 29, 1988, operative January 1, 1989, added "Special Olympics, Inc., American Youth Soccer Organization, California Youth Soccer Association, North, California Youth Soccer Association, South, and Pop Warner Football." Stats. 1989, Ch. 654, in effect January 1, 1990, added subdivision letters (a), (b), (c) and (d), and substituted "501(c)" for "170(c)" in subdivision (a). Stats. 1990, Ch. 116, in effect June 1, 1990, deleted "nonprofit" after "(a) Any", deleted "youth group sponsored by a school district, or other organization the primary purpose of which is to provide a supervised program of competitive sports for youth, or to promote good citizenship in youth, which does not discriminate on the basis of race, sex, nationality, or religion, and which qualifies for tax-exempt status under Section 501(c) of the Internal Revenue Code," after "Any organization", added "listed or described in subdivision (b)" before "is a", deleted "of" after "consumer", deleted "with respect to" after "part", added "of" before "food", deleted "which it sells" after "the organization", added "provided, however, that the organization's sales are made" before "on an irregular", substituted "and" for "provided", added "organization's" before "profits", added "from those sales" after "profits", deleted "solely and" before "exclusively", substituted "the" for "those" after "furtherance of", added "of the organization" after "purposes" in subdivision (a); added subdivision (b); relettered former subdivision (b) as subdivision (c); renumbered former subdivision (c) as paragraph (3) of subdivision (b); deleted "The organizations described in this section include only" before "Little League", substituted "football" for "Football" in paragraph (3) of subdivision (b); added "For purposes of this section,", substituted "irregular" for "Irregular", deleted "as used in this section" before "means"; substituted "That term includes" for "Included are" added "does" after "leagues, but", substituted "That term includes" for "included are", deleted ", or activities by any group that does not qualify for tax-exempt status under Section 501(c) of the Internal Revenue Code." after "licenses"; and deleted former subdivision (d) which stated, " 'Nonprofit organization', as used in this section, does not include the state or any of its political subdivisions".

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6361.1. Nonprofit youth organization. [Repealed by Stats. 1990, Ch. 116, in effect June 1, 1990.]

6361.1. Handcrafted items. (a) Any qualified organization is a consumer of, and shall not be considered a retailer of, tangible personal property if all of the following conditions are met:

(1) The tangible personal property is of a handcrafted or artistic nature and is designed, created, or made by either individuals with developmental disabilities or children with severe emotional disturbances who are members of, or receive services from, the qualified organization.

(2) The price of each item of tangible personal property sold does not exceed twenty dollars ($20).

(3) The qualified organizations's sales are made on an irregular or intermittent basis.

(4) The qualified organizations's profits from the sales are used exclusively in furtherance of the purposes of the organization.

(b) For purposes of this section, "qualified organization" means any organization that meets all of the following conditions:

(1) The organization is exempt from taxation pursuant to paragraph (3) of subsection (c) of Section 501 of Title 26 of the United States Code.

(2) The primary purpose of the organization is to provide services to either individuals with developmental disabilities or children with severe emotional disturbances.

(3) The organization does not discriminate on the basis of race, sex, nationality, or religion.

History.—Added by Stats. 1993, Ch. 653, in effect October 1, 1993, but operative January 1, 1994. Stats. 1995, Ch. 290, in effect August 3, 1995, added "or artistic" after "handcrafted", added "either" after "made by" and added "or children . . . disturbances" after "disabilities" in paragraph (1) and substituted "twenty dollars ($20)" for "ten dollars ($10)" in paragraph (2) of subdivision (a); added "either" after "services to" and added "or children . . . disturbances" after "disabilities" in paragraph (2) of subdivision (b). Stats. 2004, Ch. 183 (AB 3082), in effect January 1, 2005, substituted "organization's" for "organizations's" after "The qualified" in paragraphs (3) and (4) of subdivision (a), and substituted "paragraph (3) . . . United States" for "Section 501(c)(3) of the Internal Revenue" after "pursuant to" in paragraph (1) of subdivision (b).

6361.5. School yearbooks and catalogs. Any public or private school, school district, county office of education, or student organization is

a consumer of, and shall not be considered a retailer within the provisions of this part with respect to yearbooks and catalogs prepared for or by it and distributed to students.

History.—Added by Stats. 1977, Ch. 921, operative January 1, 1978. Stats. 1988, Ch. 205, in effect June 23, 1988, operative October 1, 1988, added "county office of education."

6362.5. Master tapes or master records. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale or lease of, and the storage, use, or other consumption in this state of, master tapes or master records embodying sound, except amounts subject to the taxes imposed by other provisions of this part paid by a customer in connection with the customer's production of master tapes or master records to a recording studio for the tangible elements of such master records or master tapes.

(b) For purposes of this section:

(1) "Master tapes or master records embodying sound" means tapes, records, and other devices utilized by the recording industry in making recordings embodying sound.

(2) "Amounts paid for the furnishing of the tangible elements" shall not include any amounts paid for the copyrightable, artistic or intangible elements of such master tapes or master records, whether designated as royalties or otherwise including, but not limited to, services rendered in producing, fabricating, processing, or imprinting tangible personal property or any other services or production expenses in connection therewith which may otherwise be construed as constituting "sale" under Section 6006.

(3) "Recording studio" is a place where, by means of mechanical or electronic devices, voices, music, or other sounds are transmitted to tapes, records, or other devices capable of reproducing sound.

History.—Added by Stats. 1975, Ch. 1116, operative January 1, 1976. Stats. 1982, Ch. 951, in effect January 1, 1983, added the balance of subsection (2) of subdivision (b) after "otherwise."

Master sound tapes.—1982 amendment did not make 1975 enactment of section 6362.5 retroactive to years prior to enactment. Taxpayers' agreements with independent producers for master tapes were sales agreements, not employment contracts. Master tapes were physically useful in manufacturing process. Sales of master tapes may constitutionally be taxed differently than leases of movies. Capitol Records, Inc. v. State Board of Equalization (1984) 158 Cal.App.3d 582.

Master tapes are tangible personal property.—The true object of contracts between a record company and various artist companies was the production and acquisition of master tapes not the procurement of recording services. A & M Records, Inc. v. State Board of Equalization (1988) 204 Cal.App.3d 358.

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6362.7. Newspapers and periodicals distributed without charge.
[Repealed by Stats. 1992, Ch. 903, in effect September 25, 1992, operative November 1, 1992.]

6362.7. Newspapers and periodicals distributed without charge; periodicals. (a) 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 tangible personal property which becomes an ingredient or component part of any newspaper or periodical that is distributed without charge and regularly issued at average intervals not exceeding three months, and any such newspaper or periodical.

(b) 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 tangible personal property which becomes an ingredient or a component part of any periodical regularly issued at average intervals not exceeding three months, and any such periodical, that is sold by subscription and delivered by mail or common carrier.

(c) For purposes of this section, "periodical" means any publication that appears at stated intervals at least four times per year, but not more than 60 times per year, each issue of which contains news or information of general interest to the public, or to some particular organization or group of persons. Each issue must bear a relationship to prior or subsequent issues with respect to continuity of literary character or similarity of subject matter, and there must be some connection between the different issues of the series in the nature of the articles appearing in them. Each issue must be sufficiently similar in style and format to make it evident that it is one of a series. The term does not include printed sales messages, shopping guides, or other publications of which the advertising portion, including product publicity, exceeds 90 percent of the printed area of the entire issue in more than one-half of the issues during any 12-month period.

History.—Added by Stats. 1992, Ch. 903, in effect September 25, 1992, operative November 1, 1992.

Classification of advertising publications as taxable.—Differential tax treatment of advertising publications was not content based discrimination that is prohibited by the first amendment. The presence of advertising as a basis for distinction is a constitutionally reasonable basis. Redwood Publishing Co. v. State Board of Equalization (1989) 207 Cal.App.3d 734.

6362.8. Newspaper and periodicals distributed by nonprofit organizations. (a) 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 tangible personal property that becomes an ingredient or component part of any newspaper or periodical regularly issued at average intervals not exceeding three months, or any such newspaper or periodical.

(b) This section shall apply only with respect to any of the following:

(1) Any newspaper or periodical that is published or purchased by an organization that qualifies for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and is distributed to the members of the organization in consideration of payment of the organization's membership fee, or to the organization's contributors.

(2) Any newspaper or periodical that is published by an organization that qualifies for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and does not receive revenue from, or accept, any commercial advertising.

(3) Any newspaper or periodical distributed by a nonprofit organization for which both of the following apply:

(A) Distribution is to any member of the nonprofit organization in consideration, in whole or in part, of payment of the organization's membership fee.

(B) The amount paid or incurred by the nonprofit organization for the cost of printing the newspaper or periodical is less than 10 percent of the membership fee attributable to the period for which the newspaper or periodical is distributed.

History.—Added by Stats. 1991, Ch. 461, in effect October 1, 1991, operative November 1, 1991. Stats. 1992, Ch. 903, in effect September 25, 1992, operative November 1, 1992, added "regularly issued at . . . months" after "periodical" in subdivision (a); substituted "and is distributed" for ", and to which any of the following apply: (A) Distribution" in paragraph (1) of subdivision (a), substituted "(2) Any . . . Code and" for "(B) The publication" in paragraph (2) of subdivision (b), and renumbered former paragraph (2) of subdivision (a) as paragraph (3).

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6363. Meals. 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, meals and food products for human consumption furnished or served to the students of a school by public or private schools, school districts, student organizations, parent-teacher associations, and any blind person (as defined in Section 19153 of the Welfare and Institutions Code) operating a restaurant or vending stand in an educational institution under Article 5 (commencing with Section 19625) of Chapter 6 of Part 2 of Division 10 of the Welfare and Institutions Code. The term "food products" as used in this section has the meaning ascribed to it in Section 6359.

The exemption provided by this section shall not apply when the meals or food products are sold for consumption within a place, the entrance to which is subject to an admission charge, except for national and state parks and monuments.

History.—Added by Stats. 1943, p. 2456, operative July 1, 1943. Stats. 1947, p. 2029, operative July 1, 1947, added provisions respecting food products. Stats. 1955, p. 2104, in effect September 7, 1955, added provisions respecting blind persons, and rearranged wording. Stats. 1963, p. 3763, in effect September 20, 1963, deleted the provisions relating to "employers or employee organizations." Stats. 1965, p. 3131 in effect September 17, 1965, deleted "or teachers." Stats. 1970, p. 1059, in effect November 23, 1970, substituted reference to Welfare and Institutions Code for reference to Government Code, deleted wording following "in section 6359" from last sentence of first paragraph, and added second paragraph. Stats. 1971, p. 3713, in effect December 14, 1971, operative January 1, 1972, added the words "furnished or" preceding "served to students".

Construction of prior exemption.—This section constitutes a change in the law rather than a clarification of former Section 2(e) of the Retail Sales Tax Act, under which the tax did not apply to sales of meals served by employers or employee organizations exclusively to employees. An employer who served meals to its employees and the employees of subcontractors did not serve meals "exclusively" to its employees and was required to pay tax on the sale of the meals to employees and others. Twaits v. State Board of Equalization (1949) 93 Cal.App.2d 796.

6363.2. Auctions; nonprofit organizations. There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, tangible personal property that is sold to a successful bidder at an auction that is conducted by, or affiliated with, a nonprofit organization, if the purpose of that auction is to obtain revenue for the funding of a shelter for homeless individuals and families and those revenues obtained are actually expended for that purpose. For purposes of this section, "nonprofit organization" means an organization that is exempt from taxation under Section 23701d. This section shall not apply to any sale at an auction that is conducted more than once during any 12-month period.

History.—Added by Stats. 1994, Ch. 855, in effect September 27, 1994, but operative January 1, 1995.

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Text of section operative January 1, 2002 through January 1, 2012

6363.3. Nonprofit thrift stores. (a) There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, used pieces of clothing, household items, or other retail items sold by thrift stores operated by a nonprofit organization if the purpose of that thrift store is to obtain revenue for the funding of medical, hospice, or social services to chronically ill individuals, and at least 75 percent of the net income derived from operations of the thrift store are actually expended for the purpose of providing medical, hospice, or social services to the chronically ill.

(b) For purposes of this section, "nonprofit organization" means an organization that provides medical, hospice, or social services to individuals with a chronic, life-threatening illness, as defined in subdivision (c) of Section 1568.01 of the Health and Safety Code, and is exempt from taxation under Section 23701d.

(c) This section shall deletionremain in effect only until January 1, deletion2019, and as of that date is repealed.

History.—Added by Stats. 1996, Ch. 781, in effect September 23, 1996, but operative January 1, 1997. Stats. 2001, Ch. 383 (AB 180), in effect October 1, 2001, substituted ", hospice or" for "and" after "of medical" twice in the first sentence, and in the second sentence of subdivision (a), and substituted "2007" for "2002" in subdivision (b). Stats. 2006, Ch. 373 (SB 1341), in effect September 20, 2006, substituted "the net income derived from operations of the thrift store" for "those net revenues" after "at least 75 percent of" in subdivision (a); created new subdivision (b) with the former second sentence of subdivision (a); relettered former subdivision (b) as (c) and substituted "2012" for "2007" after "January 1," therein. Stats. 2011, Ch. 289 (AB 289), in effect September 21, 2011, substituted "remain in effect only until" for "cease to be operative on" after "This section shall" and substituted "2019" for "2012" after "January 1," in subdivision (c).

6363.4. Military welfare society thrift stores. (a) There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, tangible personal property sold by a thrift store located on a military installation and operated by a designated entity that, in partnership with the United States Department of Defense, provides financial, educational, and other assistance to members of the Armed Forces of the United States, eligible family members, and survivors that are in need.

(b) For purposes of this section, "designated entity" means a military welfare society described in Section 1033 of Chapter 53 of Part II of Subtitle A of Title 10 of the United States Code.

(c) This section shall remain in effect only until January 1, 2014.

History.—Added by Stats. 2009, Ch. 615 (SB 765), in effect October 11, 2009. Stats. 2010, Ch. 328 (SB 1330), in effect January 1, 2011, added "a" after "and operated by" and deleted the extra period after "are in need" in subdivision (a).

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6363.5. Religious organization meals. 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, meals and food products for human consumption furnished or served by any religious organization at a social or

other gathering conducted by it or under its auspices, if the purpose in furnishing or serving the meals and food products is to obtain revenue for the functions and activities of the organization and the revenue obtained from furnishing or serving the meals and food products is actually used in carrying on such functions and activities.

For the purposes of this section, "religious organization" means any organization the property of which is exempt from taxation pursuant to subdivision (f) of Section 3 of Article XIII of the State Constitution.

History.—Added by Stats. 1961, p. 1588, in effect September 15, 1961. Stats. 1971, p. 3713, in effect December 14, 1971, operative January 1, 1972, added the words "furnished or" and "furnishing or" preceding "served" and "serving", respectively. Stats. 1976, Ch. 1079, effective January 1, 1977, changed "Section 11" to "subdivision (f) of Section 3."

6363.6. Meals served to residents or patients of institutions. 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, meals and food products for human consumption furnished or served to and consumed by residents or patients of the following:

(a) A health facility as defined in Section 1250 of the Health and Safety Code, which holds the license required pursuant to Section 1253, or is exempt from the license requirement pursuant to subdivision (a) of Section 1270, or is operated by the United States.

(b) A community care facility as defined in Section 1502 of the Health and Safety Code, which holds the license required by Section 1508, or is a residential facility selected by a licensee pursuant to Section 1506 and exclusively used for the reception and care of persons placed by the licensee, or is exempt from the license requirement pursuant to subdivision (f) of Section 1505, or is operated by the United States.

(c) A residential care facility for the elderly, as defined in Section 1569.2 of the Health and Safety Code, that holds the license required by Section 1569.10 of the Health and Safety Code or is exempt from the license requirements pursuant to Section 1569.145 of the Health and Safety Code, or is operated by the United States.

(d) Any house or institution supplying board and room for a flat monthly rate and serving as a principal residence exclusively for persons 62 years of age or older and any housing that primarily serves older persons and that is financed by state or federal programs.

(e) An alcoholism recovery facility, as defined in Section 11834.02 of the Health and Safety Code, that holds the license required by Section 11834.30 of the Health and Safety Code. This subdivision shall apply to meals served by the facility on or after January 1, 1985.

(f) A drug abuse recovery or treatment facility, as defined in Section 11834.02 of the Health and Safety Code, that holds the license required by Section 11834.30 of the Health and Safety Code.

History.—Added by Stats. 1968, p. 2555, in effect August 14, 1968, operative October 1, 1968. Stats. 1971, p. 3714, in effect December 14, 1971, operative January 1, 1972, added the words "furnished or" preceding "served" in the first paragraph of former section 6363.6. Stats. 1971, p. 3909 in effect December 17, 1971, relettered the section, corrected references to Welfare and Institutions Code, and added a subsection relating to certain patients released from state hospitals. Stats. 1971, p. 5143 (First Extra Session), operative January 1, 1972, repealed and reenacted the section and provided that it was the intent of the Legislature in enacting sections 22 and 23 of the act (applicable to section 6363.6) that the provisions of Stats. 1971, Ch. 1741 and Stats. 1971, Ch. 1807 of the 1971 Regular Session, both be given effect as they amend section 6363.6 of the Revenue and Taxation Code. Stats. 1974, Ch. 709, effective September 6, 1974, revised the exemptions and conformed the references to the Health and Safety Code. Stats. 1979, Ch. 1048, operative January 1, 1980, changed "patients and inmates" in first sentence to "residents and patients", added (c). Stats. 1987, Ch. 278, operative July 30, 1987, changed "residents and patients" in first sentence to "residents or patients", added (d) Stats. 1989, Ch. 919, in effect January 1, 1990, added subdivision (e). Stats. 1994, Ch. 702, in effect September 21, 1994, but operative January 1, 1995, substituted "the" for "such" after "placed by" in subdivision (b); added subdivision (c); relettered former subdivisions (c), (d), and (e) as (d), (e), and (f), respectively; and substituted "the" for "such" after "served by" in subdivision (d). Stats. 1995, Ch. 91, in effect January 1, 1996, added a comma after "use" and added "the following" after "patients of" in the first paragraph; substituted "11834.02" for "11834.11" after "Section", substituted "that" for "which" after "Code", and substituted "11834.30" for "11834.12" after "Section" in subdivisions (e) and (f).

Nonreusable hospital menus.—Paper menus used by hospital patients to order meals and returned to patients with meals are not exempt as component parts of those meals. American Hospital Supply Corp. v. State Board of Equalization (1985) 169 Cal.App.3d 1088.

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6363.7. Meals delivered to elderly and disabled. There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, meals that are delivered to homebound elderly or disabled persons by a nonprofit volunteer home delivery meal provider.

History.—Added by Stats. 1995, Ch. 240, in effect August 1, 1995, operative January 1, 1996.

6363.8. Nonprofit veterans' organizations. 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, meals and food products for human consumption that are furnished or served by any nonprofit veterans' organization at a social or other gathering conducted by it or under its auspices, if the purpose in furnishing or serving the meals and food products is to obtain revenue for the functions and activities of the organization and the revenue obtained from furnishing or serving the meals and food products is actually used in carrying on those functions and activities.

History.—Added by Stats. 2003, Ch. 721 (AB 189), in effect October 9, 2003, but operative April 1, 2004.

6364. Containers. There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of and the storage, use, or other consumption in this state of:

(a) Nonreturnable containers when sold without the contents to persons who place the contents in the container and sell the contents together with the container.

(b) Containers when sold with the contents if the sales price of the contents is not required to be included in the measure of the taxes imposed by this part.

(c) Returnable containers when sold with the contents in connection with a retail sale of the contents or when resold for refilling.

(d) Containers, when sold or leased without the contents to persons who place food products for human consumption in the container for shipment, provided the food products will be sold, whether in the same container or not, and whether the food products are remanufactured or repackaged prior to sale.

(e) For purposes of this section, "returnable containers" means containers of a kind customarily returned by the buyer of the contents for reuse. All other containers are "nonreturnable containers."

History.—Added by Stats. 1943, p. 2456, operative July 1, 1943. Stats. 1943, p. 2620, operative July 1, 1943, added "or when resold for refilling" to end of (c). Stats. 1999, Ch. 758, (SB 1210), in effect October 10, 1999, but operative April 1, 2000, substituted "the sale in this state" for "sales" after "receipts from" and substituted "state" for "State" after "consumption in this" in subdivision (a); added subdivision (d); created new subdivision (e) from former last paragraph by substituting "(e) For purposes of this section," for "As used herein the term".

Sales of barrels and kegs.—Sales to a soft drink manufacturer of barrels and kegs used as containers of syrup sold to jobbers are exempt from sales tax as sales of nonreturnable containers when the manufacturer reserves no title in the containers, makes no separate charge for them and does not require a deposit or give a credit for their return. Coca-Cola Co. v. State Board of Equalization (1945) 25 Cal.2d 918.

Skinless sausage casings.—Cellulose sausage casings used in manufacture of skinless wieners but removed and destroyed prior to sale are not containers within the meaning of this section because the casings are not sold with the contents. Luer Packing Co. v. State Board of Equalization (1950) 101 Cal.App.2d 99.

Reused grocery cartons.—Cartons used to deliver groceries from supply centers to retail stores and then emptied and used to package and deliver groceries to customers are not exempt as nonreturnable containers. Safeway Stores, Inc. v. State Board of Equalization (1957) 148 Cal.App.2d 299.

Dry ice.—Dry ice packed with ice cream products in cardboard containers to delay melting does not constitute wrapping or packing material and is therefore not a container. Good Humor Co. v. State Board of Equalization (1957) 152 Cal.App.2d 873.

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 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.

Paper cups in vending machines.—Although under Section 6359.4, plaintiff was a consumer of tangible property sold through its vending machines, plaintiff's paper cups containing beverages dispensed through its vending machines were nevertheless exempt nonreturnable containers under Section 6364(a). Canteen Corp. v. State Board of Equalization (1985) 174 Cal.App.3d 952.

Reusable bottles.—The manufacturer of soft drinks is liable for use tax on its purchases of reusable bottles because the bottles were returned more than 50 percent of the time, were reused four times, and bore the taxpayer's trademark with the words "return for deposit." The taxpayers primary purpose in purchasing the bottles was not to resell them but to fill them with its product. Associated Beverage Company, Inc. v. State Board of Equalization (1990) 224 Cal.App.3d 192.

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6364.5. Blood collection and pack units. (a) There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, any container used to collect or store human whole blood, plasma, blood products, or blood derivatives that are exempt from taxation pursuant to Section 33, including, but not limited to, blood collection units and blood pack units.

(b) For purposes of this section, "blood collection units" and "blood pack units" include all items that form an integral, interconnected package that, when sold to plasmapheresis centers and blood banks, are used to collect blood or blood components, which are then sold together with the bags and tubing in which they are contained. Blood pack units consist of a plastic bag or bags, tubing, and a needle. Blood collection units are either a manual system that includes a needle, multiple bags, a bag containing saline solution, tubing, filters, grommets, and a pooling bag or an automated system that consists of a needle, a bag of anticoagulant, tubing, a plastic bowl containing a stainless steel centrifuge and a pooling bag. Blood collection units and blood pack units also include plastic bags and tubing sold to plasmapheresis centers when those centers use them to collect blood plasma or platelets and then sell the plasma or platelets together with the bags and tubing in which they are contained.

History.—Added by Stats. 1997, Ch. 773 (AB 993), in effect October 8, 1997, operative April 1, 1998.

6365. Art works. (a) 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, original works of art, which are:

(1) Purchased by this state or any city, county, city and county, or other local governmental entity;

(2) Purchased by any nonprofit organization operating any public museum for, and pursuant to contract with, any such governmental entity;

(3) Purchased by any nonprofit organization which has qualified for exemption pursuant to Section 23701d for one or more museums regularly open to the public not less than 20 hours per week for not less than 35 weeks of the calendar year and operated by the purchaser of such art or operated by another nonprofit organization which has qualified for exemption pursuant to Section 23701d;

(4) Purchased for donation and actually donated by delivery by the retailer pursuant to the instructions of the buyer to any such governmental entity, or nonprofit organization, and evidenced by a written transfer of title from the buyer to such governmental entity or nonprofit organization; or

(5) Leased from one nonprofit organization to another nonprofit organization for 35 years or more, if both the lessor and lessee are nonprofit organizations as defined in either paragraph (2) or (3).

(b) The exemption provided by this section shall apply only to works of art purchased to become part of the permanent collection of any of the following:

(1) A museum.

(2) A nonprofit corporation which has qualified for exemption pursuant to Section 23701d; regularly loans not less than 85 percent of the value of its collection of works of art to one or more museums; and is required by its articles of incorporation to loan its works of art and is otherwise prohibited by its articles from making any private use of its works of art; provided, that the work of art for which the exemption is claimed pursuant to this section shall actually be placed on display at one or more museums in California for not less than 24 months during the three-year period commencing from the date of purchase.

(3) Any city, county, city and county, or other local governmental entity and this state which purchases, comissions, or leases from any such governmental entity public art for display to the public in buildings, parks, plazas, or other public places. These areas shall be open to the public not less than 20 hours per week for not less than 35 weeks of the calendar year.

(c) For purposes of this section, "work of art" means a work of visual art, including, but not limited to, a drawing, painting, mural, fresco, sculpture, mosaic, film, or photograph, a work of calligraphy, a work of graphic art (including, but not limited to, an etching, lithograph, offset print, silk screen, or a work of graphic art of like nature), crafts (including, but not limited to, crafts in clay, textile, fiber, wood, metal, plastic, glass, costume, dress, clothing, personal adornment, and like materials), or mixed media (including, but not limited to, a collage, assemblage, or any combination of the foregoing art media).

(d) For purposes of this section, a "museum" shall only include:

(1) A museum which has a significant portion of its space open to the public without charge;

(2) A museum open to the public without charge for not less than six hours during any month the museum is open to the public; or

(3) A museum which is open to a segment of the student or adult population without charge.

(e) For the purposes of this section, "permanent collection" as it applies to leases of original works of art, means a collection with a lease term of 35 years or more.

(f) Any public entity or nonprofit organization claiming an exemption pursuant to this section shall maintain records, in such forms as prescribed by the board, sufficient to substantiate its claim. Such records shall include, but not be limited to, the date of purchase, the purchase price, the date the property was first brought into this state, and the dates and locations the work of art was on display at a museum.

History.—Added by Stats. 1978, Ch. 1019, operative January 1, 1979. Stats. 1979, Ch. 260, effective July 17, 1979, changed "a museum" in (a) (3) to "one or more museums", changed "a museum, as defined in Section 6366.4" in (b) following "permanent collection of" to present wording. Stats. 1987, Ch. 1266, in effect September 28, 1987, operative

January 1, 1988, in paragraph (b), added "any of the following" after "collection of"; in (b)(1), deleted "; or" following "museum" and substituted a period; and added paragraph (e). Stats. 2006, Ch. 281 (AB 2533), in effect September 14, 2006, but operative January 1, 2007, deleted "or" after "Section 23701d;" in paragraph (3) and added paragraph (5) of subdivision (a); deleted "or" after "state which purchases," and added ", or leases from any such governmental entity" after "commissions" in paragraph (3) of subdivision (b); added "costume, dress . . . adornment," after "plastic, glass" in subdivision (c); deleted "or" after "public without charge;" in paragraph (1) of subdivision (d); added subdivision (e); and relettered former subdivision (e) as (f).

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6366. Aircraft sold to common carriers, foreign governments, and nonresidents. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, the following:

(1) Aircraft sold to any person using the aircraft as a common carrier of persons or property under authority of the laws of this state, of the United States, or of any foreign government, or sold to any foreign government for use by that government outside of this state, or sold to any person who is not a resident of this state and who will not use that aircraft in this state otherwise than in the removal of the aircraft from this state.

(2) (A) A ground control station sold to any foreign government for use by that government outside of this state or sold to any person who is not a resident of this state and who will not use that ground control station in this state otherwise than in the removal of the ground control station from this state.

(B) A "ground control station" means a portable facility used to operate aircraft in the air without a pilot on board. The term includes controls, video equipment, computers, generators, and communications equipment, sold as an integral part of the station, and antennas used to control the aircraft. The term does not include trucks, tractor-trailers, or other devices solely used to transport the station.

(3) Tangible personal property that is purchased on or after October 1, 1996, and becomes a component part of any aircraft described in paragraph (1), as a result of the maintenance, repair, overhaul, or improvement of that aircraft in compliance with Federal Aviation Administration requirements, and any charges made for labor and services rendered with respect to that maintenance, repair, overhaul, or improvement.

(b) With respect to aircraft sold on or after January 1, 1997, it shall be presumed that a person is not engaged in business as a common carrier if the person's yearly gross receipts from the use of the aircraft as a common carrier do not exceed 20 percent of the purchase cost of the aircraft to him or her, or fifty thousand dollars ($50,000), whichever is less. This presumption may be rebutted by contrary evidence satisfactory to the board showing that the person is engaged in business as a common carrier. In no event shall "gross receipts" include compensation by the person or related parties for use of the aircraft as a common carrier.

History.—Added by Stats. 1947, p. 2216, in effect June 25, 1947. Stats. 1951, p. 2982, in effect September 22, 1951, added provision exempting sales to nonresidents whose only use of the aircraft in this State will be the removal thereof from this State. Stats. 1965, p. 3449, in effect September 17, 1965, deleted "certificated or licensed" inserting "common" and deleted "in interstate or foreign commerce." Also, "of this state" was added. Stats. 1986, Ch. 1361, effective January 1, 1987, added a rebuttable presumption regarding a person not engaged in business as a common carrier. Stats. 1996, Ch. 954, in effect September 26, 1996, but operative January 1, 1997, added "in this state" after "from the sale" and substituted "in this state of, the following:" for "of aircraft" after "other consumption" in subdivision (a); added "(1) Aircraft" before "sold to", substituted "any person" for "persons" after "sold to", substituted "the" for "such" after "using", added "of" after "States, or", substituted "that" for "such" after "use by", substituted "any person" for "person" after "or sold to", substituted "is" for "are" after "any person who", substituted "a resident" for "residents" before "of this state", substituted "that" for "such" after "will not use", substituted "the" for "such" after "removal of" in the former first paragraph of subdivision (a), and deleted former second paragraph of subdivision (a) which provided a rebuttable presumption regarding a person not engaged in business as a common carrier; added paragraph (2) to subdivision (a); added subdivision letter designation (b) and "With respect to . . . exceed 20" therein; substituted "fifty thousand dollars ($50,000)" for "twenty-five thousand dollars ($25,000)" after "or her, or"; added the second sentence in subdivision (b); and added second paragraph of subdivision (b); and added subdivision (c). Stats. 1997, Ch. 733 (SB 1101), in effect October 7, 1997, operative April 1, 1998, added "a" after "aircraft as" in paragraph (1) of subdivision (a) and in the second paragraph of subdivision (c); and added paragraph (2) and paragraph number designation (3) in subdivision (a). Stats. 2000, Ch. 923 (AB 2894), in effect January 1, 2001, added "a" after "the aircraft as" in paragraph (1) of subdivision (a), and deleted former subdivision (c) which stated, "For purposes of this section, it shall be rebuttably presumed that the aircraft is not regularly used in the business of transporting for hire property or persons if the yearly gross receipts of the lessor from the lease of that aircraft to persons using that aircraft as common carriers of property or persons do not exceed 10 percent of the cost of the aircraft to the lessor, or twenty-five thousand dollars ($25,000), whichever is less."

Note.—Sec. 2, Stats. 1997, Ch. 733 (SB 1101), states the following: "It is the intent of the Legislature that the State Board of Equalization administer the exemption for the sale and use of ground control stations provided by Section 1 of this act consistent with existing regulations administering the exemption for the sale and use of aircraft sold to a foreign government for use by that government outside of this state or sold to a person who is not a resident of this state and who will not use that aircraft in this state otherwise than in the removal of the aircraft from this state."

Note.—Sec. 41, Stats. 1986, Ch. 1361 required that:

(a) On January 15, of each year from 1988 to 1992, inclusive, the State Board of Equalization and the Franchise Tax Board shall submit a report to the Legislature on implementation of the provisions of this act, with the exception of Section 40 of this act (for which separate reporting requirements are set out).

(b) The revenue and taxation policy committees of each house of the Legislature shall hold a public hearing no later than June 30 of each year from 1988 to 1992, inclusive, on the reports submitted pursuant to subdivision (a).

(c) The intent of this section is to assure the Legislature the opportunity to oversee the implementation of this act. The intent of the Legislature in enacting this act is to improve enforcement and voluntary compliance with the tax system and cash-pay reporting rules. The intent of the Legislature in enacting this act is not to cause harassment of or undue burden on innocent taxpayers.

Sec. 41 applies to the following Revenue and Taxation Code Sections: 6069, 6071, 6366, 6366.1, 6368.1, 6452, 6455, 6776, 6777, 7154, 8404, 9355, 30481, 32556, 40188, 41143, and 44186.

Separate purchase of extra equipment.—Assuming the other conditions for exemption are met, use tax does not apply to equipment which the Civil Aeronautics authority requires to be installed in an aircraft and which has been installed by the time the aircraft first enters this state, even though the carrier purchases the equipment from a seller other than the manufacturer of the aircraft but has the equipment delivered to the manufacturer of the aircraft for installation. Pan American World Airways, Inc. v. State Board of Equalization (1955) 131 Cal.App.2d 638.

Purchase of replacement parts.—This section exempts from use tax a purchase of ailerons outside this state by a certificated carrier where the carrier installs the ailerons on its aircraft outside this state and the aircraft is subsequently flown to this state and thereafter is placed in use in interstate commerce. Flying Tiger Line, Inc. v. State Board of Equalization (1958) 157 Cal.App.2d 85.

Resident.—Sales of aircraft to out-of-state corporations doing a substantial business in California were not exempt under the above section since the vendee corporations were residents due to the fact that they had a factual abode of some permanency in this state. Garrett Corp. v. State Board of Equalization (1961) 189 Cal.App.2d 504.

Six Months Principal Use Test.—In the absence of prior notice of its test by regulation or otherwise, the board may not deny the common carrier exemption of this section on the basis of the principal use of the aircraft during the first six months of ownership when records for a longer period are available. Pacific Southwest Airlines v. State Board of Equalization (1977) 73 Cal.App.3d 32.

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6366.1. Aircraft leased to common carriers, foreign governments, and nonresidents. (a) 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 aircraft which are leased, or are sold to persons for the purpose of leasing, to lessees using such aircraft as common carriers of persons or property under authority of the laws of this state, of the United States or any foreign government, or to any foreign government as lessees for use by such government outside the state, or to persons as lessees who are not residents of this state and who will not use such aircraft in this state otherwise than in the removal of such aircraft from this state.

(b) 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 tangible personal property sold to an aircraft manufacturer and incorporated into aircraft to be leased by the manufacturer under conditions set forth in subdivision (a) of this section.

(c) With respect to aircraft leased, or sold for the purpose of leasing, on or after January 1, 1997, it shall be presumed that the aircraft is not regularly used in the business of transporting for hire property or persons if the lessor's yearly gross receipts from the lease of that aircraft to persons using the aircraft as common carriers of property or persons do not exceed 20 percent of the cost of the aircraft to the lessor, or fifty thousand dollars ($50,000), whichever is less. This presumption may be rebutted by contrary evidence satisfactory to the board showing that the aircraft is regularly used as a common carrier of property or persons.

In no event shall "gross receipts" include compensation by the lessor or related parties for use of the aircraft as a common carrier.

History.—Added by Stats. 1964, p. 276 (First Extra Session), in effect August 22, 1964. Stats. 1965, p. 3450, in effect September 17, 1965, substituted "common" carriers for "certificated or licensed" carriers, deleted "in interstate or foreign commerce" and added "of this state." Stats. 1986, Ch. 1361, effective January 1, 1987, added a rebuttable presumption regarding an aircraft not regularly used in the business of transporting for hire. Stats. 2000, Ch. 923 (AB 2894), in effect January 1, 2001, substituted "With respect to . . . it shall be" for "For purposes of this section, it shall be rebuttably" before "presumed that", added "lessor's" after "persons if the", deleted "of the lessor" after "gross receipts", substituted "the" for "that" after "persons using", substituted "20" for "10" after "do not exceed", substituted "fifty thousand dollars ($50,000)" for "twenty-five thousand dollars ($25,000)" after "the lessor, or" and added the second sentence in subdivision (c).

Note.—Sec. 41, Stats. 1986, Ch. 1361 required that:

(a) On January 15, of each year from 1988 to 1992, inclusive, the State Board of Equalization and the Franchise Tax Board shall submit a report to the Legislature on implementation of the provisions of this act, with the exception of Section 40 of this act (for which separate reporting requirements are set out).

(b) The revenue and taxation policy committees of each house of the Legislature shall hold a public hearing no later than June 30 of each year from 1988 to 1992, inclusive, on the reports submitted pursuant to subdivision (a).

(c) The intent of this section is to assure the Legislature the opportunity to oversee the implementation of this act. The intent of the Legislature in enacting this act is to improve enforcement and voluntary compliance with the tax system and cash-pay reporting rules. The intent of the Legislature in enacting this act is not to cause harassment of or undue burden on innocent taxpayers.

Sec. 41 applies to the following Revenue and Taxation Code Sections: 6069, 6071, 6366, 6366.1, 6368.1, 6452, 6455, 6776, 6777, 7154, 8404, 9355, 30481, 32556, 40188, 41143, and 44186.

Tangible Personal Property Later Becoming Aircraft Parts.—Sales tax applies to sales of tangible personal property thereafter becoming component parts of aircraft which have already been sold, leased, or sold for the purpose of leasing, to persons using such aircraft as common carriers of persons or property. National Aircraft Leasing, Ltd. v. State Board of Equalization (1979) 90 Cal.App.3d 549.

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6366.2. New vehicles; foreign purchaser. (a) 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 new motor vehicle sold to a purchaser who is a resident of a foreign country and who arranges for the purchase through an authorized vehicle dealer in the foreign country prior to arriving in the United States, if the following conditions are met:

(1) The purchaser is issued an in-transit permit pursuant to Section 6700.1 of the Vehicle Code.

(2) Prior to the expiration of the in-transit permit issued to the purchaser, the retailer ships or drives the motor vehicle to a point outside the United States by means of facilities operated by the retailer, or by delivery to a carrier, customs broker or forwarding agent for shipment to that point.

(b) For purposes of this section, "carrier" means a person or firm engaged in the business of transporting for compensation tangible personal property owned by other persons, and includes both common and contract carrier. "Forwarding agent" means a person or firm engaged in the business of preparing property for shipment or arranging for its shipment.

History.—Added by Stats. 1989, Ch. 762, operative January 1, 1990.

6366.3. Museums. (a) 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 tangible personal property purchased by the state or any local government as part of a public art collection which shall be considered a museum pursuant to paragraph (4) of subdivision (d) or a nonprofit museum regularly open to the public which is operated by or for a local or state government entity, or operated by a nonprofit organization which has qualified for exemption pursuant to Section 23701d, provided:

(1) The property is purchased to replace property which has been physically destroyed by fire, flood, earthquake, or other calamity;

(2) The property is purchased and used exclusively for display purposes within such museum; and

(3) The property is purchased within three years from the date the calamity occurred.

(b) The aggregate amount of the exemption provided by this section shall not exceed the value of the property destroyed on the date the calamity occurred.

(c) The exemption provided by this section extends only to items which have value as museum pieces and does not extend to display cases, shelving, lamps, lighting fixtures, or other items of tangible personal property utilized in the operation of a museum.

(d) For purposes of this section, a "museum" shall only include:

(1) A museum which has a significant portion of its space open to the public without charge; or

(2) A museum open to the public without charge for not less than six hours during any month the museum is open to the public; or

(3) A museum which is open to a segment of the student or adult population without charge.

(4) A public art collection if that art work is on display in a space which is open to the public without charge.

History.—Added by Stats. 1978, Ch. 1019, operative January 1, 1979. Stats. 1987, Ch. 1266, in effect September 28, 1987, operative January 1, 1988, in paragraph (a), added "the state or any local government . . . of subdivision (d) or" after "purchased by", and added subdivision (d)(4).

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6366.4. Museum pieces. (a) 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 tangible personal property purchased by a nonprofit museum regularly open to the public that is operated by or for a local or state government entity, or operated by a nonprofit organization which has qualified for exemption pursuant to Section 23701d, provided the property is purchased and used exclusively for display purposes within the museum.

(b) The exemption provided by this section extends only to items that have value as museum pieces and does not extend to display cases, shelving, lamps, lighting fixtures, or other items of tangible personal property utilized in the operation of a museum. However, the exemption does include sprung instant structures used as temporary exhibit housing.

(c) For purposes of this section, a "museum" includes only any of the following:

(1) A museum that has a significant portion of its space open to the public without charge.

(2) A museum open to the public without charge for not less than six hours during any month the museum is open to the public.

(3) A museum that is open to a segment of the student or adult population without charge.

(d) This section applies only to the San Diego Aero-Space Museum and the California Science Center.

History.—Added by Stats. 1986, Ch. 1270, in effect September 29, 1986. Stats. 1988, Ch. 904, in effect September 14, 1988, operative January 1, 1989, substituted "includes only" for "shall only include" in subdivision (c) following "museum," substituted "applies" for "shall apply" following "section" and added "and the California Museum of Science and Industry" at the end of subdivision (d), and deleted subdivision (e) which said, "This section shall apply to sales and transactions occurring on or after November 24, 1985." Stats. 1992, Ch. 875, in effect September 23, 1992, added "However . . . exhibit housing." as the second sentence of subdivision (b). Stats. 1996, Ch. 841, in effect January 1, 1997, substituted "that" for "which" throughout text, and substituted "Science Center" for "Museum of Science and Industry" after "California" in subdivision (d).

6366.5. Endangered and threatened animal and plant species. 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, endangered or threatened animal and plant species, as defined in subdivision (b) of Section 6010.50 if both the seller and the purchaser are nonprofit zoological societies as defined in subdivision (c) of Section 6010.50.

History.—Added by Stats. 1989, Ch. 937, operative January 1, 1990. Stats. 1994, Ch. 771, in effect September 26, 1994, but operative January 1, 1995, deleted subdivision letter designation (a) before "There are", added "or threatened" after "endangered", added "as defined . . . 6010.50" after "species", added "as defined . . . 6010.50" after "societies", and deleted subdivision (b) which defined endangered animal and plant species.

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6367. Occasional sales. There are exempted from the taxes imposed by this part the gross receipts from occasional sales of tangible personal property and the storage, use, or other consumption in this state of tangible personal property, the transfer of which to the purchaser is an occasional sale. This exemption does not apply to the gross receipts from the sale of, or to the storage, use, or other consumption in this state of, a mobilehome or commercial coach required to be annually registered under the Health and Safety Code, a vessel or aircraft, as defined in Article 1 (commencing with Section 6271) of Chapter 3.5 of this part, or a vehicle required to be registered under the Vehicle Code or a vehicle required to be identified under Division 16.5 (commencing with Section 38000) of the Vehicle Code or a vehicle that qualifies under the permanent trailer identification plate program pursuant to subdivision (a) of Section 5014.1 of the Vehicle Code. This section shall not preclude the exemption afforded under Section 6281.

History.—Added by Stats. 1947, p. 2030, in effect June 19, 1947. Stats. 1965, p. 5451, operative August 1, 1965, added second sentence. Stats. 1972, Ch. 973, in effect August 16, 1972, added "(commencing with Section 6271)" and "or a vehicle required to be identified under Division 16.5 (commencing with Section 38000) of the Vehicle Code." to the second sentence. Stats. 1982, Ch. 1589, in effect January 1, 1983, added "a mobilehome . . . Safety Code," before "a vessel" in the second sentence. Stats. 2000, Ch. 861 (SB 2084), in effect September 29, 2000, added "of the Vehicle . . . Section 5014.1" after "Section 38000)" in the second sentence.

Note.—See annotations following Section 6006.5.

6368. Watercraft. (a) 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 watercraft and any sales of tangible personal property becoming a component part of that watercraft in the course of constructing, repairing, cleaning, altering, or improving the same, and charges made for labor and services rendered in respect to that constructing, repairing, cleaning, altering, or improving, if any of the following conditions are met:

(1) The watercraft is for use in interstate or foreign commerce involving the transportation of property or persons for hire.

(2) The watercraft is for use in commercial deep sea fishing operations outside the territorial waters of this state by persons who are regularly engaged in commercial deep sea fishing.

(3) The watercraft is functionally used 80 percent or more of the time in the transporting for hire of property or persons to vessels or offshore drilling platforms located outside the territorial waters of this state.

(b) For purposes of this section, it shall be rebuttably presumed that a person is not regularly engaged in the business of commercial deep sea fishing if the person has gross receipts from commercial fishing operations of less than twenty thousand dollars ($20,000) a year.

(c) For purposes of this section, it shall be rebuttably presumed that the watercraft is not regularly used in interstate or foreign commerce involving the transportation for hire of property or persons, if the yearly gross receipts of the person using that watercraft in the transportation of property or persons do not exceed 10 percent of the cost of that watercraft to him or her, or twenty-five thousand dollars ($25,000), whichever is less.

History.—Added by Stats. 1949, p. 2120, in effect October 1, 1949. Stats. 1979, Ch. 1161, operative January 1, 1980, added "by persons who are regularly engaged in commercial deep sea fishing" to first sentence and added (b). Stats. 1984, Ch, 1707, deleted "for use . . . deep sea fishing" after first "watercraft" in (a), substituted "that" for "such" before "constructing" in (a), added "if any . . . met" and (1), (2), and (3) before (b). Stats. 1986, Ch. 1361, effective January 1, 1987, added a rebuttable presumption regarding watercraft not regularly used in interstate or foreign commerce. Stats. 1991, Ch. 236, in effect July 29, 1991, substituted "twenty thousand dollars ($20,000)" for "five thousand dollars ($5,000)" after "of less than" in subdivision (b).

Note.—Sec. 41, Stats. 1986, Ch. 1361 required that:

(a) On January 15, of each year from 1988 to 1992, inclusive, the State Board of Equalization and the Franchise Tax Board shall submit a report to the Legislature on implementation of the provisions of this act, with the exception of Section 40 of this act (for which separate reporting requirements are set out).

(b) The revenue and taxation policy committees of each house of the Legislature shall hold a public hearing no later than June 30 of each year from 1988 to 1992, inclusive, on the reports submitted pursuant to subdivision (a).

(c) The intent of this section is to assure the Legislature the opportunity to oversee the implementation of this act. The intent of the Legislature in enacting this act is to improve enforcement and voluntary compliance with the tax system and cash-pay reporting rules. The intent of the Legislature in enacting this act is not to cause harassment of or undue burden on innocent taxpayers.

Sec. 41 applies to the following Revenue and Taxation Code Sections: 6069, 6071, 6366, 6366.1, 6368, 6368.1, 6452, 6455, 6776, 6777, 7154, 8404, 9355, 30481, 32556, 40188, 41143, and 44186.

Primary Use of Watercraft-Interstate Commerce.—Taxpayer did not meet burden of showing the primary use of ferry boats was transportation of interstate passengers. Campbell Industries v. State Board of Equalization (1985) 167 Cal.App.3d 863.

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6368.1. Watercraft leased for use in interstate or foreign commerce or for commercial fishing. (a) 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 watercraft which are leased, or are sold to persons for the purpose of leasing, and any sales of tangible personal property becoming a component part of such watercraft in the course of constructing, repairing, cleaning, altering, or improving the same, and charges made for labor and services rendered in respect to such constructing, repairing, cleaning, altering, or improving, if any of the following conditions are met:

(1) The lessee uses the watercraft in interstate and foreign commerce involving the transportation of property or persons for hire.

(2) The watercraft is for use in commercial deep sea fishing operations outside the territorial waters of this state by persons who are regularly engaged in commercial deep sea fishing.

(3) The lessee functionally uses the watercraft 80 percent or more of the time in the transporting for hire of property or persons to vessels or offshore drilling platforms located outside the territorial waters of this state.

(b) For purposes of this section, it shall be rebuttably presumed that a person is not regularly engaged in the business of commercial deep sea fishing if the person has gross receipts from commercial fishing operations of less than twenty thousand dollars ($20,000) a year.

(c) For purposes of this section, it shall be rebuttably presumed that the watercraft is not regularly used in the business of transporting for hire property or persons, if the yearly gross receipts of the lessor from the lease of that watercraft to persons using that watercraft in the transportation of property or persons do not exceed 10 percent of the cost of that watercraft to the lessor, or twenty-five thousand dollars ($25,000), whichever is less.

History.—Added by Stats. 1965, p. 3177, in effect September 17, 1965. Stats. 1979, Ch. 1161, operative January 1, 1980, added "by persons who are regularly engaged in commercial deep sea fishing" to first sentence and added (b). Stats. 1984, Ch. 1707, deleted "to lessees using . . . deep sea fishing" after "purpose of leasing" in (a), added "if any . . . met" and (1), (2), (3) before (b). Stats. 1986, Ch. 1361, effective January 1, 1987, added a rebuttable presumption regarding watercraft not regularly used in interstate or foreign commerce. Stats. 1991, Ch. 236, in effect July 29, 1991, substituted "twenty thousand dollars ($20,000)" for "five thousand dollars ($5,000)" after "of less than" in subdivision (b).

Note.—Sec. 41, Stats. 1986, Ch. 1361 required that:

(a) On January 15, of each year from 1988 to 1992, inclusive, the State Board of Equalization and the Franchise Tax Board shall submit a report to the Legislature on implementation of the provisions of this act, with the exception of Section 40 of this act (for which separate reporting requirements are set out).

(b) The revenue and taxation policy committees of each house of the Legislature shall hold a public hearing no later than June 30 of each year from 1988 to 1992, inclusive, on the reports submitted pursuant to subdivision (a).

(c) The intent of this section is to assure the Legislature the opportunity to oversee the implementation of this act. The intent of the Legislature in enacting this act is to improve enforcement and voluntary compliance with the tax system and cash-pay reporting rules. The intent of the Legislature in enacting this act is not to cause harassment of or undue burden on innocent taxpayers.

Sec. 41 applies to the following Revenue and Taxation Code Sections: 6069, 6071, 6366, 6366.1, 6368, 6368.1, 6452, 6455, 6776, 6777, 7154, 8404, 9355, 30481, 32556, 40188, 41143, and 44186.

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6368.2. Diesel fuel used in watercraft in commercial deep sea fishing. [Repealed by Stats. 1987, Ch. 1352, effective September 29, 1987, operative January 1, 1988.]

6368.2. Diesel fuel used in watercraft in commercial deep sea fishing. [Repealed. Became inoperative January 1, 1989 pursuant to the provisions of Ch. 1352, Stats. 1987.]

6368.5. Rail freight cars. 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 rail freight cars for use in interstate or foreign commerce.

History.—Added by Stats. 1963, p. 1763, in effect September 20, 1963.

6368.7. Passenger transportation vehicles. There are exempted from the taxes imposed by this part, the gross receipts from the sale and the storage, use, or other consumption of passenger transportation vehicles, including, but not limited to, rail passenger cars, locomotives, other rail vehicles, bus and van fleets, and ferryboats, sold or leased to the Department of Transportation by a person who received title to the property from the Department of Transportation 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.

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Text of section operative January 1, 2004 through January 1, 2009

6368.8. Sale and leaseback; public transportation equipment. (a) There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, qualified equipment, provided all of the following conditions are satisfied:

(1) The qualified equipment is sold or leased by a qualified person.

(2) The qualified person has paid sales tax reimbursement or use tax with respect to the qualified person's purchase or acquisition of the qualified equipment.

(3) The qualified equipment is sold or leased by the qualified person and the qualified equipment is leased back to the qualified person.

(b) For purposes of this section:

(1) "Qualified person" means an entity that qualifies as a claimant, as defined in Section 99203 of the Public Utilities Code, eligible to receive allocations under the Transportation Development Act (commencing with Section 99200 of the Public Utilities Code).

(2) "Qualified equipment" means a vehicle or vessel and any related equipment used in the provision of public transportation services, including, but not limited to, bus and van fleets, ferry boats, rail passenger cars, locomotives, other rail vehicles, train control equipment, fare collection equipment, communication systems, global positioning systems, and other systems and accessories related to the operation of a vehicle or vessel used in the provision of public transportation services.

(c) The exemption provided by this section also applies to subsequent purchases of qualified equipment by a qualified person at the end of the term of a lease or sublease of qualified equipment, provided the provisions of paragraphs (1), (2), and (3) of subdivision (a) are met.

(d) The Legislative Analyst, in consultation with the State Board of Equalization and the Franchise Tax Board, shall conduct a study on the impact of the exemption authorized under this section and shall report to the Legislature, by January 1, 2008, on the following:

(1) The number of persons utilizing the exemption.

(2) The fiscal impact of the exemption, including the total exemption amount and any depreciation claimed for qualified equipment.

(3) The impact, if any, of federal law, including, but not limited to, Revenue Ruling 99–14, on the utilization of the exemption.

(4) The impact of the exemption on California's public transit sector.

(5) A recommendation as to whether the exemption should be continued, and if the continuation of exemption is recommended, recommendations on modifications to the existing exemption provisions that should be implemented.

(6) The impact, if any, on the California personal income and corporation taxes, based on the information provided in subdivisions (e) and (f).

(e) No later than five business days after the closing of any transaction executed pursuant to paragraph (3) of subdivision (a), the qualified person shall provide to the Franchise Tax Board, the Legislative Analyst, the Department of Transportation, the Senate Committee on Revenue and Taxation, and the Assembly Committee on Revenue and Taxation, the following documents:

(1) Copies of the consent letter obtained by the qualified person from the Federal Transit Administration (FTA) within the United States Department of Transportation, authorizing the transaction under FTA Circular 7020.1: Cross-Border Leasing Guidelines.

(2) Copies of the appropriate Internal Revenue Service Form 8264: Application for Registration of a Tax Shelter, that is related to the transaction.

(3) A report describing how the qualified person is using the benefits derived from the lease-leaseback transaction, and, where available, the division between the qualified persons and the purchasers, including equity partners, of the lease or sublease of the qualified equipment.

(f) The Franchise Tax Board, every other year, shall review
the information it is provided by qualified persons pursuant to subdivision (e), and, based on the apportionment of income between the qualified persons and the purchasers of the lease or sublease of the qualified equipment, including the equity partners, assess the revenue loss to the state, if there is any. The board shall report its assessment to the Legislative Analyst, the Senate Committee on Revenue and Taxation, and the Assembly Committee on Revenue and Taxation.

(g) This section shall remain in effect only until January 1, 2009, and as of that date is repealed.

History.—Added by Stats. 2001, Ch. 592 (AB 984), in effect October 9, 2001, operative November 1, 2001. Stats. 2003, Ch. 597 (SB 760), in effect September 20, 2003, but operative January 1, 2004, substituted "2008" for "2004" after "January 1," in subdivision (d); substituted "continued, and . . . recommended," for "extended beyond the January 1, 2004 expiration date, and if it is recommended that the exemption should be extended," in paragraph (5) of subdivision (d), and added paragraph (6) to subdivision (d); added subdivisions (e) and (f); and added subdivision letter designation (g) before "This section shall", and substituted "2009" for "2004" in subdivision (g).

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6368.9. Public transportation equipment; option to purchase exemption. (a) There are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, qualified equipment purchased by a qualified person at the end of the term of a lease or sublease of qualified equipment pursuant to any exercise of a purchase option under the lease or sublease, provided the following conditions are satisfied:

(1) As of the date the lease or sublease was entered into, the qualified person and qualified equipment were otherwise eligible for exemption under Section 6368.8, as that section read on that same date.

(2) The lease or sublease was entered into before the repeal date of Section 6368.8.

(b) For purposes of this section, "qualified equipment" and "qualified person" have the same meanings as defined in Section 6368.8, as that section read on the date the lease or sublease was entered into.

(c) This section shall only become operative if Section 6368.8 is repealed and, in that event, shall become operative on the date that section is repealed.

History.—Added by Stats. 2003, Ch. 597 (SB 760), in effect September 20, 2003, but operative January 1, 2004.

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6369. Prescription medicines. [Repealed by Stats. 1982, Ch. 1589, in effect January 1, 1983.]

6369. Prescription medicines. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale in this state of, and the storage, use, or other consumption,in this state of, medicines:

(1) Prescribed for the treatment of a human being by a person authorized to prescribe the medicines, and dispensed on prescription filled by a registered pharmacist in accordance with law.

(2) Furnished by a licensed physician and surgeon, dentist, or podiatrist to his or her own patient for treatment of the patient.

(3) Furnished by a health facility for treatment of any person pursuant to the order of a licensed physician and surgeon, dentist, or podiatrist.

(4) Sold to a licensed physician and surgeon, podiatrist, dentist, or health facility for the treatment of a human being.

(5) Sold to this state or any political subdivision or municipal corporation thereof, for use in the treatment of a human being; or furnished for the treatment of a human being by a medical facility or clinic maintained by this state or any political subdivision or municipal corporation thereof.

(6) Furnished without charge by a pharmaceutical manufacturer or distributor to a licensed physician, surgeon, dentist, podiatrist, or health facility for the treatment of a human being, or furnished by a pharmaceutical manufacturer or distributor without charge to an institution of higher education for instruction or research, provided that the exemption provided in this paragraph is limited to medicines of a type that can be dispensed only (A) for the treatment of a human being and (B) pursuant to prescriptions issued by persons authorized to prescribe medicines. The exemption provided in this paragraph shall include the materials used to package, and the constituent elements and ingredients used to produce, the medicines described in this paragraph and is intended to preclude any imposition of tax pursuant to Section 6094 or 6095 with respect to those materials, elements, and ingredients.

(b) "Medicines" as used in this section, means any substance or preparation intended for use by external or internal application to the human body in the diagnosis, cure, mitigation, treatment, or prevention of disease and commonly recognized as a substance or preparation intended for that use. However, "medicines" does not include any of the following:

(1) Any auditory, prosthetic, ophthalmic, or ocular device or appliance.

(2) Articles that are in the nature of splints, bandages, pads, compresses, supports, dressings, instruments, apparatus, contrivances, appliances, devices, or other mechanical, electronic, optical or physical equipment or article or the component parts and accessories thereof.

(3) Any alcoholic beverage the manufacture, sale, purchase, possession, or transportation of which is licensed and regulated by the Alcoholic Beverage Control Act (Division 9 (commencing with Section 23000) of the Business and Professions Code).

(c) Notwithstanding subdivision (b), "medicines" as used in this section means and includes any of the following:

(1) Sutures, whether or not permanently implanted.

(2) Bone screws, bone pins, pacemakers, and other articles, other than dentures, permanently implanted in the human body to assist the functioning of any natural organ, artery, vein, or limb and which remain or dissolve in the body.

(3) (A) Orthotic devices, other than orthodontic devices, designed to be worn on the person of the user as a brace, support, or correction for the body structure, and replacement parts for these devices. However, orthopedic shoes and supportive devices for the foot are not exempt unless they are custom-made biomechanical foot orthoses or are an integral part of a leg brace or artificial leg.

(B) For purposes of this paragraph, "custom-made biomechanical foot orthoses" means an individually prescribed foot orthosis which is custom fabricated over a neutral or near neutral subtalar joint with a pronated midtarsal joint position positive plaster model of the patient's foot, which model, when the cast is modified to support the osseous position of the forefoot in relationship to the rearfoot, embodies the angular osseous relationships of the anterior and posterior portions of the foot.

(4) Prosthetic devices, and replacement parts for those devices, designed to be worn on or in the person of the user to replace or assist the functioning of a natural part of the human body, other than auditory, opthalmic, and ocular devices or appliances, and other than dentures, removable or fixed bridges, crowns, caps, inlays, artificial teeth, and other dental prosthetic materials and devices.

(5) Artificial limbs and eyes, or their replacement parts, for human beings.

(6) Programmable drug infusion devices to be worn on or implanted in the human body.

(d) "Health facility" as used in this section has the meaning ascribed to it in Section 1250 of the Health and Safety Code, and also includes "clinic" as defined in Section 1200 of the Health and Safety Code.

(e) Insulin and insulin syringes furnished by a registered pharmacist to a person for treatment of diabetes as directed by a physician shall be deemed to be dispensed on prescription within the meaning of this section.

(f) Orthotic and prosthetic devices, and replacement parts for these devices, furnished pursuant to the written order of a physician or podiatrist, shall be deemed to be dispensed on prescription within the meaning of paragraph (1) of subdivision (a), whether or not the devices are furnished by a registered pharmacist.

(g) Mammary prostheses, and any appliances and related supplies necessary as the result of any surgical procedure by which an artificial opening is created in the human body for the elimination of natural waste, shall be deemed to be dispensed on prescription within the meaning of this section.

History.—Added by Stats. 1961, p. 2273, operative January 1, 1962. Stats. 1962, p. 12, in effect April 23, 1962, added a provision concerning the furnishing of medicine by a physician and surgeon or podiatrist, or a county or other licensed hospital, dispensed by a registered pharmacist, pursuant to Sections 4051 or 4052.1 of the Business and Professions Code; and added the second paragraph. Stats. 1963, p. 1723, in effect September 20, 1963, renumbered the section, deleted the reference to Section 4031 of the Business and Professions Code, deleted the second paragraph, and added (5), (b), (c), and (d). Stats. 1970, p. 2999, operative July 1, 1971, included "dentist" as person whose furnishing and purchases of prescription medicines is exempt, renumbered former (5)(c) and (5)(d) as (5)(d) and (5)(e) respectively and added new (5)(c). Stats. 1972, Ch. 877, operative October 1, 1972, added the words "other than dentures," and "and artificial limbs or their replacement parts, for human beings." to part (c). Stats. 1977, Ch. 1245, operative October 1, 1977 through December 31, 1982, changed "hospital" to "health facility" in paragraphs (a)(3) and (a)(4); deleted "prosthetic" in paragraph (b) following "(1) any auditory"; in paragraph (c) added "shall" before "mean", added a colon and "(1)" following "include" and before "sutures"; added a semicolon and "(2)" following "implanted"; added a semicolon following "in the body"; added subparagraphs (3), (4), and added "(5)". In paragraph (d) changed "Hospital" to "Health facility", and Section "1401" to "1250", and added paragraph (f). Stats. 1978, Ch. 229, operative August 1, 1978 through December 31, 1982, added "prosthetic" following "auditory" to (b) (1) added "other than orthodontic devices," following "orthotic devices" added "and replacement parts for such devices" following "body structure" to (c) (3) added "and replacement parts for such devices" following "prosthetic devices" rearranged wording and added rest of sentence following "other than dentures" to (c) (4) added new (f) and changed former (f) to (g). Stats. 1982, Ch. 1589, in effect January 1, 1983, added "(6)" in subdivision (c), and added "and insulin syringes" after "insulin" in subdivision (e). Stats. 1987, Ch. 384, in effect September 3, 1987, at the end of (a)(1), (a)(2), (a)(3), deleted ", or" and substituted a period; in (a)(2) added "or her" after "him", in (b) changed "section mean and include" to "section, means and includes" and changed "intended for such use; provided that 'medicines' do not include" to "intended for that use. However, 'medicines' does not include any of the following", ended (b)(1) and (b)(2) with periods and deleted the commas, in subdivision (c) changed "shall mean and include" to "means and includes any of the following", at the end of (c)(1), (c)(2), (c)(3), (c)(4), replaced semicolons with periods, in (c)(3), changed "for such devices; provided, that" to "for these devices. However, " added "custom-made biomechanical foot orthoses or" before "an integral part" and added a definition for "custom-made biomechanical foot orthoses", in (c)(5) deleted "and" before "(6)", in paragraph (f) substituted "these" for "such", added "or podiatrist" following "physician", and changed "paragraph (a)(1) of this section" to "(1) of subdivision (a)." Stats. 1994, Ch. 857, in effect September 27, 1994, but operative January 1, 1995, added "in this state of" after "sale,", deleted a comma after "consumption", and added a comma after "state of" in subdivision (a); added paragraph (6) to subdivision (a); deleted "and includes" after "means", added a comma after "treatment", and deleted "which is" after "disease and" in subdivision (b); added a comma after "opthalmic" in paragraph (1) of subdivision (b); substituted "that" for "which" after "Articles" in paragraph (2) of subdivision (b); added a comma after "possession" in paragraph (3) of subdivision (b); added paragraph letter designation (A) after "(3)" and added a comma after "support" in paragraph (3) of subdivision (b); created new paragraph (B) in subdivision (c) with the former third sentence of paragraph (3) therein; substituted "those" for "such" after "parts for", and added commas after "opthalmic" and "teeth" in paragraph (4) of subdivision (c). Stats. 2001, Ch. 706 (AB 646), in effect October 11, 2001, operative April 1, 2002, added ", and also includes . . . Safety Code" after "and Safety Code" in subdivision (d).

Antiseptic sudsing skin scrub.—Antiseptic skin cleanser used by hospitals on patients and for preoperative scrubbing by operating personnel and hand cleansing by hospital personnel caring for patients was found to be a tax-exempt medicine since the cleanser, in all such uses, is applied to the human body in the mitigation and prevention of disease. The application of the cleanser by hospital personnel to their own bodies benefits the patient and constitutes a critical component of the patient's treatment. Purdue Frederick Co. v. State Board of Equalization (1990) 218 Cal.App.3d 1021.

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6369.1. Hemodialysis products. There are exempted from the taxes imposed by this part the gross receipts from the sale, and the storage, use or other consumption, in this state of hemodialysis products supplied to a patient on order of a licensed physician and surgeon pursuant to Section 4050.7 or 4227 of the Business and Professions Code and which constitute medicines as defined in Section 6369.

History.—Added by Stats. 1972, Ch. 1336, effective December 22, 1972.

6369.2. deletionWheelchairs, crutches, canes, quad canes, and walkers. 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 wheelchairs, crutches, canes, quad canes, white canes used by the legally blind, and walkers, and replacement parts for these devices, when sold to an individual for the personal use of that individual as directed by a physician.

History.—Added by Stats. 1977, Ch. 1245, effective October 1, 1977, in effect until January 1, 1983, and as of such date repealed, unless a later enacted statute, which is chaptered before January 1, 1983 revises such date. Stats. 1978, Ch. 229, operative August 1, 1978 through December 31, 1982, added "and replacement parts for such devices," following "walkers". Stats. 1992, Ch. 622, in effect September 14, 1992, added "white canes . . . blind," after"quad canes"; substituted "these" for "such" after "parts for".

6369.4. Vehicles for physically handicapped persons. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale, and the storage, use, or other consumption, in this state of items and materials when used to modify a vehicle for physically handicapped persons.

(b) In the case of the sale of a modified vehicle described in subdivision (a) to a disabled person who is eligible to be issued a distinguishing license plate or placard for parking purposes pursuant to Section 22511.5 of the Vehicle Code, there are exempted from the taxes imposed by this part the gross receipts from the sale, and the storage, use, or other consumption attributable to that portion of the vehicle which has been modified for physically handicapped persons.

History.—Added by Stats. 1978, Ch. 959, operative January 1, 1979. Stats. 1987, Ch. 1471, in effect September 30, 1987, operative January 1, 1988, added "(a)" before first paragraph, added subdivision (b).

6369.5. Medical oxygen delivery systems. There are exempted from the taxes imposed by this part the gross receipts from the sale, and the storage, use, or other consumption, in this state of any medical oxygen delivery system, including, but not limited to, liquid oxygen containers, high pressure cylinders, and regulators, when sold, leased, or rented to an individual for the personal use of that individual as directed by a physician.

History.—Added by Stats. 1982, Ch. 1423, in effect September 27, 1982, operative January 1, 1983. Stats. 1984, Ch. 1450, effective September 26, 1984, deleted "(a)" designation, deleted subdivision (b).

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6370. Parent-teacher associations. (a) This section applies to each of the following:

(1) Nonprofit parent-teacher associations chartered by the California Congress of Parents, Teachers, and Students, Incorporated, and equivalent organizations performing the same type of service for public or private schools and authorized to operate within the school by the governing authority of the school.

(2) Nonprofit parent cooperative nursery schools.

(3) Nonprofit associations commonly called The Friends of the Library, and equivalent organizations performing auxiliary services to any library district, municipal library, or county library in the state, which are authorized to operate within the library by the governing authority of the library.

(b) An organization described in subdivision (a) is a consumer of, and shall not be considered a retailer within the provisions of this part with
respect to, tangible personal property which it sells, if the profits are used exclusively in furtherance of the purposes of the organization.

(c) This section shall not be applicable to the state or any of its political subdivisions.

History.—Added by Stats. 1978, Ch. 39, operative July 1, 1978. Stats. 1979, Ch. 765, operative January 1, 1980, added (2). Stats. 1987, Ch. 1213, effective September 27, 1987, operative January 1, 1988, in paragraph (a) added "each of the following" after "to", substituted "Parents, Teachers, and Students", for "P.T.A." renumbered former (2) as (3), and added new (2), in paragraph (b) substituted "if" for "provided".

6370.5. Auxiliary services to museums. (a) This section applies to nonprofit associations and equivalent organizations performing auxiliary services to any city or county museum in the state, which are authorized to operate within the museum by the governing authority of the museum and have held an annual rummage sale for at least five consecutive years immediately preceding the sale referred to in subdivision (b).

(b) An organization described in subdivision (a) is a consumer of, and shall not be considered a retailer within the provisions of this part with respect to, tangible personal property which it sells at an annual rummage sale; provided, the profits are used exclusively in furtherance of the purposes of the organization.

(c) This section shall not be applicable to the state or any of its political subdivisions.

History.—Added by Stats. 1982, Ch. 1168, in effect January 1, 1983.

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6371. Medical identification tags. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage, use, or other consumption of, medical identification tags furnished by an organization which is exempted from taxes under Section 23701.

(b) For purposes of this section, "medical identification tags" includes any tag worn by a person for the purpose of alerting other persons that the wearer of the tag has a medical disability or allergic reaction to certain treatments.

History.—Added by Stats. 1978, Ch. 878, operative January 1, 1979, in effect until September 19, 1980, and as of such date repealed, unless a later enacted statute, which is chaptered before September 19, 1980, revises such date. Stats. 1980, Ch. 222, effective June 25, 1980, extended the September 19, 1980 repeal date indefinitely. Stats. 1993, Ch. 88, in effect January 1, 1994, substituted "identification" for "alert" after "medical" in subdivisions (a) and (b), and substituted "the" for "such" after "wearer of" in subdivision (b).2

6373. Food stamp coupons. (a) 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 tangible personal property the gross receipts of which are received in the form of deletionCalFresh benefits acquired by the purchaser pursuant to the deletionfederal Food and Nutrition Act of 2008 (Chapter 51 (commencing with Section 2011) of Title 7 of the United States Code), including subsequent amendments thereto.

(b) When the gross receipts from a sale of tangible personal property are received partly in the form of cash and partly in the form of deletionCalFresh benefits, the amount of the deletionCalFresh benefits shall be attributed first to gross receipts which would have been subject to the taxes imposed by this part if payment were not received in the form of deletionCalFresh benefits.

(c) A retailer shall not add to the sale price of tangible personal property any amount designated as sales tax, use tax, or sales tax reimbursement when the sale is exempt pursuant to this section.

(d) In lieu of separately accounting for gross receipts which are exempt pursuant to this section and taking a deduction on sales tax returns for the exact amount of those gross receipts, the board may provide, for the efficient administration of this part, an alternative method that retailers may use to compute the allowable deduction for the total amount of deletionCalFresh benefits redeemed during the period for which the return is filed, provided that method results in a deduction the amount of which is at least equal to 2 percent of the total amount of deletionCalFresh benefits redeemed.

(e) This section is repealed on the first day of the first calendar month immediately following the effective date of any federal act which repeals those provisions which prohibit deletionthe state from participating in the deletionfederal Supplemental Nutrition Assistance Program if sales taxes are imposed within that state on purchases made with deletionCalFresh benefits.

History.—Added by Stats. 1987, Ch. 1103, in effect September 25, 1987, operative October 1, 1987. Stats. 1992, Ch. 902, in effect September 25, 1992, operative January 1, 1993, substituted "the board may . . . deduction for" for "a retailer may take a deduction on each sales tax return equal to two percent of" and added ", provided that . . . coupons redeemed" in subdivision (d). Stats. 2011, Ch. 227 (AB 1400), in effect January 1, 2012, substituted "CalFresh benefits" for "food stamp coupons" or "food stamps" throughout the section; substituted "federal Food and Nutrition Act of 2008 (Chapter 51 (commencing with Section 2011) of Title 7 of the United States Code)" for "Food Stamp Act of 1977 (Public Law 95-113)" after "pursuant to the" in subdivision (a); substituted "the" for "any" after "provisions which prohibit" and substituted "federal Supplemental Nutrition Assistance Program" for "food stamp program" after "participating in the" in subdivision (e).

6374. Meals served to low-income elderly persons. 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 meals and food products for human consumption furnished or served to low-income elderly persons at or below cost by a nonprofit organization or governmental agency under a program funded by this state or the United States for such purposes.

History.—Added by Stats. 1972, Ch. 877, operative October 1, 1972.

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6375. Sales by charitable organizations. 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, tangible personal property made, prepared, assembled, or manufactured by organizations formed and operated for charitable purposes qualifying for the exemption provided by Section 214 known as the "welfare exemption," which are engaged in the relief of poverty and distress, and make the sales and donations as a matter of assistance to the purchasers and donees.

History.—Added by Stats. 1959, p. 3582, in effect September 18, 1959. Stats. 1989, Ch. 1447, operative January 1, 1990, substituted "state" for "State", added comma after "assembled", deleted "of the Revenue and Taxation Code" after "Section 214", added "and donations" after "sales", and added "and donees" after "purchasers".

Exemption not applicable when sales made to general public.—Charitable organization did not qualify for charitable sales exemption because it did not sell goods at discounted prices to distressed or needy purchasers. Charitable organization cannot be denied sales tax exemption solely because it has insufficient property to qualify for property tax exemption. Good Shephard Lutheran Home v. State Board of Equalization (1983) 139 Cal.App.3d 876.

Text of section operative until January 1, 2014

6375.5. Sales of new children's clothing to a nonprofit organization. (a) 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, new children's clothing that is sold to a nonprofit organization for its distribution without charge to individuals under 18 years of age.

(b) For purposes of this section, "nonprofit organization" means an organization which meets all of the following criteria:

(1) Is organized and operated for charitable purposes.

(2) Has exempt status under Section 23701d or 23701f.

(3) Furnishes new children's clothing principally as a matter of assistance to recipients in distressed financial conditions.

(c) This section shall remain in effect only until January 1, 2014, and as of that date is repealed.

History.—Added by Stats. 1982, Ch. 708, in effect September 8, 1982, operative January 1, 1983. Stats. 2007, Ch. 317 (AB 538), in effect January 1, 2008, added subdivision letter designation "(a)" before first paragraph, substituted "that" for "which" after "children's clothing", and substituted "individuals . . . of age" for "elementary school children" after "charge to" therein; added subdivision letter designation (b) before former second paragraph; renumbered former subdivisions (a), (b), and (c) as (1), (2), and (3); deleted "Is engaged in the relief of poverty and distress." from former subdivision (c); deleted subdivision letter designation (d); substituted "Furnishes" for "Distributes" in former subdivision (d); and added new subdivision (c).

Text of section operative January 1, 2014

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6375.5. Sales of new children's clothing to a nonprofit organization. (a) 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, new children's clothing that is sold to a nonprofit organization for its distribution without charge to elementary schoolchildren.

(b) For purposes of this section, "nonprofit organization" means an organization that meets all of the following requirements:

(1) Is organized and operated for charitable purposes.

(2) Has exempt status under Section 23701d.

(3) Is engaged in the relief of poverty and distress.

(4) Distributes new children's clothing principally as a matter of assistance to recipients in distressed financial conditions.

(c) This section shall become operative on January 1, 2014.

History.—Added by Stats. 2007, Ch. 317 (AB 538), in effect January 1, 2008.

6376. Construction contracts. [Repealed by Stats. 1968, p. 2602, in effect August 15, 1968, as affected by Stats. 1971, p. 2783, operative July 1, 1972; and by Stats. 1972, Ch. 1406, effective December 26, 1972.]

Note.—See note following Section 6051.

No Exemption for Equipment and Supplies Used In Construction Contract Entered Into for Fixed Price Prior to August 1, 1967.—Plaintiff was awarded a lump-sum fixed price contract with the State Department of Water Resources for the construction of a dam. Subsequent thereto, the state Legislature increased the sales and use tax rate by 1 percent, effective August 1, 1967, and also added Section 6376 to the law providing an exemption from the increase for the sale and use of material and fixtures obligated pursuant to an engineering construction contract entered into for a fixed price prior to the effective date of the rate increase. The Board took the position that the exemption was applicable only to "materials" and "fixtures" as those terms had previously been defined in the Board's Ruling 11 "Construction Contractors." This interpretation excluded from the exemption other tangible personal property such as construction equipment and supplies. Plaintiff sought declaratory relief that the Section 6376 exemption covered equipment and supplies and other alternative relief against the state as a party to the contract. Plaintiff subsequently paid approximately $102,000 in additional taxes, unsuccessfully sought a refund from the Board, and filed a suit for refund. In the consolidated actions, the trial court found that Section 6376 did not exempt the transactions in dispute and denied plaintiff relief against the state as a party to the contract. In affirming the judgment of the lower court denying plaintiff's claim for refund of tax, the court held that the words "materials and fixtures" did not include construction equipment and supplies. The court found that it was reasonable to assume that the Legislature used the words "material and fixtures" advisedly and in the sense which had been given them by long standing administrative ruling and by judicial decision. Even without reference to the administrative ruling, the court observed, by no stretch of the imagination could construction equipment and supplies be considered either "fixtures" or "materials." Further, both the language of Section 6376 and the post enactment history of the section strongly supported the interpretation urged by the Board. The court further held that the construction contract did not provide for additional compensation on account of the increased tax burden, and that plaintiff was not subject to any unconstitutional impairment of its contract with the Department of Water Resources as a result of any additional burden falling on it by virtue of the increased tax. Western Contracting Corp. v. State Board of Equalization (1974) 39 Cal.App.3d 341.

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6376. Fixed price contracts. [Repealed by Stats. 1991, Ch. 1091, in effect January 1, 1992.]

6376.1. Fixed price contracts exemption. (a) On and after July 15, 1991, there is exempted from the taxes imposed by this part an amount equal to an amount that is attributable to a ¼ percent rate of tax with respect to the following:

(1) The gross receipts from the sale of and the storage, use, or other consumption in this state of the following:

(A) Tangible personal property if the seller is obligated to furnish or the purchaser is obligated to purchase, the property for a fixed price pursuant to a contract entered into prior to July 15, 1991.

(B) Materials and fixtures obligated pursuant to an engineering construction contract or a building construction contract entered into for a fixed price prior to July 15, 1991.

(C) For purposes of this section, tangible personal property shall not be deemed obligated pursuant to a contract for any period of time for which any party to the contract has the right to terminate the contract upon notice, whether or not the right is exercised.

(2) A lease of tangible personal property that is a continuing sale of the property for any period of time for which the lessor is obligated to lease the property for an amount fixed by the lease prior to July 15, 1991. For the purposes of this paragraph, the sale or lease of tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not that right is exercised.

(3) The possession of, or the exercise of any right or power over, tangible personal property under a lease that is a continuing purchase of the property for any period of time for which the lessee is obligated to lease the property for an amount fixed by a lease entered into prior to July 15, 1991. For purposes of this paragraph, the storage, use, or other consumption of, or possession of, or exercise of any right or power over, tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not the right is exercised.

(b) From July 15, 1991, to the date on which the taxes imposed by Sections 6051.2 and 6201.2 cease to be operative pursuant to subdivision (b) of Section 6051.2 or subdivision (b) of Section 6201.2, there is exempted from the taxes imposed by this part an amount equal to an amount that is attributable to a one-half of 1 percent rate of tax with respect to the following:

(1) The gross receipts from the sale of and the storage, use, or other consumption in this state of the following:

(A) Tangible personal property if the seller is obligated to furnish or the purchaser is obligated to purchase, the property for a fixed price pursuant to a contract entered into prior to July 15, 1991.

(B) Materials and fixtures obligated pursuant to an engineering construction contract or a building construction contract entered into for a fixed price prior to July 15, 1991.

(C) For purposes of this section, tangible personal property shall not be deemed obligated pursuant to a contract for any period of time for which any party to the contract has the right to terminate the contract upon notice, whether or not the right is exercised.

(2) A lease of tangible personal property that is a continuing sale of the property for any period of time for which the lessor is obligated to lease the property for an amount fixed by the lease prior to July 15, 1991. For the purposes of this paragraph, the sale or lease of tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not that right is exercised.

(3) The possession of, or the exercise of any right or power over, tangible personal property under a lease that is a continuing purchase of the property for any period of time for which the lessee is obligated to lease the property for an amount fixed by a lease entered into prior to July 15, 1991. For purposes of this paragraph, the storage, use, or other consumption of, or possession of, or exercise of any right or power over, tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not the right is exercised.

(c) From July 15, 1991, to the date the taxes imposed by Sections 6051.5 and 6201.5 cease to be operative, there is exempted from the taxes imposed by this part an amount equal to an amount that is attributable to a ½ percent rate of tax with respect to the following:

(1) The gross receipts from the sale of and the storage, use, or other consumption in the state of the following:

(A) Tangible personal property if the seller is obligated to furnish or the purchaser is obligated to purchase, the property for a fixed price pursuant to a contract entered into prior to July 15, 1991.

(B) Materials and fixtures obligated pursuant to an engineering construction contract or a building construction contract entered into for a fixed price prior to July 15, 1991.

(C) For purposes of this section, tangible personal property shall not be deemed obligated pursuant to a contract for any period of time for which any party to the contract has the right to terminate the contract upon notice, whether or not the right is exercised.

(2) A lease of tangible personal property that is a continuing sale of the property for any period of time for which the lessor is obligated to lease the property for an amount fixed by the lease prior to July 15, 1991. For the purposes of this paragraph, the sale or lease of tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not that right is exercised.

(3) The possession of, or the exercise of any right or power over, tangible personal property under a lease that is a continuing purchase of the property for any period of time for which the lessee is obligated to lease the property for an amount fixed by a lease entered into prior to July 15, 1991. For purposes of this paragraph, the storage, use, or other consumption of, or possession of, or exercise of any right or power over, tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not the right is exercised.

(d) On and after July 15, 1991, there is exempted from the taxes imposed by this part an amount equal to the tax imposed by this part on July 14, 1991, with respect to the sale or purchase of any tangible personal property that was exempt prior to the enactment of the act adding this section, with respect to the following:

(1) The gross receipts from the sale of and the storage, use, or other consumption in the state of tangible personal property if the seller is obligated to furnish or the purchaser is obligated to purchase, the property for a fixed price pursuant to a contract entered into prior to July 15, 1991.

(2) A lease of tangible personal property that is a continuing sale of the property for any period of time for which the lessor is obligated to lease the property for an amount fixed by the lease prior to July 15, 1991. For the purposes of this paragraph, the sale or lease of tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not that right is exercised.

(3) The possession of, or the exercise of any right or power over, tangible personal property under a lease that is a continuing purchase of the property for any period of time for which the lessee is obligated to lease the property for an amount fixed by a lease entered into prior to July 15, 1991. For
purposes of this paragraph, the storage, use, or other consumption of, or possession of, or exercise of any right or power over, tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or leased has the unconditional right to terminate the contract or lease upon notice, whether or not the right is exercised.

History.—Added by Stats. 1991, Ch. 85, in effect June 30, 1991. Stats. 1991, Ch. 88, in effect June 30, 1991, substituted "July 15, 1991" for "July 1, 1991" in subdivision (a), paragraphs (1) and (2) of subdivision (a), subdivision (b), paragraphs (1), (2) and (3) of subdivision (b), subdivision (c), paragraphs (1), (2) and (3) of subdivision (c), subdivision (d), and paragraphs (1), (2) and (3) of subdivision (d). Stats. 1991, Ch. 236, in effect July 29, 1991, added "the following:" after "in this state of" in subdivisions (a), (b ) and (c), substituted "(A) Tangible" for "tangible" before "personal property" in paragraph (1) of subdivisions (a), (b) and (c), and substituted "July 14, 1991" for "June 30, 1991" after "by this part on" in subdivision (d). Stats. 2006, Ch. 538 (SB 1852), in effect January 1, 2007, substituted "is" for "are" after ", there" in the first sentence of subdivisions (a), (b), (c), and (d); and added "to" after "shall be deemed not" in the second sentence of paragraph (2) of subdivision (d).

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6376.2. Fixed price contracts exemption. From July 1, 1993, to the date on which the taxes imposed by Sections 6051.6 and 6201.6 cease to be operative, there are exempted from the taxes imposed by this part an amount equal to an amount that is attributable to a ½ percent rate of tax with respect to the following:

(a) The gross receipts from the sale of, and the storage, use, or other consumption in this state of, the following:

(1) Tangible personal property, if the seller is obligated to furnish or the purchaser is obligated to purchase the property for a fixed price pursuant to a contract entered into prior to July 1, 1993.

(2) Materials and fixtures obligated pursuant to an engineering construction contract or a building construction contract entered into for a fixed price prior to July 1, 1993.

For purposes of this subdivision, tangible personal property shall not be deemed obligated pursuant to a contract for any period of time for which any party to the contract has the right to terminate the contract upon notice, whether or not the right is exercised.

(b) A lease of tangible personal property that is a continuing sale of the property for any period of time for which the lessor is obligated to lease the property for an amount fixed by the lease prior to July 1, 1993. For purposes of this subdivision, the sale or lease of tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not that right is exercised.

(c) The possession of, or the exercise of, any right or power over tangible personal property pursuant to a lease that is a continuing purchase of the property for any period of time for which the lessee is obligated to lease the property for an amount fixed by a lease entered into prior to July 1, 1993. For purposes of this subdivision, the storage, use, or other consumption of, or possession of, or exercise of any right or power over, tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not the right is exercised.

History.—Added by Stats. 1993, Ch. 73, in effect June 30, 1993.

6376.5. Meals served to elderly condominium residents. 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 meals and food products for human consumption furnished to and consumed by persons 62 years of age or older residing in a condominium and who own equal shares in a common kitchen facility; provided, that the meals and food products are served to such persons on a regular basis.

History.—Added by Stats. 1980, Ch. 645, operative January 1, 1981.

6377. Property used in manufacturing and related activities. [Repealed operative January 1, 2004 pursuant to Stats. 1993, Ch. 881
(SB 671).]

Note.—Stats. 1993, Ch. 881 (SB 671) which added Section 6377 provided that this section shall cease to be operative on January 1, 2001, or on January 1 of the earliest year thereafter, if the total employment in this state, as determined by the Employment Development Department on the preceding January 1, does not exceed by 100,000 jobs the total employment in this state on January 1, 1994. By January 1, 2003, the employment figure dropped below the 100,000 benchmark, and the statute was repealed effective January 1, 2004.

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6378. Property used in teleproduction and postproduction activities.

(a) 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 of the following:

(1) Tangible personal property purchased for use by a qualified person to be used primarily in teleproduction or other postproduction services.

(2) Tangible personal property purchased for use by a qualified person to be used primarily to maintain, repair, measure, or test any property described in paragraph (1).

(b) This exemption shall not apply to any tangible personal property that is used primarily in administration, general management, or marketing.

(c) For purposes of this section:

(1) "Primarily" means tangible personal property used 50 percent or more of the time in an activity described in subdivision (a).

(2) "Qualified person" means any person that is primarily engaged in teleproduction or other postproduction activities that are described in Code 512191 of the North American Industry Classification System Manual published by the United States Office of Management and Budget, 1997 edition.

(3) "Teleproduction or other postproduction services" means services for film or video that include editing, film and video transfers, transcoding, dubbing, subtitling, credits, close captioning, audio production, special effects (visual or sound), graphics, or animation.

(4) "Tangible personal property" includes, but is not limited to, all of the following:

(A) Machinery and equipment, including component parts.

(B) All equipment or devices used or required to operate, control, regulate, or maintain the machinery, including, without limitation, computers, data processing equipment, and computer software, together with all repair and replacement parts with a useful life of one or more years, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayers or another party.

(5) "Tangible personal property" does not include furniture, inventory, or equipment used to store products.

(d) No exemption shall be allowed under this section unless the purchaser furnishes the retailer with an exemption certificate, completed in accordance with any instructions or regulations as the board may prescribe, and the retailer subsequently furnishes the board with a copy of the exemption certificate. The exemption certificate shall contain the sales price of the machinery and equipment that is exempt pursuant to subdivision (a).

(e) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by the section shall not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of these laws.

(2) The exemption established by this section shall not apply with respect to any tax levied pursuant to Sections 6051.2 and 6201.2, or pursuant to Section 35 of Article XIII of the California Constitution.

(3) The exemption established by this section shall not apply to any sale or use of property that, within one year from the date of purchase, is either removed from California or converted from an exempt use under subdivision (a) to some other use not qualifying for the exemption.

(f) If a purchaser certifies in writing to the seller that the property purchased without payment of the tax will be used in a manner entitling the

seller to regard the gross receipts from the sale as exempt from the sales tax, and within one year from the date of purchase, the purchaser (1) removes that property outside California, (2) converts that property for use in a manner not qualifying for the exemption, or (3) uses that property in a manner not qualifying for the exemption, the purchaser shall be liable for payment of sales tax, with applicable interest, as if the purchaser were a retailer making a retail sale of the property at the time the property is so removed, converted, or used, and the sales price of the property to the purchaser shall be deemed the gross receipts from that retail sale.

History.—Added by Stats. 1998, Ch. 323, in effect August 20, 1998, but operative January 1, 1999.

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6378.1. Rural investment tax exemption. [Repealed effective January 1, 2006 pursuant to Stats. 2000, Ch. 107 (AB 511).]

6379. Sale of used mobilehomes. 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, as defined in Section 18014 of the Health and Safety Code, which is subject to property tax pursuant to Part 13 (commencing with Section 5800) of Division 1, or any used floating home, defined and subject to tax pursuant to Section 229.

History.—Added by Stats. 1979, Ch. 1180, effective January 1, 1980. Stats. 1980, Ch. 285, operative July 1, 1980, substituted "sale of" for "resale of", "any used mobilehome" for "mobilehomes" and substituted the part of sentence following "Code" for former wording. Stats 1982, Ch. 1589, in effect January 1, 1983, substituted "Section 18014" for "Sections 18008 and 18211" after "defined in". Stats. 1986, Ch. 308, effective January 1, 1987, added reference to floating homes.

6379.5. Printed sales messages for goods and services printed to the special order of the purchaser. 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 catalogs, letters, circulars, brochures, and pamphlets consisting substantially of printed sales messages for goods and services printed to the special order of the purchaser and mailed or delivered by the seller, the seller's agent, or a mailing house, acting as the agent for the purchaser, through the United States Postal Service or by common carrier to any other person at no cost to that person who becomes the owner thereof.

History.—Added by Stats. 1986, Ch. 1515, operative on January 1, 1987.

Note.—Stats. 1986, Ch. 1515, required that on or after January 1, 1991, the Legislative Analyst shall conduct a study of the effects of the exemption provided by this act on the state's printing industry during the four preceding years. The study shall include an estimate of the revenue effect, a discussion of whether the exemption has assisted the California printing industry in increasing its share of the direct mail and catalog market, and recommendations for any necessary modifications in the governing statute. The Legislative Analyst shall report to the Legislature on the results of this study no later than June 30, 1991.

6379.8. Mailing lists. (a) 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, mailing lists, if the contract regarding that mailing list restricts the purchaser to a single use of the mailing list.

(b) For purposes of this section, "mailing list" means a written or printed list, series, set, group, or aggregation of names and addresses of, and occasionally, other information concerning persons, including, but not limited to, potential customers or donors, that is intended for use in circulating material by mail. A mailing list may be in the form of a manuscript list, directory, Cheshire tape, Dick tape, gummed labels, index cards, or other similar means of communication. "Mailing list" also includes a magnetic tape or similar device used to produce written or printed names and addresses by electronic or mechanical means.

History.—Added by Stats. 1993, Ch. 498, in effect September 27, 1993, but operative January 1, 1994.

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6380. Space flight property. (a) 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, qualified property for use in space flight.

(b) For purposes of this section:

(1) "Qualified property" means any of the following:

(A) Tangible personal property that has space flight capability, including, but not limited to, an orbital space facility, space propulsion system, space vehicle, satellite, or space station of any kind, and any component thereof.

(B) Tangible personal property to be placed or used aboard any facility, system, vehicle, satellite, or station described in subparagraph (A), regardless of whether that property is to be ultimately returned to this state for subsequent use, storage, or other consumption.

(C) Fuel of a quality that is not adaptable for use in ordinary motor vehicles, but is produced, sold, and used exclusively for space flight.

(2) "Space flight" means any flight designed for suborbital, orbital, or interplanetary travel by a space vehicle, satellite, space facility, or space station of any kind.

(c) The exemption established by this section shall not be denied by reason of a failure, postponement, or cancellation of a launch of a space vehicle, satellite, space facility, or space station of any kind, or the destruction of any launch vehicle or any component thereof, but the exemption shall not apply to any material that is not intended to be launched into space.

History.—Added by Stats. 1993, Ch. 881, in effect October 6, 1993, but operative January 1, 1994. Stats. 1998, Ch. 323, in effect August 20, 1998, but operative January 1, 1999, deleted ", and originating at Vandenberg Air Force Base" after "of any kind" in paragraph (2) of subdivision (b), and deleted former subdivision (d) which provided a sunset date of January 1, 2004.

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Article 2. Exemptions from Sales Tax

6381. United States. There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of any tangible personal property to:

(a) The United States, its unincorporated agencies and instrumentalities;

(b) Any incorporated agency or instrumentality of the United States wholly owned by the United States or by a corporation wholly owned by the United States;

(c) The American National Red Cross, its chapters and branches.

History.—Stats. 1943, p. 2456, operative July 1, 1943, reworded (a) and added (b) and (c). Stats. 1965, p. 5451, operative August 1, 1965, added the last sentence. Stats. 1986, Ch. 308, effective January 1, 1987, deleted reference to rentals payable under a lease as excluded from the exemption.

Contracts for the Improvement of Real Property.—Property sold to and purchased by United States contractors for use in constructing improvements to real property in this state is not exempt from tax under this section. Such property is consumed by the contractor rather than resold to the United States and sales of such property to and purchases by the contractor are thus subject to tax under Section 6384 of the Revenue and Taxation Code. Chula Vista Electric Co. v. State Board of Equalization (1975) 53 Cal.App.3d 445.

Incidence of the Sales Tax for Federal Purposes is on the Purchaser.—Tax cannot be applied to rentals payable under a lease of tangible personal property to the United States, since the incidence of the tax falls upon the United States and it would violate the constitutional immunity of the United States from state taxation. United States v. State Board of Equalization (1976) 536 F.2d 294.

Special Test Equipment Purchased for Resale by U.S. Government Contractors.—Tax does not apply to special test equipment manufactured or purchased by defense contractors and used in the performance of their obligations under defense contracts with the federal government. Legal title and the right to control such equipment passed to the federal government as soon as the equipment was ready for use, the special test equipment was not purchased by the taxpayers at retail but purchased for resale in the regular course of business to the federal government, and any use or storage of the equipment thereafter was that of the federal government in which title immediately vested. Lockheed Aircraft Corp. v. State Board of Equalization; Aerojet General Corp. v. State Board of Equalization (1978) 81 Cal.App.3d 257.

Transmission Lines are Improvements to Real Property.—Transmission lines and supporting installations are properly classified as improvements to real property. Taxpayers, as users of the materials consumed in the performance of the contract to improve real property, were required to pay the use tax. Fischbach & Moore, Inc. v. State Board of Equalization (1981) 117 Cal.App.3d 627.

Leases to U.S. Contractors.—Use tax imposed on leases to private contractors designated as agents of United States was constitutional. Legal incidence of the tax fell on contractors, not United States. United States v. California State Board of Equalization (1982) 683 F.2d 316.

Overhead materials in contracts.—The Board improperly relied on Regulation 1618 in assessing sales and use taxes against aerospace company on supplies and materials the company obtained to perform a research and development contract with the federal government. The court rejected the Board's interpretation of Regulation 1618, which ignored terms of the contract and required proof of allocation of overhead materials to a specific contract in order for title to such materials to vest in the federal government. Aerospace Corporation v. State Board of Equalization (1990) 218 Cal.App.3d 1300.

Tax on leases to United States unconstitutional.—California sales tax scheme manifests a legislative intent that the lessee pay the sales tax. It places the legal incidence of the tax on the United States and violates the United States' immunity from state taxation. United States v. State Board of Equalization (1981) 650 F.2d 1127, aff'd (1982) 456 U.S. 901.

6381.5. United States; leases to. [Repealed by Stats. 1986, Ch. 308, effective January 1, 1987.]

6383. Silver bullion. [Repealed by Stats. 1979, Ch. 1150, operative July 1, 1980.]

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6384. United States contractors. Notwithstanding any other provision of law the tax imposed under this part shall apply to the gross receipts from the sale of any tangible personal property to contractors purchasing such property either as the agents of the United States or for their own account and subsequent resale to the United States for use in the performance of contracts with the United States for the construction of improvements on or to real property in this State.

History.—Stats. 1955, p. 1396, in effect September 7, 1955, added "in this State".

Note.—See also Section 6007.5.

Application of different rules to United States contractors not invalid.—Where the Board distinguishes between contractors generally and United States government contractors in the application of tax, such differences are not invalid because the United States government has a unique tax status. Honeywell, Inc. v. State Board of Equalization (1975) 48 Cal.App.3d 907.

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.

Electrical Transmission Line.—A contract with the United States to replace cable as a component of an electrical transmission line is a contract for the construction of improvements to real estate. Sales of materials to and purchases of materials by contractors for use under such contracts are subject to tax. Chula Vista Electric Co. v. State Board of Equalization (1975) 53 Cal.App.3d 445.

Federal contractors as consumers.—Sales and Use Tax Law does not levy a direct tax on United States, where tax is imposed on transfer of property between supplier and federal contractor. Board regulation classifying federal contractors as consumers of materials and fixtures is consistent with sections 6007.5 and 6384 and does not discriminate between federal contractors and other federal suppliers. Howell, In re (1984) 731 F.2d 624, cert. den._U.S._.

Modification of facilities for separation and distribution of petroleum and natural gas.—Tank settings, pipelines and compressor stations used by a contractor in reconditioning a naval petroleum facility for the United States were taxable fixtures because they were essential to the structure and of a permanent nature. The term "machinery and equipment" excludes "fixtures" as defined under property tax law. C. R. Fedrick, Inc. v. State Board of Equalization (1988) 204 Cal.App.3d 252.

Taxes on Federal Government contractors.—Federal Government contractors are not immune from state taxes simply because the government reimburses all of the contractors' state tax expenditures. Immunity from state taxation is appropriate only when the levy falls directly on the United States itself or on an agency or instrumentality so closely connected to the Federal Government that the two cannot realistically be viewed as separate entities. Also, contrary to its argument that it was not bound by the state's statutes of limitations, the United States, as subrogee of its contractor, is bound by California's statutory claims procedures. (United States v. California (1993) 507 U.S. 746, 123 L.Ed.2d 528.)

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Text of section operative January 1, 2003 through March 31, 2004

6385. Common carriers. (a) There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property, other than fuel and petroleum products, to a common carrier, shipped by the seller via the purchasing carrier's facilities under a bill of lading whether the freight is paid in advance, or the shipment is made freight charges collect, to a point outside this state and the property is actually transported to the out-of-state destination for use by the carrier in the conduct of its business as a common carrier.

(b) There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property, other than aircraft fuel and petroleum products, purchased by a foreign air carrier and transported by the foreign air carrier's facilities to a foreign destination for use by the air carrier in the conduct of its business as a common carrier by air of persons or property. To qualify for this exemption, the foreign air carrier shall furnish to the seller a certificate in writing that the property shall be transported and used in the manner required in this subdivision. The certificate shall be substantially in the form prescribed by the board. A seller is not liable for the sales tax if the seller accepts the certificate in good faith. If the seller does not have the certificate at the time the board requests the seller to submit the certificate to the board, the seller shall be given a reasonable time to request the foreign air carrier to provide the seller with the certificate. The foreign air carrier shall maintain records in this state, such as a copy of a bill of lading, and air waybill or cargo manifest, documenting its transportation of the tangible personal property to a foreign destination.

(c) "Common carrier," as used in this section, with respect to water transportation, shall be deemed to include any vessel engaged, for compensation, in transporting persons or property in interstate or foreign commerce.

(d) "Foreign air carrier," as used in this section, means a foreign air carrier as defined in Section 1301 of Title 49 of the United States Code.

(e) Pursuant to subdivisions (a) and (b), any use of the property by the purchasing carrier, other than that incident to the delivery of the property to the carrier and the transportation of the property by the carrier to an out-of-state destination and subsequent use in the conduct of its business as a common carrier, or a failure of the carrier to document its transporting the property to an out-of-state destination, shall subject the carrier to liability for payment of sales tax as if it were a retailer making a retail sale of the property at the time of that use or failure, and the sales price of the property to it shall be deemed to be the gross receipts from the retail sale.

(f) This section shall become operative on January 1, 2003.

History.—Added by Stats. 1992, Ch. 905 (AB 2396), in effect September 25, 1992, operative January 1, 1998. Stats. 1997, Ch. 615 (AB 366), in effect October 3, 1997, operative January 1, 2003, substituted "2003" for "1998" in subdivision (f).

Note.—Section 3 of Stats. 1997, Ch. 615 (AB 366), requires the Legislative Analyst's Office to report to the Legislature on or before January 1, 2001, on the effect on bunker fuel sales of the sales tax exemption for the sale of fuel and petroleum products to a water common carrier provided by Section 6385 of the Revenue and Taxation Code for the period beginning on and after January 1, 1993, as compared to the period beginning on July 1, 1991, and ending January 1, 1993, when no exemption was allowed for those sales.

Text of section operative April 1, 2004 through January 1, 2014

6385. Common carriers. (a) There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property, other than fuel and petroleum products, to a common carrier, shipped by the seller via the purchasing carrier's facilities under a bill of lading whether the freight is paid in advance, or the shipment is made freight charges collect, to a point outside this state and the property is actually transported to the out-of-state destination for use by the carrier in the conduct of its business as a common carrier.

(b) There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property, other than aircraft fuel and petroleum products, purchased by a foreign air carrier and transported by the foreign air carrier's facilities to a foreign destination for use by the air carrier in the conduct of its business as a common carrier by air of persons or property. To qualify for this exemption, the foreign air carrier shall furnish to the seller a certificate in writing that the property shall be transported and used in the manner required in this subdivision. The certificate shall be substantially in the form prescribed by the board. A seller is not liable for the sales tax if the seller accepts the certificate in good faith. If the seller does not have the certificate at the time the board requests the seller to submit the certificate to the board, the seller shall be given a reasonable time to request the foreign air carrier to provide the seller with the certificate. The foreign air carrier shall maintain records in this state, such as a copy of a bill of lading, and air waybill or cargo manifest, documenting its transportation of the tangible personal property to a foreign destination.

(c) There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of fuel and petroleum products to a water common carrier, for immediate shipment outside this state for consumption in the conduct of its business as a common carrier after the first out-of-state destination. To qualify for the exemption the common carrier shall furnish to the seller an exemption certificate in writing stating the quantity of fuel and petroleum products claimed as exempt which is to be consumed after reaching the first out-of-state destination. That certificate shall bear the purchaser's valid seller's permit number or valid fuel exemption registration number and shall be substantially in the form prescribed by the board. Acceptance in good faith of that certificate shall relieve the seller from liability for the sales tax.

(d) "First out-of-state destination," as used in this section, means the first point reached outside this state by a common carrier in the conduct of its business as a common carrier at which cargo or passengers are loaded or discharged, cargo containers are added or removed, fuel is bunkered, or docking fees are charged.

"First out-of-state destination," as used in this section, also includes the entry point of the Panama Canal when the carrier is only transiting the canal in the conduct of its business as a common carrier.

(e) "Common carrier," as used in this section, with respect to water transportation, shall be deemed to include any vessel engaged, for compensation, in transporting persons or property in interstate or foreign commerce.

(f) "Foreign air carrier," as used in this section, means a foreign air carrier as defined in Section 40102 of Title 49 of the United States Code.

(g) "Immediate shipment," as used in this section, means that the delivery of the fuel and petroleum products by the seller is directly into a ship for transportation outside this state and not for storage by the purchaser or any third party.

(h) Any common carrier claiming exemption under subdivision (c) who is not required to hold a valid seller's permit shall be required to register with the board and obtain a fuel exemption registration number and shall be required to file returns as the board may prescribe if either the board notifies the carrier that returns must be filed or the carrier is liable for taxes based upon consumption of fuel erroneously claimed as exempt under this section. A common carrier required to hold a fuel exemption registration number shall be subject to all applicable provisions of this part, Part 1.5 (commencing with Section 7200), and Part 1.6 (commencing with Section 7251).

(i) A common carrier claiming an exemption under subdivision (c), upon request, shall make available to the board records, including, but not limited to, a copy of a log abstract or a cargo manifest, documenting its transportation of the fuel or petroleum product to an out-of-state destination and the amount claimed as exempt. If the carrier fails to provide these records upon request, the board may revoke the carrier's fuel exemption registration number.

(j) The board may require any carrier claiming an exemption under this section and required to obtain a fuel exemption registration number to place with it that security as the board may determine pursuant to Section 6701.

(k) Pursuant to subdivisions (a), (b), and (c), any use of the property by the purchasing carrier, other than that incident to the delivery of the property to the carrier and the transportation of the property by the carrier to the first out-of-state destination and subsequent use in the conduct of its business as a common carrier, or a failure of the carrier to document its transporting the property to the first out-of-state destination, shall subject the carrier to liability for payment of sales tax as if it were a retailer making a retail sale of the property at the time of that use or failure, and the sales price of the property to it shall be deemed to be the gross receipts from the retail sale.

(l ) On December 31, 2005, the Legislative Analyst's Office (LAO) shall submit a report to the Governor and the Legislature that evaluates the economic impact of the partial sales tax exemption regarding bunker fuel.

(m) This section shall remain in effect only until January 1, 2014, and as of that date is repealed.

History.—Added by Stats. 1943, p. 2457, operative July 1, 1943. Stats. 1963, p. 2272, in effect September 20, 1963,
added the last sentence of the first paragraph. Stats. 1979, Ch. 400, effective January 1, 1980, added (b), (c), and (d). Stats. 1985, Ch. 1028, effective September 27, 1985, substituted "the sale" for "sales" after "receipts from", added "other . . . products" after "personal property", added "facilities" after "carrier's", and deleted last sentence in subdivision (a), added "facilities" after "carriers", and substituted "The" for "Such" before "certificates shall" in subdivision (b), deleted subdivision (c) and added new subdivision (c), added (d) and (e), renumbered former subdivision (d) to become subdivision (f); added subdivision (g), (h), (i), (j), and (k). Stats. 1989, Chapter 230, in effect January 1, 1990, deleted "timely" before "furnish" in second sentence of subdivision (b), substituted third sentence for "Acceptance in good faith of such a certificate shall relieve the seller from liability for the sales tax" in subdivision (b). Stats. 1991, Ch. 85, in effect June 30, 1991, operative July 1, 1991, substituted "required" for "described" after "manner" in the second sentence of subdivision (b); added the fourth sentence in subdivision (b); deleted former subdivision (c) which provided an exemption from sales tax the gross receipts from the sale of fuel and petroleum products to a water, air or rail common carrier; deleted former subdivision (d) which provided a definition of "first out-of-state destination"; relettered former subdivisions (e) and (f) as (c) and (d) respectively; deleted former subdivisions (g), (h), (i) and (j) which provided a definition for "immediate shipment" and specified the requirements for common carriers claiming an exemption for exempt sales of fuel and petroleum products; relettered former subdivision (k) as (e); substituted "and" for a comma after "subdivisions (a)", deleted "and (c)" after "b", substituted "an" for "the first" after "carrier to", and substituted "an" for "the first" after "property to" in subdivision (e). Stats. 1992, Ch. 905 (AB 2396), in effect September 25, 1992, operative January 1, 1993, added subdivisions (c), (d), (g), (h), (i), and (j); relettered former subdivisions (c), (d), and (e) as subdivisions (e), (f), and (k), respectively; substituted "(a), (b), and (c)," for "(a) and (b)," after "Pursuant to subdivisions", and "the first" for "an" after "by the carrier to" and "transporting the property to", in subdivision (k) and added subdivision (l ). Stats. 1997, Ch. 615 (AB 366), in effect October 3, 1997, substituted "2003" for "1998" in subdivision (l ). Stats. 2003, Ch. 712 (SB 808), in effect October 8, 2003, but operative April 1, 2004, substituted "40102" for "1301" after "defined in Section" in subdivision (f); added new subdivision "l " and relettered former subdivision (l ) as (m), and substituted "2014" for "2003" after "until January 1," therein.

Note.—Section 3 of Ch. 615 (AB 366), of Stats. 1997, requires the Legislative Analyst's Office to report to the Legislature on or before January 1, 2001, on the effect on bunker fuel sales of the sales tax exemption for the sale of fuel and petroleum products to a water common carrier provided by Section 6385 of the Revenue and Taxation Code for the period beginning on and after January 1, 1993, as compared to the period beginning on July 1, 1991, and ending January 1, 1993, when no exemption was allowed for those sales.

Note.—Section 14 of Ch. 88, Stats. 1991, amended Section 20 of Ch. 85, Stats. 1991, to change the effective date for the amendments made to Section 6385 by Chapter 85 from July 1, 1991 to July 15, 1991.

Freight charges collect.—The statement "freight charges collect" on the bill of lading was sufficient to comply with the exemption even though there were no actual freight charges except as a matter of form. H-R Truck & Equipment Co. v. State Board of Equalization (1958) 166 Cal.App.2d 378.

Technical compliance insufficient.—The purchasing carrier, in unloading freight car wheels at its shops in California, mounting the wheels onto axles owned by it and reloading the wheel-axle units for shipment to the out-of-state destinations named in the bills of lading, had exercised sufficient dominion over the wheels in California so as to transform its capacity from common carrier to that of buyer. Southern Pacific Equipment Co. v. State Board of Equalization (1971) 16 Cal.App.3d 302.

Place of delivery determines exemption.—Bill of lading must show seller as consignor and show consignment to interstate common carrier at out-of-state destination; exemption does not apply when interstate common carrier takes possession of goods in state as purchaser, not as carrier. Satco, Inc. v. State Board of Equalization (1983) 144 Cal.App.3d 12.

Offset of fuel tax overpayment.—Validity of Regulation 1621 upheld against challenge by taxpayer, a common carrier whose claim for refund of a sales tax overpayment on aircraft fuel was denied because the offset against other underpayments was not claimed in a timely manner, as required by the regulation. Taxpayer, as real party in interest, had standing to bring the action for refund, even though the tax was paid by the vendors of the fuel. Delta Air Lines, Inc. v. State Board of Equalization (1989) 214 Cal.App.3d 518.

Tax liablitity based on actual usage, not estimated.—Although estimated bills of lading may be issued initially, corrected bills must be issued. Since taxpayer failed to do so, it was proper for the Board to assess tax for underpayments of tax based on actual fuel used without offsetting overpayments of tax. Lykes Bros. Steamship Co., Inc. v. State Board of Equalization (1994) 23 Cal.App.4th 1421.

Text of section operative January 1, 2014

6385. Common carriers. (a) There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property, other than fuel and petroleum products, to a common carrier, shipped by the seller via the purchasing carrier's facilities under a bill of lading whether the freight is paid in advance, or the shipment is made freight charges collect, to a point outside this state and the property is actually transported to the out-of-state destination for use by the carrier in the conduct of its business as a common carrier.

(b) There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property, other than aircraft fuel and petroleum products, purchased by a foreign air carrier and transported by the foreign air carrier's facilities to a foreign destination for use by the air carrier in the conduct of its business as a common carrier by air of persons or property. To qualify for this exemption, the foreign air carrier shall furnish to the seller a certificate in writing that the property shall be transported and used in the manner required in this subdivision. The certificate shall be substantially in the form prescribed by the board. A seller is not liable for the sales tax if the seller accepts the certificate in good faith. If the seller does not have the certificate at the time the board requests the seller to submit the certificate to the board, the seller shall be given a reasonable time to request the foreign air carrier to provide the seller with the certificate. The foreign air carrier shall maintain records in this state, such as a copy of a bill of lading, an air waybill, or cargo manifest, documenting its transportation of the tangible personal property to a foreign destination.

(c) "Common carrier," as used in this section, with respect to water transportation, shall be deemed to include any vessel engaged, for compensation, in transporting persons or property in interstate or foreign commerce.

(d) "Foreign air carrier," as used in this section, means a foreign air carrier as defined in Section 40102 of Title 49 of the United States Code.

(e) Pursuant to subdivisions (a) and (b), any use of the property by the purchasing carrier, other than that incident to the delivery of the property to the carrier and the transportation of the property by the carrier to an out-of-state destination and subsequent use in the conduct of its business as a common carrier, or a failure of the carrier to document its transporting the property to an out-of-state destination, shall subject the carrier to liability for payment of sales tax as if it were a retailer making a retail sale of the property at the time of that use or failure, and the sales price of the property to it shall be deemed to be the gross receipts from the retail sale.

(f) This section shall become operative on January 1, 2014.

History.—Added by Stats. 2003, Ch. 712 (SB 808), in effect October 9, 2003, but operative January 1, 2014.

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6386. Out-of-state contractors. There are exempted from the computation of the amount of the sales tax the gross receipts from the sale in this state of tangible personal property to a holder of a valid seller's permit issued under Section 6067 when the property is used by the purchaser outside of this state in his performance of a contract to improve real property and, as a result of such use, is incorporated into and becomes a part of real property located outside of this state. This exemption shall apply only if the purchaser certifies in writing to the seller, in such form as the board may prescribe, that the property will be used in a manner and for a purpose herein specified.

History.—Added by Stats. 1955, p. 588, in effect April 13, 1955. Stats. 1970, p. 1058, in effect November 23, 1970, substituted "Section 6067" for "Section 6068".

6387. Delivery to export packers. There are exempted from the computation of the amount of the sales tax the gross receipts from sales of tangible personal property purchased for use solely outside this State and delivered to a forwarding agent, export packer, or other person engaged in the business of preparing goods for export or arranging for their exportation, and actually delivered to a port outside the continental limits of the United States prior to making any use thereof.

History.—Added by Stats. 1955, p. 2746, in effect September 7, 1955.

Sales for export.—A sale of aircraft parts to a Mexican airline to service its planes is not subject to tax where the parts are shipped by a common carrier to a location on the U.S. Mexican border where an independent freight forwarder, with the assistance of the airline's employees, processed the property through U.S. and Mexican Customs and the parts were moved on a continuous and unbroken journey to the foreign destination other than for unavoidable delays that were incidental to their journey. McDonnel Douglas Corporation v. State Board of Equalization (1992) 10 Cal.App.4th 1413.

6388. New or remanufactured vehicles purchased from out-of-state dealer. Where a new or remanufactured truck, truck tractor, semitrailer, or trailer, any of which has an unladen weight of 6,000 pounds or more, or a new or remanufactured trailer coach or a new or remanufactured auxiliary dolly, is purchased from a dealer located outside this State for use without this state and is delivered by the manufacturer or remanufacturer to the purchaser within this state, and the purchaser drives or moves the vehicle from the manufacturer's or remanufacturer's place of business in this state to any point outside this state within 30 days from and after the date of the delivery, there are exempted from the taxes imposed by this part the gross receipts from the sale of and the storage, use or other consumption of the vehicle within the state, if the purchaser furnishes the following to the manufacturer or remanufacturer:

(a) Written evidence of an out-of-state registration for the vehicle.

(b) The purchaser's affidavit attesting that he or she is not a resident of California and that he or she purchased the vehicle from a dealer at a specified location without the state for use outside this state.

(c) The purchaser's affidavit that the vehicle has been moved or driven to a point outside this state within 30 days of the date of the delivery of the vehicle to him or her.

History.—Added by Stats. 1959, p. 4191, in effect September 18, 1959. Stats. 1963, p. 4016, in effect September 20, 1963, added "new truck, new truck tractor, new semi-trailer, or new trailer, any of which has an unladen weight of 6,000 pounds or more," and "new auxiliary dolly". Stats. 1983, Ch. 1286, in effect January 1, 1984, included "remanufacturers" within the scope of the exemption and made numerous grammatical corrections throughout.

Note.—Stats. 1970, p. 2871, operative July 1, 1971, to December 31, 1974, provides in part, Notwithstanding Section 6388 of the Revenue and Taxation Code, where a new truck trailer with an unladen weight of 6,000 pounds or more is purchased for use without this state and is delivered by the manufacturer to the purchaser within this state, and such purchaser drives or moves such vehicle from the manufacturer's place of business in this state to any point outside this state within 30 days from and after the date of delivery, there are exempted from the taxes imposed by Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), Part 1.6 (commencing with Section 7251), and Part 17 (commencing with Section 37001) of Division 2 of the Revenue and Taxation Code the gross receipts from the sale of and the storage, use or other consumption of such vehicle within the state, provided that the purchaser furnishes the following to the manufacturer:

(a) Written evidence of an out-of-state license and registration for such vehicle.

(b) The purchaser's affidavit attesting that he purchased such vehicle from a dealer at a specified location for use exclusively outside this state, or exclusively in interstate commerce.

(c) The purchaser's affidavit that such vehicle has been moved or driven to a point outside this state within 30 days of the date of the delivery of the vehicle to him.

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6388.2. New camp trailers or housecars purchased from out-of-state dealer. [Repealed by Stats. 1974, Ch. 1010, effective June 30, 1978.]

6388.3. Purchaser affidavit forms. The State Board of Equalization shall prepare and distribute a standard form or forms for the purchaser affidavit required by Sections 6388 and 6388.5.

History.—Added by Stats. 1985, Ch. 1152, effective January 1, 1986.

6388.5. New or remanufactured trailers purchased for out-of-state or interstate commerce use. Notwithstanding Section 6388, whenever a new or remanufactured trailer or semitrailer with an unladen weight of 6,000 pounds or more that has been manufactured or remanufactured outside this state is purchased for use without this state and is delivered by the manufacturer, remanufacturer or dealer to the purchaser within this state, and the purchaser drives or moves the vehicle to any point outside this state within 30 days from and after the date of delivery, or whenever a new or remanufactured trailer or semitrailer with an unladen weight of 6,000 pounds or more that has been manufactured or remanufactured in this state is purchased for use without this state and is delivered by the manufacturer, remanufacturer, or dealer to the purchaser within this state, and the purchaser drives or moves the vehicle to any point outside this state within 75 days from and after the date of delivery, there are exempted from the taxes imposed by Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), and Part 1.6 (commencing with Section 7251) the gross receipts from the sale of and the storage, use or other consumption of the vehicle within the state, if the purchaser or the purchaser's agent furnishes the following to the manufacturer, remanufacturer, or dealer:

(a) (1) Written evidence of an out-of-state license and registration for the vehicle.

(2) In cases where the vehicle is subject to the permanent trailer identification plate program under Section 5014.1 of the Vehicle Code and is used exclusively in interstate or foreign commerce, or both, written evidence of the purchaser's or lessee's United States Department of Transportation number or Single State Registration System filing may be substituted for the written evidence described in paragraph (1).

(b) The purchaser's affidavit attesting that he or she purchased the vehicle from a dealer at a specified location for use exclusively outside this state, or exclusively in interstate or foreign commerce, or both.

(c) The purchaser's affidavit that the vehicle has been moved or driven to a point outside this state within the appropriate period of either 30 days or 75 days of the date of the delivery of the vehicle to him or her.

History.—Added by Stats. 1974, Ch. 1406, effective January 1, 1975. Stats. 1982, Ch. 1223, in effect September 22, 1982, added "which has been manufactured outside this state" before "is purchased," "or dealer" after the first "manufacturer," "or whenever . . . delivery" after the first "delivery," "and" before "Part 1.6," deleted "and Part 17 . . . 37001" after "Section 7251)," and added "or dealer" after the third "manufacturer" in the first sentence; added "or she" after "he" and "or foreign" after "interstate" in subdivision (b); added "the appropriate period of either" after "within", "or 75 days" after "30 days," and "or her" after "him" in subdivision (c); and substituted "the" for "such" before "vehicle" in five places throughout the section. Stats. 1983, Ch. 1286, in effect January 1, 1984, included "remanufacturers" within the scope of the exemption and substituted "if" for "provided that" before the fifth "the purchaser" in the first sentence. Stats. 2001, Ch. 826 (AB 1472), in effect January 1, 2002, substituted "that" for "which" after "pounds or more" twice, and added "or the purchaser's agent" after "if the purchaser" in the first paragraph; added paragraph designation (1) before "Written evidence", and added paragraph (2) in subdivision (a).

Note.—This section was preceded by an uncodified exemption enacted by Stats. 1970, Ch. 1456.

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6390. Rentals included in use tax or outside state. There are exempted from the computation of the amount of the sales tax the rentals payable under a lease of tangible personal property (a) when such rentals are required to be included in the measure of the use tax or (b) when such property is situated outside this state.

History.—Added by Stats. 1965, p. 5451, operative August 1, 1965.

6391. Prior leases. There are exempted from the computation of the amount of the sales tax the rentals payable under a lease of tangible personal property for any period of time for which the lessor is obligated to lease the property for an amount fixed by the lease prior to August 1, 1965, and the lessor did not elect under Sections 6094 or 6244 to pay use tax measured by the amount of the rental charge. The lessor shall be deemed not to be obligated for any period of time for which he has the unconditional right to terminate the lease upon notice, whether or not the right is exercised.

History.—Added by Stats. 1965, p. 5451, operative August 1, 1965. Stats. 1967, p. 2257, in effect November 8, 1967, deleted "unconditionally" preceding "obligated" and added the second sentence.

6395. Cargo containers. [Repealed by Stats. 1979, Ch. 1150, operative July 1, 1980.]

6396. Interstate shipments. There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property which, pursuant to the contract of sale, is required to be shipped and is shipped to a point outside this state by the retailer by means of: (a) facilities operated by the retailer, or (b) delivery by the retailer to a carrier, customs broker or forwarding agent, whether hired by the purchaser or not, for shipment to such out-of-state point.

For purposes of this section, the term "carrier" shall mean a person or firm engaged in the business of tranporting for compensation tangible personal property owned by other persons, and includes both common and contract carriers. The term "forwarding agent" shall mean a person or firm engaged in the business of preparing property for shipment or arranging for its shipment.

History.—Added by Stats. 1970, p. 2872, in effect September 19, 1970.

Actual out-of-state delivery required.—Exemption does not apply where seller delivered vehicles to carrier and obtained buyers' certificates of out-of-state delivery, but delivery actually occurred in state. Engs Motor Truck Co. v. State Board of Equalization (1987) 189 Cal.App.3d 1458.

Forwarding agent's in-state deliveries taxable.—When the deliveries of mobilehomes were made to purchasers in California, the transactions were subject to sales tax, even though the contract of sale required shipment out of state, the seller first delivered the mobilehomes to a forwarding agent, and the purchasers removed the mobilehomes out of state. Pope v. State Board of Equalization (1988) 202 Cal.App.3d 73.

Completion of manufacture and sale by second retailer.—Under particular facts of this case, the change in contractors prior to completion of the full contract did not constitute delivery in California where the second contractor delivered the property out of state by common carrier as the original contract required. Chevron U.S.A. Inc. v. State Board of Equalization (1997) 53 Cal.App.4th 289.

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Article 3. Exemptions from Use Tax

6401. Sales tax applicable. The storage, use, or other consumption in this state of property, the gross receipts from the sale of which the purchaser establishes to the satisfaction of the board were included in the measure of the sales tax, is exempted from the use tax; provided, however, that this exemption does not extend to the possession of, or the exercise of any right or power over, tangible personal property by a lessee under a lease.

History.—Stats. 1965, p. 5451, operative August 1, 1965, added all after the semicolon. Stats. 1978, Ch. 1211, effective January 1, 1979, deleted "are required to be" following "sale of which" and substituted "the purchaser establishes to the satisfaction of the board were".

6402. Property purchased from United States. The storage, use or other consumption in this State of property purchased from any unincorporated agency or instrumentality of the United States, except (a) any property reported to the Surplus Property Board of the United States, or to any agency succeeding to the functions of that board, as surplus property by any owning agency and (b) any property included in any contractor inventory, is exempted from the use tax.

"Surplus property," "owning agency," and "contractor inventory" as used in this section have the meanings ascribed to them in that act of the Congress of the United States known as the "Surplus Property Act of 1944."

History.—Added by Stats. 1945, p. 1725, operative July 1, 1945. Stats. 1947, p. 2029, operative July 1, 1947, added "or to any agency succeeding to the functions of that board," to the first paragraph.

6403. Property donated by retailers. The storage, use, or other consumption in this state of property donated by any seller to any organization described in Section 170(b)(1)(A) of the Internal Revenue Code and located in California, is exempt from the use tax. A museum shall not be a qualifying donee organization under this section unless the museum is a nonprofit museum described in subdivision (c) of Section 6366.4, and uses the donated property exclusively for display purposes within a museum.

History.—Added by Stats. 1988, Ch. 905, in effect September 14, 1988, operative January 1, 1989. Stats 1989, Ch. 1387, in effect October 2, 1989, substituted "seller" for "retailer" in first sentence and added second sentence.

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6404. Property loaned to educational institutions. (a) The loan by any retailer of any tangible personal property to any school district for an educational program conducted by the district is exempt from the use tax.

(b) The loan by any retailer of any motor vehicle to the University of California or to the California State University for the exclusive use in an approved driver education teacher preparation certification program conducted by the university or the state university is exempt from the use tax.

(c) The loan by any retailer of a motor vehicle to be used exclusively for driver training in an accredited private or parochial secondary school in a driver education and training program approved by the State Department of Education as a regularly conducted course of study is exempt from the use tax.

(d) The loan by any retailer of any motor vehicle to a veterans hospital or such other nonprofit facility or institution to provide instruction in the operation of specially equipped motor vehicles to disabled veterans is exempt from the use tax.

(e) If the retailer makes any other use of the property except retention, demonstration, or display while holding it for sale in the regular course of business, the use is taxable to the retailer under Chapter 3 (commencing with Section 6201) as of the time the property is first so used, and the sales price of the property to the retailer is the measure of the tax.

History.—Added by Stats. 1956, p. 141, in effect July 3, 1956. Stats. 1967, p. 1906, in effect November 8, 1967, reworded the section to make applicable to all tangible personal property loaned to a school district for an educational program.

Stats. 1970, Ch. 1546, in effect September 2, 1970, divided former section into paragraphs (a) and (e) and added new paragraphs (b), (c) and (d). Identical amendments were made by Stats. 1970, p. 3141, in effect September 20, 1970. Stats. 1983, Ch. 143, in effect January 1, 1984, substituted "University of California or to the California State University" for "California State Colleges or the University of California" after "to the" and "university or the state university" for "state college or university" in subdivision (b), and deleted "of this part" after "Section 6201" in subdivision (e).

6405. Property purchased in a foreign country. Notwithstanding Section 6246, the storage, use, or other consumption in this state of the first eight hundred dollars ($800) of tangible personal property purchased in a foreign country by an individual from a retailer and personally hand-carried into this state from the foreign country within any 30-day period is exempt from the use tax. This section shall not apply to property sent or shipped to this state.

History.—Added by Stats. 1990, Ch. 1533, in effect September 30, 1990. Stats. 2007, Ch. 342 (AB 1748), in effect January 1, 2008, substituted "eight hundred dollars ($800)" for "four hundred dollars ($400)" after "of the first" and substituted "hand-carried" for "hand carried" after "and personally" in the first sentence.

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6406. Credit for tax paid to another jurisdiction. A credit shall be allowed against, but shall not exceed, the taxes imposed on any person by Chapter 3 (commencing with Section 6201) of this part, by any ordinance enacted pursuant to Part 1.5 (commencing with Section 7200), by any ordinance enacted pursuant to Part 1.6 (commencing with Section 7251), and by any ordinance enacted pursuant to Article 2 (commencing with Section 37021) of Part 17 of this division by reason of the storage, use, or other consumption of tangible personal property in this state to the extent that the person has paid a retail sales or use tax, or reimbursement therefor, imposed with respect to that property by any other state, political subdivision thereof, or the District of Columbia prior to the storage, use, or other consumption of that property in this state. The credit shall be apportioned to the taxes against which it is allowed in proportion to the amounts of those taxes.

A credit, otherwise permitted by the foregoing provisions of this section, shall not be allowed against taxes which are measured by periodic payments made under a lease, to the extent that the taxes imposed by any other state, political subdivision thereof, or the District of Columbia were also measured by periodic payments made under a lease for a period prior to the storage, use, or other consumption of the property in this state.

History.—Added by Stats. 1966, p. 176, in effect July 1, 1967. Stats. 1967, p. 2062, in effect November 8, 1967, added the second paragraph. Stats. 1968, p. 1796, in effect November 13, 1968, added the provision relating to "Article 2 (commencing with Section 37021) of Part 17." Stats. 1969, p. 117, in effect November 10, 1969, added the provision relating to "Part 1.6 (commencing with Section 7251)".

6407. Prior leases. The possession of, or the exercise of any right or power over, tangible personal property under a lease of such property is exempt from the use tax for any period of time for which the lessee is obligated to lease the property for an amount fixed by the lease prior to August 1, 1965. The lessee shall be deemed not to be obligated for any period of time for which he has the unconditional right to terminate the lease upon notice, whether or not the right is exercised.

History.—Added by Stats. 1967, p. 2257, in effect November 8, 1967.

6408. Medical health information. The storage, use, or other consumption in this state of medical health information literature purchased by any organization formed and operated for charitable purposes which qualifies for the exemption provided by Section 214 (known as the "welfare exemption"), which is engaged in the dissemination of medical health information, is exempted from the use tax; provided, however, that such purchases are made from a national office, or another branch of that national office, of the same organization.

History.—Added by Stats. 1978, Ch. 26, effective March 3, 1978.

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6409. Health and safety materials. The storage, use, or other consumption in this state of health and safety educational materials and insignia routinely sold in connection with health and safety and first aid classes, purchased or sold by any national organization formed and operated for charitable purposes which qualifies for the exemption provided by Section 214 (known as the "welfare exemption"), which is engaged in the dissemination of health and safety information, is exempted from the use tax; provided, however, that such purchases are made from a national office or another branch or chapter of such national office of the same organization.

History.—Added by Stats. 1978, Ch. 26, effective March 3, 1978.

6410. Trailers and semitrailers. The storage, use, or other consumption in this state of new or used trailers or semitrailers which involves the moving or operation laden of those trailers or semitrailers in accordance with a one-trip permit issued pursuant to Section 4003.5 of the Vehicle Code is exempted from the use tax.

History.—Added by Stats. 1986, Ch. 715, effective September 15, 1986.

6411. Railroad equipment parts purchased outside this state.

(a) The storage, use, or other consumption in this state of tangible personal property becoming a component part of any railroad equipment in the course of repairing, cleaning, altering, or improving that railroad equipment outside of this state, and charges made for labor and services rendered with respect to that repairing, cleaning, altering, or improving, are exempt from the use tax.

(b) For purposes of this section, "railroad equipment" includes locomotives, freight and passenger cars, maintenance of way equipment, and any other equipment riding on flanged wheels and owned or used by a common carrier engaged in interstate or foreign commerce, or by any person for the purpose of leasing that equipment to a common carrier engaged in interstate or foreign commerce.

History.—Added by Stats. 1996, Ch. 550, in effect September 16, 1996.

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Article 4. Exemption Certificates

6421. Liability of purchaser. (a) If a purchaser certifies in writing to a seller that the property purchased will be used in a manner or for a purpose entitling the seller to regard the gross receipts from the sale as exempted by this chapter from the computation of the amount of the sales tax, and uses the property in some other manner or for some other purpose, the purchaser shall be liable for payment of sales tax as if he were a retailer making a retail sale of the property at the time of such use, and the cost of the property to him shall be deemed the gross receipts from such retail sale. The certificate shall relieve the seller from liability for the sales tax only if it is taken in good faith.

(b) For purposes of this section, "use" is the same as defined in Section 6009 without the exclusion defined in Section 6009.1.

History.—Added by Stats. 1953, p. 2722, in effect September 9, 1953. Stats. 1977, Ch. 607, lettered existing first paragraph as (a), added "The certificate shall relieve the seller from liability for the sales tax only if it is taken in good faith." and added new paragraph (b). Stats. 1989, Ch. 654, in effect January 1, 1990, deleted "in the first paragraph of" before "Section 6009.1" in subdivision (b).

Buyers' certificates of out-of-state delivery.—Where buyers certified trucks they purchased were delivered out of state, but trucks were actually delivered in state, sales tax liability was not shifted to the buyers under Section 6421 because the buyers only certified that they took delivery out of state, not that they used the property for an exempt purpose following delivery. Engs Motor Truck Co. v. State Board of Equalization (1987) 189 Cal.App.3d 1458.

6422.1. Vehicles; exemption certificates. The board may provide for exemption certificates and other tax clearance certificates to be issued by it or by retailers selling vehicles as defined in Article 1 (commencing with Section 6271) of Chapter 3.5, commercial coaches as defined in Section 18001.8 of the Health and Safety Code or mobilehomes as defined by Section 18008 of the Health and Safety Code. The certificates shall be used to allow a completion of registration of a vehicle by the Department of Motor Vehicles or a commercial coach or mobilehome by the Department of Housing and Community Development. The certificates may indicate that the board finds that no use tax is due or is likely to become due with respect to the storage, use, or other consumption of the vehicle, commercial coach, or mobilehome, or that the tax has been paid or is to be paid in a manner not requiring the withholding of a registration or transfer of registration. The certificates shall be in such form as the board may prescribe and shall be executed, issued and accepted for clearance of registration on such conditions as the board may prescribe. The issuance, alteration, forgery, or use of any such certificate in a manner contrary to the requirements of the board constitutes a misdemeanor.

History.—Added by Stats. 1965, p. 5452, operative August 1, 1965. Stats. 1981, Ch. 975, in effect January 1, 1982, added "or mobilehomes . . . Safety Code" after "part" in the first sentence, "or a mobilehome . . . Development" after "Vehicles" in the second sentence, and "or mobilehome" after "vehicle" in the third sentence. Stats. 1982, Ch. 1589, in effect January 1, 1983, added, "commercial coaches . . . Code" before "or mobilehomes" in the first sentence, "commercial coach or" before "mobilehome" in the second sentence, and "commercial coach" before "or mobilehome" in the third sentence. Stats. 1984, Ch. 144, effective January 1, 1985, added "(commencing with Section 6271)" after "Article 1," added "of this part" after "Chapter 3.5."

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6423. Exemption certificate; Federal excise tax on diesel fuel. (a) A purchaser certifying under subparagraph (B) of paragraph (4) of subdivision (c) of Section 6011 or subparagraph (B) of paragraph (4) of subdivision (c) of Section 6012 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 shall do so in a form prescribed by the board.

(b) If the purchaser provides the certificate referred to in subdivision (a) and uses the fuel in a manner that does not entitle the purchaser to a direct refund or credit against his or her income tax for the federal excise tax paid or if the purchaser does not receive such a refund or credit, the purchaser shall be liable for sales or use tax measured by the amount of federal excise tax paid to the extent the seller has not remitted sales or use tax measured by that amount. The certificate shall relieve the seller from liability for any sales or use tax due only if it is taken in good faith.

(c) Any person, including any officer or employee of a corporation, who certifies under subparagraph (B) of paragraph (4) of subdivision (c) of Section 6011 or subparagraph (B) of paragraph (4) of subdivision (c) of Section 6012 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 on fuel when that person knows at the time of purchase that he or she shall not be entitled to the refund or credit is liable to the state for the amount of sales or use tax that would be due if he or she had not so certified. In addition to the tax, interest, and other penalties, the person shall be liable to the state for a penalty of 10 percent of the tax or five hundred dollars ($500), whichever is greater, for purchases made for personal gain or to evade payment of taxes.

(d) Any person, including any officer or employee of a corporation, who, for the purpose of evading payment to the seller of a portion of the tax applicable to the transaction, certifies under subparagraph (B) of paragraph (4) of subdivision (c) of Section 6011 or subparagraph (B) of paragraph (4) of subdivision (c) of Section 6012 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 on fuel when that person knows at the time of purchase that he or she is not entitled to such a refund or credit is guilty of a misdemeanor punishable as provided in Section 7153.

History.—Added by Stats. 1988, Ch. 500, in effect August 22, 1988, operative January 1, 1989. Stats. 1989, Ch. 654, in effect January 1, 1990, deleted "diesel" before "fuel" in subdivisions (b), (c) and (d).

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