Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 175.0037

175.0037 Independent Contractors Solicit Sales for Resale Only. An out-of-state firm with no locations in California is in the business of wholesaling and retailing apparel. The firm is comprised of two separate divisions. The first is the wholesale division and the second is the retail mail-order division. The divisions keep separate sets of books and records. The executive management is the same for both divisions, although each division has its own operations management team.

The sales for the wholesale business are conducted through independent contractors who periodically solicit sales from California distributors. The firm has no direct control over the independent contractors. The independent contractors are authorized to solicit from only distributors. They are not allowed to solicit from individuals (the end user of the product). The independent contractors are not employees of the firm, but receive a commission on sales. They are able to represent numerous business entities at their own discretion. The independent contractor forwards sales orders to the firm's out-of-state headquarters for acceptance or rejection. All the products are shipped from out of state to California via common carrier.

The sales for retail business are transacted through mail-order solicitations from catalogs and direct mail advertising brochures. The products are distributed from an out-of-state warehouse by common carrier to the California customers.

Under section 6203(b), a retailer is engaged in business in this state if it has any representative or agent in this state for an activity related to sales of tangible personal property. This is true without regard to whether the representatives are only selling to resale customers. (See Annotation 220.0220 (10/26/64).) As such, the firm must collect the use tax from all of its California retail purchasers and pay that tax to this state, without regard to whether the purchases are made through one of the representatives, or entirely by mail or telephone, and without regard to which division makes the sale. (Section 6005.) 7/11/96.