Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2015
Sales and Use Tax Annotations
175.0000 COLLECTION OF USE TAX BY RETAILERS—Regulation 1684
175.0315 Telephone Orders with Shipment by Third Parties. An out-of-state service organization arranges sales through vendors to its members. The members pay a $25.00 membership fee to the organization which allows them to call the organization and check the price of merchandise. If the organization's price is cheapest, the member can utilize the organization's system which takes the member's order, contacts the vendor and instructs the vendor to ship the merchandise to the member. The vendor bills the organization who in turn bills the member on his credit card. The invoice from the vendor shows the merchandise being sold to the organization with shipment to the member. In the above situation, the organization is a seller but its activities in this state is not considered sufficient to support a finding that it is a retailer engaged in business in this state.
Virtually all membership fees are generated through direct mail sent from outside California. Its salespersons do not solicit any California firms or members in person. The only solicitation for members is by credit card inserts which are arranged by telephone or mail from out of state. The only limited connection with California is the location of the local telephone number and electronic switching of telephone calls for the organization's shopping service and the fact that one vendor is located in California which is not sufficient to support nexus. Although the organization is not engaged in business in this State and not required to collect use tax with respect to any orders which are delivered from a California vendor to a purchaser in California, section 6007 applies and tax will apply to such sales. 7/30/82.