Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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195.0000 CONTAINERS AND LABELS—Regulation 1589

Annotation 195.0705


195.0705 Packaging Material. A common carrier purchases various types of nonreturnable packaging materials including, but not limited to, boxes, envelopes, tubes, way bills and sealing tape. These materials, furnished to customers at no charge, are purchased and stored for less than 90 days in California warehouses. The customers receiving these supplies are located in several western states, including California.

The sale of these materials is not exempt from tax under Regulation 1589. The carrier does not sell the contents together with the container. The carrier also does not sell the containers to persons who place the contents in the containers and then sell them both. The carrier is consuming the materials in the conduct of its business. Sales or use tax applies to the carrier's purchase or use of these materials unless some other exemption applies.

In a use tax situation, when the carrier supplies the materials to its customers and title passes to the customers in California, the carrier has consumed the property in California and the use tax applies even if the customer's use is outside California. However, if the carrier transfers the materials to another state for use there, section 6009.1 provides for exclusion from use tax.

If the materials are purchased in a sales tax transaction, the subsequent use in another state does not give rise to an exemption. Section 6009.1 applies only to use tax transactions. 8/21/90.