Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Preston v. State Board of Equalization . . . (2001)

Technology Transfer Agreements

Taxpayer entered into written agreements to provide artwork on a temporary basis for use as book illustrations and rubber stamp designs. The customers copied or reproduced images from the finished artwork and returned the tangible artwork to taxpayer. Taxpayer retained all other rights in the artwork not specifically transferred under the agreements, including title. Taxpayer argued that she did not sell her artwork because the use rights she transferred were intangible property. The court held that taxpayer did, in fact, make taxable leases by transferring the artwork in tangible form for consideration. However, the court also concluded that the agreements were technology transfer agreements under Revenue and Taxation Code sections 6011(c)(10) and 6012(c)(10), and that these provisions applied on a retroactive basis to exclude from tax the charges attributable to the transfers of copyright interests. Accordingly, since taxpayer did not separately state a price for the tangible personal property, tax applied to these leases based on the price at which that tangible personal property had been sold, leased, or offered to third parties or based on 200 percent of the cost of materials and labor used to produce the tangible personal property. Preston v. State Board of Equalization (2001) 25 Cal.4th 197.