Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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135.0000 BANKS AND INSURANCE COMPANIES—Regulation 1567

Annotation 135.0355

135.0355 Sales to Insurance Company An out-of-state taxpayer with sales offices and warehousing in California sells labels to an insurance company located in California. The insurance company contacts the taxpayer's sales office in this state to order labels. The taxpayer's employee takes the order and arranges for the manufacture and delivery of these labels. The labels are manufactured out of state and then shipped by common carrier directly to the insurance company in California. The contract of sale is silent as to the passage of title.

Under these circumstances, since the contract of sale is silent as to passage of title, title passes from the seller, and thus the sale occurs no later than the time at which the seller completes its performance with respect to the physical delivery of the property. This generally occurs upon the seller's delivery of the property to a common carrier for shipment to the customer. Accordingly, because the sale takes place outside of California, the applicable tax would be use tax imposed on the insurance company rather than sales tax imposed on the retailer. If the insurance company is paying the California Insurance Gross Premiums Tax, its use of the labels is exempt from California use tax under section 28 of Article XIII of the California Constitution. 3/27/97.