Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2017

Sales and Use Tax Annotations

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Annotation 220.0117

220.0117 Independent Dealers. An out-of-state firm sells its merchandise to California consumers through its mail-order division which is also located outside of California. Orders for purchases are by telephone at its out-of-state location and goods are shipped to consumers by U.P.S. The firm, including its mail-order division, has no continuous or regular physical presence in California. If a product sold by the firm requires repair which is covered by warranty, the work is performed at its out-of-state location, except for products whose manufacturer is responsible for the warranty repairs. Repairs not covered by warranty are offered by authorized California dealers of the merchandise and the firm is not involved in such repairs.

California customers can also purchase the firm's merchandise from authorized California dealers. The firm has a distribution network of wholesale distributors to whom it sells merchandise. Those wholesale distributors in turn sell the merchandise to authorized independent dealers. The dealers carry the firm's brands as well as those of competitors. The firm has no direct contact with or any ownership interest in the dealers.

From the facts presented, the dealers are retailers who sell the firm's merchandise on their own behalf and not for the firm. Also, there is no indication that the dealers, or anyone else in California, acts as the firm's agent or representative for the purpose of selling, delivering, installing, assembling, or taking orders for any merchandise. Therefore, the firm is not engaged in business in California and thus is not liable to collect use tax on its mail order sales of merchandise in California. 6/10/94.