Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 220.0100

220.0100 Franchise Dealer Designated as Independent Contractor. An out-of-state supplier of magazines and encyclopedias entered into franchise dealer agreements with individuals in this state, pursuant to which the individuals (designated in the contract as independent contractors) were authorized to solicit combination installment sales of magazines and encyclopedias. Purchase orders were sent to the out-of-state supplier for acceptance and approval. The magazines and encyclopedias were drop shipped to the customers in this state. Periodically, the supplier would obtain mail orders directly from the customers for yearbooks.

Since the franchise dealers were representatives of the out-of-state supplier operating in this state under the authority of the out-of-state supplier for the purpose of selling or taking orders for encyclopedias, the out-of-state supplier was "engaged in business in this state" and was required to register and collect the use tax with respect to encyclopedias and yearbooks sold to customers in California, notwithstanding the fact that the franchise dealers were independent contractors. 11/30/64.