Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2012
 

Transactions And Use Tax Regulations

Article 20. Transactions (Sales) and Use Taxes


Regulation 1821. Foreword.

Reference: Sections 7251–7273, inclusive, Revenue and Taxation Code.

Transactions (sales) and use taxes imposed by certain special taxing districts are administered by the State Board of Equalization. These taxes incorporate most of the provisions of the State Sales and Use Tax Law and generally have the same tax base as the Bradley-Burns uniform local sales and use taxes adopted in accordance with the provisions of Part 1.5 of Division 2 of the Revenue and Taxation Code.

The primary differences between the transactions (sales) and use taxes and the state and Bradley-Burns uniform local sales and use taxes are:

(1) The transactions (sales) tax of a district is not applicable to the gross receipts from the sale or lease of tangible personal property which the seller or the lessor is obligated to furnish for a fixed price pursuant to a contract entered into prior to the operative date of the district transactions (sales) and use taxes ordinance.

(2) The transactions (sales) tax does not apply to gross receipts from the sale of property to be used outside the district when the property is shipped to a point outside the district, pursuant to the contract of sale, by delivery to such point by the retailer or his agent, or by delivery by the retailer to a carrier for shipment to a consignee at such point. If thereafter the purchaser brings the property into the district for use there and uses it there, the district use tax may apply and the purchaser may be required to pay that tax.

(3) The use tax of a district is not applicable to the storage, use or other consumption in the district of tangible personal property which the purchaser or lessee is obligated to purchase or lease for a fixed price pursuant to a contract or lease entered into prior to the operative date of the district transactions (sales) and use tax ordinance.

(4) The district use tax must be collected by retailers engaged in business in the district and paid to the board when the retailer ships or delivers the property sold into the district or participates within the district in making the sale. The state and Bradley-Burns uniform local use tax must be collected by retailers engaged in business in this state.

(5) Beginning January 1, 1988, retailers of vehicles, aircraft, or undocumented vessels described in paragraph (c)(4) of Regulation 1827 (18 CCR 1827) are engaged in business in a district imposing a state-administered transactions use tax and are required to collect the use tax from the purchaser and pay it to the board when such vehicles, aircraft or undocumented vessels are registered or licensed in that district.

The district use tax applies to the storage, use or other consumption in the district of tangible personal property purchased after the operative date of the ordinance for storage, use or other consumption in the district.

History: Adopted January 6, 1970, effective February 25, 1970.

Amended March 9, 1970, effective March 10, 1970.

Amended December 12, 1973, effective January 18, 1974.

Amended June 22, 1976, effective July 25, 1976.

Amended December 6, 1978, effective January 28, 1979. Adopts Section (b)(3) which adds Santa Cruz Metropolitan Transit District to the transit districts imposing the transactions and use tax.

Amended July 27, 1983, effective October 13, 1983. Deleted "(a) In General" and subdivision (b).

Amendments adopted June 5, 1991, effective August 11, 1991.

Amended the first paragraph to make clear that the Transactions (Sales) and Use Tax Law is not imposed only for transit purposes.

Added paragraph (5) to explain the primary differences between the transactions and use taxes and the state and the Bradley-Burns Uniform Local sales and use taxes.


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Regulation 1822. Place of Sale for Purposes of Transactions (Sales) and Use Taxes.

Reference: Sections 6012.6, 6015, 6359, 6359.45, and 7263, Revenue and Taxation Code.

Auctioneers, see Regulation 1565.

Vending Machine Operators, see Regulation 1574.

(a) IN GENERAL.

(1) RETAILERS HAVING ONE PLACE OF BUSINESS. For the purposes of the Transactions (Sales) and Use Tax Law, if a retailer has only one place of business in this state, all California retail sales of that retailer occur at that place of business unless the tangible personal property sold is delivered by the retailer or his or her agent to an out-of-state destination, or to a common carrier for delivery to an out-of-state destination.

(2) RETAILERS HAVING MORE THAN ONE PLACE OF BUSINESS. If a retailer has more than one place of business in this state which participate in the sale, the sale occurs at the place of business where the principal negotiations are carried on. If this place is the place where the order is taken, it is immaterial that the order must be forwarded elsewhere for acceptance, approval of credit, shipment, or billing. For the purposes of this regulation, an employee's activities will be attributed to the place of business out of which he or she works.

(3) PLACE OF PASSAGE OF TITLE IMMATERIAL. If title to the tangible personal property sold passes to the purchaser in California, it is immaterial that title passes to the purchaser outside the taxing jurisdiction in which the retailer's place of business is located.

(b) PLACE OF SALE IN SPECIFIC INSTANCES.

(1) VENDING MACHINE OPERATORS. The place of sale is the place at which the vending machine is located. If an operator purchases property under a resale certificate or from an out-of-district seller without payment of tax and the operator is the consumer of the property, for purposes of the use tax, the use occurs at the place where the vending machine is located.

(2) ITINERANT MERCHANTS. The place of sale with respect to sales made by sellers who have no permanent place of business and who sell from door to door for their own account shall be deemed to be at the location of the seller's permanent address as shown on the seller's permit issued to him or her. If this address is in a district imposing transactions (sales) and use taxes, the district transactions (sales) tax applies with respect to all sales unless otherwise exempt (i.e., when the property sold is shipped or delivered to a purchaser outside the district for use outside the district). If the address is outside such a district but the merchant solicits orders in a district imposing transactions (sales) and use taxes, he or she must collect the district use tax with respect to property sold and delivered or shipped to customers in the district.

(3) RETAILERS UNDER SECTION 6015. Persons regarded as retailers under Section 6015(b) are regarded as selling tangible personal property through salespersons, representatives, peddlers, canvassers, or agents who operate under or obtain the property from them. The place of sale is the place from which the salesperson, representative, peddler, canvasser, or agent who makes the sale operates. If this place is in a district imposing transactions (sales) and use taxes, the district transactions (sales) tax applies to all retail sales unless otherwise exempt (i.e., when property is shipped or delivered to a purchaser outside the district for use outside the district). If this place of business is outside such a district, but if any salesperson or representative solicits orders in a district imposing transactions (sales) and use taxes, the district use tax applies and must be collected with respect to property sold and delivered or shipped to customers in the district.

(4) AUCTIONEERS. The place of sale by an auctioneer is the place at which the auction is held.

(5) OUT-OF-STATE RETAILERS WHO MAINTAIN A STOCK OF TANGIBLE PERSONAL PROPERTY IN CALIFORNIA. If an out-of-state retailer does not have a place of business in this state other than a stock of tangible personal property, the place of sale is the location of the stock of property from which delivery or shipment is made.

(6) FACTORY-BUILT SCHOOL BUILDINGS. The place of sale or purchase of a factory-built school building (relocatable classroom) as defined in paragraph (c)(4)(B) of Regulation 1521 (18 CCR 1521). "Construction Contractors", is the place of business of the retailer of the factory-built school building regardless of whether sale of the building includes installation or whether the building is placed upon a permanent foundation.

History: Adopted January 6, 1970, effective February 25, 1970.

Amended May 9, 1984, effective September 12, 1984. Subdivision (b)(1) completely revised.

Amendments adopted June 5, 1991, effective August 18, 1991.

Amended to reference Regulation 1521(c)(4)(B) and to explain place of sale.

Amended February 19, 1992, effective July 1, 1992.

Amended subdivision (b)(3) to delete reference to last paragraph of Section 6015, Revenue and Taxation Code; Amended (a)(1) to clarify that paragraph applies only to the California retail sales of a retailer who has only one place of business in the state.


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Regulation 1823. Application of Transactions (Sales) Tax and Use Tax

Reference: Sections 6008, 6009.1, 6203, 6352, 6385, 7202, 7203, 7261, 7262, and 7263,

Revenue and Taxation Code.

(a) TRANSACTIONS (SALES) TAX.

(1) IN GENERAL. Except as stated below, in any case in which state sales tax is applicable, state-administered transactions (sales) tax is also applicable, if the place of sale is in a district imposing such a tax. In any case in which state sales tax is inapplicable, state-administered transactions (sales) tax is also inapplicable. Thus, if title to the property sold passes to the purchaser at a point outside this state, state-administered transactions (sales) tax does not apply regardless of participation in the transaction by a California retailer. As explained in paragraph (b), the use tax may apply. If so and if the retailer is engaged in business in the taxing jurisdiction, he is required to collect the use tax and pay it to the board when the retailer ships or delivers the property sold into the district or participates within the district in making the sale. Additionally, on and after January 1, 1988, any retailer of vehicles subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, or undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code, is a retailer engaged in business in any district where a transactions (sales) and use tax is imposed and is required to collect the use tax from the purchaser and pay it to the board when the vehicle, aircraft or undocumented vessel is registered or licensed in that district.

Gross receipts from sales of tangible personal property subject to the transactions (sales) tax shall include delivery charges, when such charges are subject to the state sales or use tax.

(2) EXCEPTIONS. State-administered transactions (sales) tax does not apply to gross receipts from sales of tangible personal property:

(A) To certain operators of aircraft common carriers to be used or consumed directly and exclusively in the operation of such aircraft common carriers and principally outside the county of sale;

(B) To be used outside the district when the property sold is shipped to a point outside the district pursuant to the contract of sale, by delivery to such point by the retailer or his agent, or by delivery by the retailer to a carrier for shipment to a consignee at such point. If the purchaser uses the property in a district imposing transactions (sales) and use taxes, the use tax may apply;

(C) If the seller is obligated to furnish the property for a fixed price pursuant to a contract entered into prior to the operative date of the ordinance imposing the transactions (sales) and use taxes; or

(D) Which are continuing sales of such property under a lease of such property, if the lessor is obligated to lease the property for an amount fixed by the lease prior to the operative date of the ordinance imposing the transactions (sales) and use taxes.

(b) USE TAX.

(1) IN GENERAL. State-administered district use tax applies if tangible personal property is purchased from a retailer on or after the operative date of the district taxing ordinance and the property is purchased for use in the district and is actually used there, provided any one of the following conditions exist:

(A) Title to the property purchased passes to the purchaser at a point outside this state;

(B) The place of sale is in this state but not in a district having state-administered transactions (sales) and use taxes;

(C) The place of sale is in a district having state-administered transactions (sales) and use taxes and there is an exemption of the sale of the property from the transactions (sales) tax but there is no exemption of the use of the property from the use tax;

(D) The property is purchased under a valid resale certificate; or

(E) The place of sale is in a district having state-administered transaction (sales) and use taxes, but at a rate lower than the rate (or combined rate) in effect in the district (or districts) in which the property is purchased for use and actually used. The person liable for the use tax is entitled to a credit against the use tax liability equal to but not exceeding the transactions (sales) tax or transactions tax reimbursement paid to a district or to a retailer in the district where the sale occurred. If the taxable use occurs in two or more districts whose boundaries are overlapping or coextensive, the amount of the credit shall be applied as follows: first, against the use tax liability imposed in the district having the earliest enacted state-administered transactions (sales) and use tax ordinance; second, against the use tax liability imposed in the district having the next earliest state-administered transactions (sales) and use tax ordinance; and so forth, until the amount of the credit is exhausted.

(2) EXCEPTIONS. State-administered district use tax does not apply to:

(A) The storing, keeping, retaining, processing, fabricating or manufacturing of tangible personal property for subsequent use solely outside the state or for subsequent use solely outside any district imposing a use tax;

(B) The storage, use or other consumption of tangible personal property, the gross receipts from the sale of which have been subject to a transactions (sales) tax by the district in which the tangible personal property is stored, used, or consumed;

(C) The storage, use or other consumption of tangible personal property by certain operators of aircraft common carriers;

(D) The storage, use or other consumption of tangible personal property if the purchaser is obligated to purchase the property for a fixed price pursuant to a contract entered into prior to the operative date of the ordinance; or

(E) The possession of, or the exercise of any right or power over, tangible personal property under a lease which is a continuing purchase of such property for any period of time for which the lessee is obligated to lease the property for an amount fixed by a lease prior to the operative date of the ordinance.

(c) LEASES. When a lease is a continuing sale or a continuing purchase, the use tax, rather than the sales tax, applies unless the lease is to the United States or an agency or instrumentality thereof, insurance company, federally chartered bank exempt from direct state taxation by federal law (such as a federal reserve bank, or federal home loan bank),1 or other lessee exempted from use tax, and the lessor is required to collect the use tax with respect to rentals collected while the property is in the district. If the lessee is exempted from use tax, the sales tax may apply. In the absence of evidence to the contrary, it shall be assumed that the use of the property by the lessee occurs in the taxing district in which the lessor delivers, or to which the lessor ships the property to the lessee.

If a lease is a continuing sale, or a continuing purchase, for the purposes of state tax, it shall be a continuing sale, or a continuing purchase, for the purposes of the transactions (sales) and use taxes. If a lease is neither a continuing sale nor a continuing purchase for the purposes of the state tax, it shall be neither a continuing sale nor a continuing purchase for the purposes of the transactions (sales) and use taxes.

If a person purchases property state tax paid prior to the operative date of the district transactions (sales) and use tax ordinance and after such date leases the property in substantially the same form as acquired, neither the transactions (sales) tax nor use tax of the district is applicable to the sales price of the property to the lessor or to the rentals.

(d) WHEN PROPERTY IS DEEMED OBLIGATED PURSUANT TO A CONTRACT OR LEASE. For the purposes of this regulation, 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 such right is exercised.

History: Adopted January 6, 1970, effective February 25, 1970.

Amended March 9, 1970, effective March 10, 1970.

Amended December 12, 1973, effective January 18, 1974.

Amended April 9, 1980, effective June 19, 1980. In (c), deleted "bank" in the first sentence, added "federally chartered bank . . . home loan bank, 1" and added footnote 1.

Amended June 26, 1985, effective September 19, 1985. Adds subdivision (b)(1)(E) which explains how the credit is to be applied if there is a difference in rates of tax and if the tax is imposed in areas where more than one district transactions
(sales) and use tax is imposed. In subdivision (b)(2)(B), deletes the phrase

"under any state administered transactions (sales) and use tax ordinance" and adds the phrase "by the district in which the tangible personal property is stored, used, or consumed".

Amended March 30, 1988, effective June 16, 1988. Amended subdivisions (a)(1), (2) and (b)(2) to remove references to an exemption which expired on December 31, 1987. Amended subdivision (a)(1) to add provision which defines retailers of certain vehicles, aircraft and undocumented vessels as doing business in districts imposing a transactions tax if such vehicles, aircraft and undocumented vessels are registered or licensed in that district pursuant to AB 2446 (Chapter 308, Statutes of 1987).

Amended April 5, 1989, effective June 16, 1989. Amendments to regulation made to delete references to repealed sections of the Harbors and Navigation Code and replace them with references to the appropriate sections of the Vehicle Code.

1 State banks and national banking associations are subject to sales and use taxes.


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Regulation 1823.4. Place of Delivery of Tangible Personal Property Generally.

Reference: Sections 7261 and 7262, Revenue and Taxation Code.

(a) IN GENERAL. A retailer engaged in business in a district (except retailers of certain vehicles, aircraft and vessels) is not required to collect use tax from the purchaser of tangible personal property unless the retailer ships or delivers the property into the district or participates within the district in making the sale of the property. The purpose of this regulation is to provide a sample declaration to be signed by a purchaser that retailers may use to support shipment or delivery of tangible personal property (other than vehicles, aircraft and vessels) to a purchaser outside of a district in order to be relieved of the obligation to collect the use tax imposed by that district. This regulation does not apply to the transactions (sales) tax. Under this regulation, the purchaser will be liable for and pay the use tax if the property is principally stored, used or otherwise consumed within a district.

(b) DELIVERY OUTSIDE DISTRICT. For the purposes of the use tax, when a retailer ships or delivers tangible personal property to a purchaser's principal residence address or principal business address outside of a district, the retailer is relieved of the obligation to collect the use tax imposed by that district by accepting in good faith a declaration under penalty of perjury, signed by the buyer, stating that such address is, in fact, the buyer's principal place of residence or principal place of business; that the buyer's principal place of residence or principal place of business is located outside the boundaries of the district; and that the property was purchased for use at a designated point or points outside of a district imposing a district use tax.

(c) RECORDS. Any seller claiming exemption under this regulation must retain in its records the declaration executed in compliance with subdivision (d).

(d) FORM OF DECLARATION. The declaration shall be in substantially the following form:

DECLARATION

I HEREBY CERTIFY THAT:

(1) The

(here insert description of tangible personal property purchased)

purchased from

(insert name of seller)

was delivered to the following address:

 

 

(2) The above address is located outside the (name of district) _____________________________ District.

(3) The above address is my principal place of residence or principal place of business.

(4) The tangible personal property listed above is purchased for use at the following location(s), which is outside the (name of district) ________________________ District.

Street, City, State, Zip Code:

I understand that this declaration is for the purpose of allowing the above named seller to treat the sale of the above-described tangible personal property as exempt from the use tax imposed by the (name of district) ______________________________________ District.

If the property is principally stored, used or otherwise consumed in that district, the purchaser shall be liable for and pay the use tax.

I have personal knowledge of the statements of fact contained in this declaration. I declare under penalty of perjury under the laws of the State of California and the United States that the foregoing statements are true and correct.

 

Name of Purchaser

 

Name and Title of Authorized Agent (if applicable)

 

Signature of Purchaser of Authorized Agent

 

Date


History: Adopted October 25, 2005, effective January 26, 2006.


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Regulation 1823.5. Place of Delivery of Certain Vehicles, Aircraft and Undocumented Vessels.

Reference: Sections 7261 and 7262, Revenue and Taxation Code.

(a) IN GENERAL. This regulation relates to the place of delivery of certain vehicles, aircraft, and undocumented vessels for the purpose of the transactions (sales) tax only. It does not apply to the use tax. Thus, even though the sale of the vehicle, aircraft or undocumented vessel is exempt from transactions (sales) tax under this regulation, the use tax will apply if the property is principally stored, used or otherwise consumed within the district. Beginning January 1, 1988, if the vehicle, aircraft or undocumented vessel is licensed or registered in any district imposing the tax, the retailer is considered as engaged in business in that district and is required to collect the use tax and pay it to the state.

(b) DELIVERY OUTSIDE DISTRICT. For the purposes of the transactions (sales) tax, "delivery to a point outside the district" shall be satisfied:

(1) With respect to vehicles (other than commercial vehicles) subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, and undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code by registration to an out-of-district address and by a declaration under penalty of perjury, signed by the buyer, stating that such address is, in fact, his principal place of residence, and

(2) With respect to commercial vehicles by registration to a place of business outside the district and a declaration under penalty of perjury, signed by the buyer, that the vehicle will be operated from that address.

(c) DEFINITION—"COMMERCIAL VEHICLE." For the purposes of this regulation, "commercial vehicle" means a vehicle of a type required to be registered under the Vehicle Code used or maintained for the transportation of persons for hire, compensation, or profit or designed, used, or maintained primarily for the transportation of property. Passenger vehicles which are not used for the transportation of persons for hire, compensation, or profit are not commercial vehicles.

(d) RECORDS. Any seller claiming exemption under this regulation must retain in his records the declaration executed in the prescribed form. If the exemption claimed relates to the sale of a vehicle, the seller also must retain in his records a copy of either the Department of Motor Vehicles report of sale or other documentary evidence showing the out-of-district address to which the vehicle is registered .

(e) FORM OF DECLARATION. The declaration shall be in substantially the following form:

(1) For vehicles (other than commercial vehicles), aircraft and undocumented vessels:


DECLARATION

(Vehicles, Aircraft, Undocumented Vessels)

I HEREBY CERTIFY THAT:

(1) The

(here insert description of vehicle, aircraft or undocumented vessel giving name of manufacturer and type) purchased from
(insert name of seller)

will be registered to the following address:

 

 

(2) The above address is outside the (name of district)________________________________ District.

(3) The above address is my principal place of residence (or, in the case of
a corporation, principal place of business).

(4) The vehicle, aircraft or undocumented vessel when not in use will be kept, garaged, hangared or docked at:

 

 

(5) The vehicle, aircraft or undocumented vessel will be stored, used or otherwise consumed principally outside the (name of district) _________________________ District.

(6)    (a) The purchaser does not hold a California seller's permit.

(b) The purchaser holds California seller's permit No. ____________________ .

(Check applicable box.)

I understand that this declaration is for the purpose of allowing the above named seller to treat the sale of the above described tangible personal property as exempt from the transactions (sales) tax imposed by the (name of district) ___________________________ District. If the property is principally stored, used or otherwise consumed in that district, the purchaser shall be liable for and pay the use tax.

The foregoing declaration is made under penalty of perjury.

PURCHASER

TITLE

AUTHORIZED AGENT

DATE _____________________







(2) For commercial vehicles:

DECLARATION

(Commercial Vehicle)

I HEREBY CERTIFY THAT:

(1) The

(here insert description of commercial vehicle, name of manufacturer and type )

purchased from

(insert name of seller)

will be registered to the following address:

 

 

(2) The vehicle will be operated from the following address:

(3) The address from which the vehicle will be operated is outside the (name of district) ________________________________ District.

(4) When not in use, the vehicle will be kept or garaged at:

(5) The vehicle will be stored, used or otherwise consumed principally outside the (name of district) ___________________________ District.

(6)    (a) The purchaser does not hold a California seller's permit.

(b) The purchaser holds California seller's permit No. .

(Check applicable box.)

I understand that this declaration is for the purpose of allowing the above named seller to treat the sale of the above described tangible personal property as exempt from the transactions (sales) tax imposed by the (name of district)
District. If the property is principally stored, used or otherwise consumed in that district, the purchaser shall be liable for and pay the use tax.

The foregoing declaration is made under penalty of perjury.

PURCHASER

TITLE

AUTHORIZED AGENT

DATE _____________________





History: Adopted December 8, 1970, effective January 15, 1971.

Amended March 30, 1988, effective June 16, 1988. Amended subdivision (a) to require that retailers of certain vehicles, aircraft and undocumented vessels must collect the transactions use tax from the purchaser if such vehicles, aircraft and undocumented vessels are licensed or registered in any district imposing a transactions (sales) and use tax pursuant to AB 2446 (Chapter 308, Statutes of 1987).

Amended April 5, 1989, effective May 28, 1989. Amendment explains that transactions tax will not apply to a vessel registered under the Harbors and Navigation Code to an address out of the district of sale and purchaser declares under penalty of perjury that such address is his/her principal residence. Replaces repealed sections of the Harbors and Navigation Code with the appropriate Vehicle Code sections.


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Regulation 1825. Aircraft Common Carriers.

Reference: Sections 7261 and 7262, Revenue and Taxation Code.

(a) DEFINITION—"COMMON CARRIERS." As used herein, the term "common carriers" means persons who engage in the business of transporting persons or property for hire or compensation and who offer their services indiscriminately to the public or to some portion of the public.

(b) AIRCRAFT COMMON CARRIERS.

(1) State-administered district transactions (sales) tax does not apply to sales of tangible personal property to operators of aircraft to be used or consumed principally outside the county in which the sale is made if such property is to be used or consumed directly and exclusively in the use of such aircraft as common carriers of persons or property under the laws of this state, the United States, or any foreign government. Tax applies, however, to sales of fuel and petroleum products on and after July 29, 1991.

(2) State-administered district use tax does not apply to the storage, use, or other consumption of tangible personal property purchased by operators of aircraft when such property is used or consumed by such operators directly and exclusively in the use of such aircraft as common carriers of persons or property for hire or compensation under a certificate of public convenience and necessity issued pursuant to the laws of this state, the United States, or any foreign government. Effective July 29, 1991, this exemption is not available for the storage, use, or other consumption of fuel and petroleum products. This exemption is in addition to that provided in sections 6366 and 6366.1 of the Revenue and Taxation Code.

(c) CONDITIONS OF EXEMPTION. The exemption for operators of aircraft common carriers applies only if the property is used directly and exclusively in the exempt activity. This exemption is limited to supplies and equipment (excluding fuel and petroleum products effective July 29, 1991) used or consumed directly in the carriage of persons or property. It does not include office or shop equipment or supplies or any other property not directly used or consumed in the carriage of persons or property.

(d) LEASES. If property is leased to an operator of an aircraft common carrier under a lease which is a continuing sale or a continuing purchase, unless otherwise exempted, either the use tax or transactions (sales) tax applies to the gross receipts from the lease during such period of time that the property is in a taxing jurisdiction.

History: Adopted January 6, 1970, effective February 25, 1970.

Amended December 12, 1973, effective January 18, 1974.

Amended September 24, 1974, effective October 26, 1974.

Amended October 22, 1975, effective November 29, 1975.

Amended February 6, 1980, effective March 29, 1980. In (c) added exemption expiration date.

Amended April 16, 1985, effective May 16, 1985. Amended heading to subdivision (c) by changing date to 1986, and added footnote.

Amended March 30, 1988, effective June 8, 1988. Amended subdivisions (b) and (c) and Appendix (b)(2) to remove reference to a specific exemption of sales to operators of waterborne vessels from the transactions (sales) tax which expired on December 31, 1987.

Amended September 30, 1992, effective January 8, 1993. Amended to repeal the exemption from the transactions tax for the sale of use of fuel or petroleum products to or by operators of aircraft effective July 29, 1991.

Amended August 24, 2004, effective January 13, 2005. Subdivision (b)(2)—word "Section" changed to "section." Appendix— (a), second sentence—words "county tax" and "county" deleted and phrases "of the Bradley-Burns local taxes," "of the 1.25% local tax . . . to 75 percent," "1 percent local," and "(i.e., .75%)" added. (b)—phrase "under Regulation 1825," "district . . . from," "local . . . is," and "; and, . . . percent" added and phrase "local . . . 1825" deleted. (b), first unnumbered paragraph—phrase "(check which is applicable)" added to body and deleted from option (3). (b), third unnumbered paragraph—phrase "exemption from" delete and ":" and phrase "(check which is applicable)" added to body; (1) phrases " added to body; (1) phrases—"Partial exemption from" and "local . . . is .75" and phrase "local tax only" deleted; (2) capital "D" replaced with "Exemption from d" (3) phrases "exemption from district tax and partial exemption from" and "local tax which: On or before June 30, 2004 is," "percent: . . . .75" added and phrases "tax and district tax," and "(check which is applicable)" deleted.

Appendix—FORM OF EXEMPTION CERTIFICATE FOR CLAIMING EXEMPTION UNDER REGULATIONS 1805 AND 1825.

(a) CERTIFICATE NECESSARY TO SUPPORT EXEMPTION. All purchasers of tangible personal property claiming exemption from Bradley-Burns local taxes under the provisions of Regulation 1805 or from both Bradley-Burns local taxes and district transactions (sales) and use taxes under Regulation 1825 should file with the seller an exemption certificate in the form shown below. On and after July 1, 1972, for purposes of the Bradley-Burns local taxes, this exemption is limited to 80 percent of the 1.25 percent local tax (i.e., 1%); and, on and after July 1, 2004, until the rate modifications in subdivision (a) of Revenue and Taxation Code section 7203.1 cease to apply, this exemption is limited to 75 percent of the 1 percent local tax (i.e., .75%).

(b) FORM OF CERTIFICATE. AIRCRAFT COMMON CARRIER. The following certificate may be used by a purchaser claiming exemption under Regulation 1825 from district transactions (sales) and use taxes, and/or claiming partial exemption under Regulation 1805 from Bradley-Burns local taxes which: On or before June 30, 2004 is 1 percent; and, on and after July 1, 2004, until the rate modifications in subdivision (a) of Revenue and Taxation Code section 7203.1 cease to apply, is .75 percent:

"The purchaser hereby certifies that the purchaser is the operator of aircraft as a common carrier of persons or property and that the property purchased will be used or consumed principally outside the county in which the sale is made and will be used or consumed directly and exclusively in the use of such aircraft as a common carrier of persons or property for hire or compensation under a certificate of public convenience and necessity issued pursuant to the laws of (check which is applicable)

(1) the State of California

(2) the United States

(3)

(Insert the name of the foreign government)

"The purchaser agrees that if the property is used in some other manner or for some other purpose, the purchaser will report and pay the tax measured by the purchase price of the property.

"This certificate is given to claim: (check which is applicable)

(1) Partial exemption from Bradley-Burns local tax only which: On or before June 30, 2004 is 1 percent; and, on and after July 1, 2004, until the rate modifications in subdivision (a) of Revenue and Taxation Code section 7203.1 cease to apply, is .75 percent

(2) Exemption from district tax only

(3) Both exemption from district tax and partial exemption from Bradley-Burns local tax which: On or before June 30, 2004 is 1 percent; and, on and after July 1, 2004, until the rate modifications in subdivision (a) of Revenue and Tax Code section 7203.1 cease to apply, is .75 percent

"Description of property to be purchased

 



Name of Seller

Purchaser

Address

Dated _________________________________ "


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Regulation 1826. Construction Contractors.

Reference: Sections 6006–6010, inclusive, 6012.6, 6015, 6384, 7261, and 7262, Revenue and Taxation Code.

(a) IN GENERAL. All of the provisions of the State Sales and Use Tax Law and regulations adopted thereunder relating to construction contractors, including subcontractors, (other than those relating to the rate of tax) are applicable to state-administered transactions (sales) and use taxes.

(b) JOBSITE IS PLACE OF BUSINESS.

(1) The jobsite is regarded as a place of business of a contractor and is the place of sale of "fixtures" furnished and installed by a contractor. The place of use of "materials" is the jobsite. Accordingly, if the jobsite is in a district (or districts) having state-administered transactions (sales) and use taxes, the transactions (sales) tax applies to the sale of fixtures, and the use tax applies to the use of the materials. If the jobsite is not in a district with a state-administered tax, state-administered transactions (sales) tax will not apply to the sale of the fixtures even though the contractor's principal place of business is in a district with such a tax.

(2) The contractor is entitled to a credit against use tax liability for transactions tax reimbursement paid to the retailer of the materials in a district, under the conditions specified in paragraph (b)(1)(E) of Regulation 1823 (18 CCR 1823), Application of Transactions (Sales) Tax and Use Tax. If fixtures are purchased by a contractor tax paid in a district having state-administered transactions (sales) and use taxes, the contractor, upon installing the fixtures in a county without such a tax, is entitled to a credit for the tax of the district of purchase. If the contractor installs the fixtures in a district (or districts) imposing transactions and use taxes at a rate (or combined rate) greater than the district in which the contractor purchased the fixtures tax paid, the contractor is also entitled to a credit for the tax of the district of purchase, but is liable for the transactions tax (or taxes) of the district (or districts) where the fixtures are installed.

(3) The place of sale or purchase of a factory-built school building (relocatable classroom) as defined in paragraph (c)(4)(B) of Regulation 1521 (18 CCR 1521), Construction Contractors, is the place of business of the retailer of the factory-built school building regardless of whether sale of the building includes installation or whether the building is placed upon a permanent foundation.

The district use tax of the district (or districts) where the building is installed or placed will apply, if the rate of tax (or combined rate) is greater than the rate of tax in the district of sale, or if the place of sale is not in a district. See paragraph (b) of Regulation 1823 (18 CCR 1823).

(c) UNITED STATES CONTRACTORS. United States contractors are consumers of both materials and fixtures, and the place of use of both is the jobsite. Accordingly, if the jobsite is in a district having state-administered transactions (sales) and use taxes, the use tax applies to the use of the materials and fixtures. The contractor is entitled to a credit against use tax liability for transactions tax reimbursement paid to the retailer of the materials or fixtures in a district, under the condition specified in paragraph (b)(1)(E) of Regulation 1823 (18 CCR 1823).

History: Adopted January 6, 1970, effective February 25, 1970.

Amended December 12, 1973, effective January 18, 1974.

Adopted June 5, 1991, effective August 16, 1991.

Amended paragraph (a) to clarify that provisions of the regulation apply to subcontractors as well as prime contractors.

Amended paragraph (b) to explain place of sale.

Amended paragraphs (b) and (c) with regard to tax credits when property is used by a contractor in two or more districts with overlapping boundaries.


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Regulation 1827. Collection of Use Tax by Retailers.

Reference: Section 7262 and 7051.3, Revenue and Taxation Code.

(a) IN GENERAL. Except as provided in subdivision (d) below, any retailer engaged in business in a district imposing transactions (sales) and use taxes and making sales of tangible personal property, the storage, use or other consumption of which is subject to the state-administered district use tax imposed by that district is required to register with the board, collect the use tax from the purchaser, give receipts therefor, and pay the tax to the board. Retailers to whom seller's permits have been or are issued under Section 6067 of the Revenue and Taxation Code and who are engaged in business in the district are registered to collect the district use tax.

Any retailer who is not engaged in business in the district imposing transactions (sales) and use taxes may apply for a Certificate of Registration—Use Tax. Holders of such certificates are required to collect tax from purchasers, give receipts therefor, and pay tax to the board in the same manner as retailers engaged in business in the district.

(b) WHEN COLLECTION OF USE TAX IS REQUIRED.

(1) DELIVERIES INTO THE DISTRICT. A retailer engaged in business in the district (except retailers of certain vehicles, aircraft and vessels as described in paragraph (c)(4) below) shall not be required to collect use tax from the purchaser of tangible personal property unless the retailer ships or delivers the property into the district or participates within the district in making the sale of the property, including, but not limited to soliciting or receiving the order, either directly or indirectly, at a place of business of the retailer in the district or through any representative, agent, canvasser, solicitor, subsidiary or person in the district under authority of the retailer.

(2) PRESUMPTION OF USE—OUT-OF-DISTRICT DELIVERIES. It shall be presumed that tangible personal property (except for certain vehicles, aircraft and vessels described in paragraph (c)(4) below) delivered outside a district imposing transactions (sales) and use taxes to a purchaser known by the retailer to be a resident of a district imposing such taxes was purchased from a retailer for storage, use or other consumption in the district in which the purchaser resides and was stored, used or otherwise consumed in that district. If the retailer is engaged in business in that district and participates within the district in making the sale of the property, he shall collect the district use tax and pay it to the board.

The presumption may be controverted and the retailer relieved of the duty of collecting the use tax if the retailer, in good faith, accepts from the purchaser a statement in writing that the property was purchased for use at a designated point or points outside a district imposing a use tax. The presumption may also be controverted by other evidence satisfactory to the board that the property was not purchased for storage, use or other consumption in a district imposing a use tax.

(3) VEHICLES, AIRCRAFT AND UNDOCUMENTED VESSELS. Retailers of vehicles, aircraft or undocumented vessels described in paragraph (c)(4) below are engaged in business in any district imposing a state-administered transactions use tax and are required to collect the use tax from the purchaser and pay it to the board when such vehicles, aircraft or undocumented vessels are registered or licensed in that district.

(c) DEFINITION—"RETAILER ENGAGED IN BUSINESS IN DISTRICT." "Retailer engaged in business in the district" includes any of the following:

(1) Any retailer maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place or other place of business in the district.

(2) Any retailer having any representative, agent, salesman, canvasser or solicitor operating in the district under the authority of the retailer or its subsidiary for the purpose of selling, delivering, or the taking of orders for any tangible personal property.

(3) As respects a lease, any retailer deriving rentals from a lease of tangible personal property situated in the district.

(4) On and after January 1, 1988, any retailer of vehicles subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, or undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code.

(d) SALES TO PERSONS HOLDING USE TAX DIRECT PAYMENT PERMITS. Retailers selling tangible personal property, the storage, use or other consumption of which is subject to the use tax, who take in good faith use tax direct payment exemption certificates from persons holding use tax direct payment permits shall be relieved from the duty of collecting district use tax. Use tax direct payment permits and exemption certificates must comply with the requirements of Regulation 1699.6. This subdivision applies only to transfers that are subject to state and local use tax.

History: Adopted January 6, 1970, effective February 25, 1970.

Amended March 9, 1970, effective March 10, 1970.

Amended March 30, 1988, effective June 16, 1988. Amended subdivisions (b) and (c) to require retailers to collect the transactions use tax from purchasers of certain vessels, aircraft and undocumented vessels when they are registered or licensed in a district which imposes a transactions (sales) and use tax pursuant to AB 2446 (Chapter 308, Statutes of 1987).

Amended April 5, 1989, effective June 21, 1989. Corrects a minor error in the California Code of Regulations by replacing the word "a" with the word "any" in subdivision (b)(3). Deletes references to repealed sections of the Harbors and Navigation Code with appropriate Vehicle Code references. Also in subdivision (b)(3), explains that when an undocumented vessel is registered in a district imposing a transactions use tax, the retailer of the vessel is considered engaged in business in that district and is required to collect the use tax.

Amended September 1, 1999, effective October 21, 1999. Added cross reference to new subdivision (d) in subdivision (a). New subdivision (d) added for provisions of Revenue and Taxation Code section 7051.3 (Statutes of 1997, Chapter 702 (SB 110)) concerning sales made to persons holding use tax direct payment permits.


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Regulation 1828. Petitions for Distribution or Redistribution of Transactions and Use Tax.

Reference: Section 7270, Revenue and Taxation Code.

(a) DEFINITIONS.

(1) DISTRICT TAX. "District tax" means a transaction and use tax adopted pursuant to Revenue and Taxation Code section 7251, et seq., or pursuant to Revenue and Taxation Code section 7285, et seq., and administered by the Board.

(2) DISTRICT. "District" means any entity, including a city, county, city and county, or special taxing jurisdiction, which has adopted a district tax.

(3) PETITION. "Petition" means a request or inquiry from a district for investigation of suspected improper distribution or nondistribution of district tax submitted in writing to the Allocation Group of the Sales and Use Tax Department. The petition must contain sufficient factual data to support the probability that district tax has not been distributed or has been erroneously distributed. Sufficient factual data should include, for each business location being questioned:

(A) Taxpayer name, including owner name and fictitious business name or dba (doing business as) designation.

(B) Taxpayer's permit number or a notation stating "No Permit Number."

(C) Complete business address of the taxpayer.

(D) Complete description of taxpayer's business activity or activities.

(E) Specific reasons and evidence why the distribution or nondistribution is questioned, identifying the delivery location or locations of the property the sales of which are at issue. If the petition alleges that the subject transactions are subject to the district's use tax, evidence that the retailer is engaged in business in the district as provided in California Code of Regulations, title 18, section 1827, subdivision (c).

(F) Name, title, and telephone number of the contact person.

(G) The tax reporting periods involved.

"Petition" also includes an appeal by a district from a notification from the Local Revenue Allocation Unit of the Sales and Use Tax Department that district taxes previously allocated to it were misallocated and will be reallocated. Such a district may object to that notification by submitting a written petition to the Allocation Group within 30 days of the date of mailing of the notification or within a period of extension described below. The petition must include a copy of the notification and specify the reason the district disputes it. If a district does not submit such a petition within 30 days of the date of mailing of the notification, or within a period of extension, the notification of the Local Revenue Allocation Unit is final as to the district so notified.

The district may request a 30-day extension to submit a written objection to a notification of misallocation from the Local Revenue Allocation Unit. Such a request must provide a reasonable explanation for the requesting district's inability to submit its objection within 30 days and must be received by the Local Revenue Allocation Unit within 30 days of the date of mailing of its notification. Within five days of receipt of the request, the Local Revenue Allocation Unit will mail notification to the district whether the request is granted or denied. If a timely request for extension is submitted, the time for the district to file a written objection is extended to 10 days after the mailing of the notice of whether the request is granted or denied. If the request is granted, the time for the district to submit a written objection to the notification of the Local Revenue Allocation Unit is further extended to the 60th day after the date of mailing of the notification of misallocation.

(4) PETITIONER. "Petitioner" is a district that has filed a valid petition pursuant to subdivision (a)(3).

(5) DATE OF KNOWLEDGE. Unless an earlier date is operationally documented by the Board, "date of knowledge" is the date on which the Allocation Group receives a valid petition. Where an error in distribution that is reasonably covered by the petition is confirmed based on additional facts or evidence supplied by the petitioner or otherwise learned as a direct result of investigating the petition, the date of knowledge is the date on which the Allocation Group received the petition.

(6) SUBSTANTIALLY AFFECTED DISTRICT. "Substantially affected district" is a district for which the decision on a petition would result in a decrease to its total distribution of 5 percent or more of its average quarterly distribution (generally determined with reference to the prior four calendar quarters) or of $50,000 or more.

(7) NOTIFIED DISTRICT. "Notified district" is a district that has been notified as a substantially affected district.

(b) REVIEW BY SALES AND USE TAX DEPARTMENTdeletion.

(1) The Allocation Group will promptly acknowledge a submission intended as a petition. If the submission does not contain the elements identified in subdivision (a)(3), the original submission will be returned to the submitting jurisdiction. The jurisdiction will have 30 days from the date of the correspondence from the Allocation Group requesting the missing information to make a supplemental submission. If the supplemental submission contains the necessary elements identified in subdivision (a)(3), then the date of receipt of the original submission will be regarded as the date of knowledge. In the event that a submission is not perfected within this 30 day period, it will not qualify as a valid petition.

(2) The deletionSales and Use Tax Department will review the petition and issue to the petitioner a written decision to grant or deny the petition, including the basis for that decision. The written decision will also note the date of knowledge, and if other than the date the petition was received, will include the basis for that date. A redistribution will be made if the preponderance of evidence, whether provided by petitioner or obtained by Board staff as part of its investigation of the petition, shows that there was an error in distribution. If the preponderance of evidence does not show that an error in distribution occurred, the petition will be denied.

(3) If the deletionSales and Use Tax Department does not issue a decision within six months of the date it receives a valid petition, the petitioner may request that the deletionSales and Use Tax Department issue its decision without regard to the status of its investigation. Within 90 days of receiving such a request, the deletionSales and Use Tax Department will issue its decision based on the information in its possession.

(4) If the decision of the deletionSales and Use Tax Department is that the asserted error in distribution did not occur and that the petition should be denied, in whole or in part, the petitioner may submit to the Allocation Group a written objection to the decision under subdivision (b)(6).

(5) If the decision of the deletionSales and Use Tax Department is that an error in distribution did occur, it will also mail a copy of its decision to any substantially affected district. Any such notified district may submit to the Allocation Group a written objection to the decision under subdivision (b)(6).

(6) The petitioner or any notified district may appeal the decision of the deletionSales and Use Tax Department by submitting a written objection to the Allocation Group within 30 days of the date of mailing of the deletionSales and Use Tax Department's decision, or within a period of extension authorized by subdivision (b)(deletion10). If no such timely objection is submitted, the decision of the deletionSales and Use Tax Department is final as to the petitioner and all notified districts.

(7) If the petitioner or a notified district submits a timely written objection to the decision of the deletionSales and Use Tax Department, the deletionSales and Use Tax Department will consider the objection and issue a written supplemental decision to grant or deny the objection, including the basis for that decision. A copy of the supplemental decision will be mailed to the petitioner, to any notified district, and to any other district that is substantially affected by the supplemental decision.

(8) If the Sales and Use Tax Department does not issue a supplemental decision within three months of the date it receives a written timely objection to the decision of the Sales and Use Tax Department, the petitioner or any notified district may request that the Sales and Use Tax Department issue its supplemental decision without regard to the status of its investigation. Within 60 days of receiving such a request, the Sales and Use Tax Department will issue its supplemental decision based on the information in its possession.

(deletion9) The petitioner or any notified district may appeal the supplemental decision of the deletionSales and Use Tax Department by submitting a written objection under subdivision (c)(1) within 30 days of the date of mailing of that supplemental decision, or within a period of extension authorized by subdivision (b)(deletion10). If no such timely objection is submitted, the supplemental decision of the deletionSales and Use Tax Department is final as to the petitioner and all notified districts.

(deletion10) The petitioner or any notified district may request a 30-day extension to submit a written objection under subdivision (b)(6) or under subdivision (b)(deletion9), as applicable. Such request must provide a reasonable explanation for the requesting district's inability to submit its objection within 30 days, must be copied to all other districts to whom the deletionSales and Use Tax Department mailed a copy of its decision or supplemental decision (to the extent known by the requesting district), and must be received by the Allocation Group within 30 days of the date of mailing of deletionthe Sales and Use Tax Department's decision or supplemental decision. Within five days of receipt of the request, the deletionSales and Use Tax Department will mail notification to the petitioner and to all notified districts whether the request is granted or denied. If a timely request for an extension is submitted, the time for the petitioner and any notified district to file a written objection to the decision or supplemental decision of the deletionSales and Use Tax Department is extended to 10 days after the mailing of the notice of whether the request is granted or denied. If the request is granted, the time for the petitioner and all notified districts to submit a written objection to the decision or supplemental decision of the deletionSales and Use Tax Department is further extended to the 60th day after the date of mailing of the decision or supplemental decision.

(c) REVIEW BY APPEALS DIVISION.

(1) The petitioner or any notified district may appeal the supplemental decision of the deletionSales and Use Tax Department by submitting a written objection to the Allocation Group within 30 days of the date of mailing of the deletionSales and Use Tax Department's supplemental decision, or within a period of extension authorized by subdivision (b)(deletion10). Such an objection must state the basis for the objecting district's disagreement with the supplemental decision and include all additional information in its possession that supports its position.

(2) If a timely objection to deletionthe Sales and Use Tax Department's supplemental decision is submitted, the Allocation Group will, within 30 days of receipt of the objection, prepare the file and forward it to the Appeals Division. The petitioner, all notified districts, any other district that would be substantially affected if the petition were granted, and the Sales and Use Tax Department will thereafter be mailed notice of the appeals conference, which will generally be sent at least 45 days prior to the scheduled date of the conference.

(A) Petitioner or any notified district may continue to discuss the dispute with staff of the Sales and Use Tax Department after the dispute is referred to the Appeals Division. If, as a result of such discussions or otherwise, the Sales and Use Tax Department decides the supplemental decision deletionwas incorrect or that further investigation should be pursued, it shall so notify the Appeals Division, the petitioner, and all notified districts.

(B) If the Sales and Use Tax Department sends notice to the Appeals Division in accordance with the subdivision (c)(2)(A) no later than 30 days prior to the date scheduled for the appeals conference, the Appeals Division will suspend its review and the dispute will be returned to the Sales and Use Tax Department. The Sales and Use Tax Department will thereafter issue a second supplemental decision, or will return the dispute to the Appeals Division along with a report of its further investigation, if appropriate, for the review and decision of the Appeals Division.

(C) If the Sales and Use Tax Department sends notice to the Appeals Division in accordance with subdivision (c)(2)(A) less than 30 days prior to the date scheduled for the appeals conference, the Appeals Division will decide whether the dispute should be returned to the Sales and Use Tax Department or remain with the Appeals Division, and notify the parties accordingly. If the dispute is returned to the Sales and Use Tax Department, the Sales and Use Tax Department will thereafter issue a second supplemental decision, or will return the dispute to the Appeals Division along with a report of its further investigation, if appropriate, for the review and decision of the Appeals Division.

(D) Where the Sales and Use Tax Department issues a second supplemental decision in accordance with subdivision (c)(2)(B) or (c)(2)(C), it will send a copy of the decision to the petitioner, any notified district, and any other district that is substantially affected by the second supplemental decision, any of whom may appeal the second supplemental decision by submitting a written objection under subdivision (c)(1) within 30 days of the date of mailing of that supplemental decision, or within a period of extension authorized by subdivision (b)(deletion10). If no such timely objection is submitted, the second supplemental decision is final as to the petitioner and all notified districts.

(3) The appeals conference is not an adversarial proceeding, but rather is an informal discussion where the petitioner, any notified districts who wish to participate, and the Sales and Use Tax Department have the opportunity to explain their respective positions regarding the relevant facts and law to the Appeals Division conference holder. To make the conference most productive, each participant should submit all facts, law, argument, and other information in support of its position to the Appeals Division conference holder, and to the other participants, at least 15 days before the date of the appeals conference; however, relevant facts and arguments will be accepted at any time at or before the appeals conference. If, during the appeals conference, a participant requests permission to submit additional written arguments and documentary evidence, the conference holder may grant that participant deletion30 days after the appeals conferencedeletion to submit to the conference holder, with copies to all other participants, such additional arguments and evidence. Any other participant at the conference who is in opposition to the requesting participant on the issue(s) covered by the additional submission is allowed deletion30 days to submit to the conference holder, with copies to all other participants, arguments and evidence in response. No request by a participant for further time to submit additional arguments or evidence will be granted without the approval of the Assistant Chief Counsel of the Appeals Division or his or her designee. The Appeals Division on its own initiative may also request, at or after the appeals conference, further submissions from any participant.

(4) Within 90 days after the final submission authorized by subdivision (c)(3), the Appeals Division will issue a written Decision and Recommendation (D&R) setting forth the applicable facts and law and the conclusions of the Appeals Division. The Chief Counsel may allow up to 90 additional days to prepare the D&R upon request of the Appeals Division. Both the request and the Chief Counsel's response granting or denying the request for additional time must be in writing and copies provided to the petitioner, all notified districts, and the Sales and Use Tax Department. A copy of the D&R will be mailed to the petitioner, to all notified districts, to any other district that will be substantially affected by the D&R, and to the Sales and Use Tax Department.

(5) The petitioner or any notified district may appeal the D&R by submitting a written request for Board hearing under subdivision (d)(1) within 60 days of the date of mailing of the D&R.

(6) The petitioner, any notified district, or the Sales and Use Tax Department may also appeal the D&R, or any Supplemental D&R (SD&R), by submitting a written request for reconsideration (RFR) to the Appeals Division before expiration of the time during which a timely request for Board hearing may be submitted, or if a Board hearing has been requested, prior to that hearing. If a district or the Sales and Use Tax Department submits an RFR before the time for requesting a Board hearing has expired, the Appeals Division will issue an SD&R to consider the request, after obtaining whatever additional information or arguments from the parties that it deems appropriate. If an RFR is submitted after a district has requested a Board hearing, the Appeals Division will determine whether it should issue an SD&R in response. A copy of the SD&R issued under this subdivision or under subdivision (c)(7) will be mailed to the petitioner, to all notified districts, to any other district that will be substantially affected by the SD&R, and to the Sales and Use Tax Department. The petitioner or any notified district may appeal the SD&R by submitting a written request for Board hearing under subdivision (d)(1) within 60 days of the date of mailing of the SD&R.

(7) Whether or not an RFR is submitted, at any time prior to the time the recommendation in the D&R or prior SD&R is acted on by the Sales and Use Tax Department as a final matter or the Board has held an oral hearing on the petition, the Appeals Division may issue an SD&R as it deems necessary to augment, clarify, or correct the information, analysis, or conclusions contained in the D&R or any prior SD&R.

(8) If no RFR is submitted under subdivision (c)(6) or request for Board hearing under subdivision (d)(1) within 60 days of the date of mailing of the D&R or any SD&R, the D&R or SD&R as applicable is final as to the petitioner and all notified districts unless the Appeals Division issues an SD&R under subdivision (c)(7).

(d) REVIEW BY BOARD.

(1) The petitioner or any notified district may submit a written request for Board hearing if it does so to the Board Proceedings Division within 60 days of the date of mailing of the D&R or any SD&R. Such a request must state the basis for the district's disagreement with the D&R or SD&R as applicable and include all additional information in its possession that supports its position.

(2) If the Board Proceedings Division receives a timely request for hearing under subdivision (d)(1), it will notify the Sales and Use Tax Department, the petitioner, any notified district, any other district that would be substantially affected if the petition were granted, and the taxpayer(s) whose distribution (or nondistribution) are the subject of the petition, that the petition for redistribution of district tax is being scheduled for a Board hearing to determine the proper distribution.

(3) The Sales and Use Tax Department, the petitioner, and all districts notified of the Board hearing pursuant to subdivision (d)(2) are parties and may participate in

the Board hearing. The taxpayer is not a party to the Board hearing unless it chooses to actively participate in the hearing process by either filing a brief or making a presentation at the hearing.

(4) Briefs may be submitted for the Board hearing in accordance with California Code of Regulations, title 18, sections 5270 and 5271.

(5) To the extent not inconsistent with this regulation, the hearing will be conducted in accordance with Chapter 5 of the Board of Equalization Rules for Tax Appeals (Cal. Code Regs., tit. 18, § 5510, et seq.). The Board will apply the preponderance of evidence rules set forth in subdivision (b)(2) in reaching its decision and not the burden of proof rules set forth in California Code of Regulations, title 18, section 5541. The Board's final decision on a petition for redistribution exhausts all administrative remedies on the matter for all districts.

(e) LIMITATION PERIOD FOR REDISTRIBUTIONS. For redistributions where the date of knowledge is prior to January 1, 2008, the standard three-year statute of limitations is applicable, based on the date of knowledge. For redistributions where the date of knowledge is on or after January 1, 2008, redistributions shall not include amounts originally distributed earlier than two quarterly periods prior to the quarter of the date of knowledge.

(f) OPERATIVE DATE AND TRANSITION RULES. This regulation is intended to reduce the time required to decide the validity of redistribution petitions and otherwise improve the process for doing so. Regulation 1828 was repealed and readopted in 2008. deletionThe readopted regulation is intended to have a neutral impact only on the current dispute over the continuing validity of certain petitions that deletionwere governed by prior Regulation 1828 (effective June 17, 2004).

(1) The operative date of this regulation as readopted in 2008 and any amendments thereto is the effective datedeletion under Section 11343.4 of the Government Code (thirty days after deletionapproval by the Office of Administrative Law and deletionforwarding to the Secretary of State) and deletionthere shall deletionbe no retroactive effect.

(2) deletionNotwithstanding subdivision (f)(3), petitions shall be reviewed, appealed and decided in accordance with this regulation as to procedures occurring after deletionits operative date or that of any amendments thereto.

(3) All deletionpetitions filed prior to July 1, 2004 and denied by Board Management must have perfected any access they may have had to a Board Member hearing no later than 60 days after the September 10, 2008, operative date of this regulation.

History: Adopted March 23, 2004, effective June 17, 2004.

Amended May 28, 2008, effective September 10, 2008. Replaced all previous language to provide for a more comprehensive process for review of petitions for district tax distribution or redistribution, to restructure the request for extension process, and to provide earlier notification to substantially affected jurisdictions. Also incorporated statutory provisions for the limitation period for redistributions in subdivision (e).

Amended December 15, 2011, effective March 8, 2012. Amended subdivision (a)(3)(G) to allow a district to request a 30-day extension to object to a notification of misallocation. Amended subdivision (b)(1) to provide a 30-day period for a district to perfect a submission intended as a petition. Added new subdivision (b)(8) to allow the petitioner or notified district to request the supplemental decision be issued within 60 days. Amended subdivision (c)(2) to provide that the Allocation Group will transfer a petition file to the Appeals Division within 30 days of receiving an objection to the supplemental decision. Amended subdivision (c)(2) to provide that potentially affected districts will be notified of the appeals conference. Amended subdivision (c)(3) to clarify that appeals conference participants are allowed 30 days to provide additional information following the appeals conference and to clarify that the other participants are allowed 30 days to respond to that information. Amended subdivision (f) to clarify the operative date of the regulation. Amended subdivisions (b) and (c) to replace "Allocation Group" with "Sales and Use Tax Department" as needed to include decisions issued by someone in the Sales and Use Tax Department other than the Allocation Group.

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