Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 220.0160.350

220.0160.350 Lumber Broker. A taxpayer who calls itself a lumber broker enters into the following types of transactions:

(1) The taxpayer purchases lumber from a California supplier and ships the product to a buyer within the State of California.

(2) The taxpayer purchases lumber from a supplier located outside the State of California, arranges to have the product shipped into California for minor improvements (e.g., having a third party pressure treat the lumber), and then arranges to have the improved product shipped to the customer located within California. Occasionally, the product may be in the state of California for more than 30 days while at the third party location for treatment before being shipped to the customer.

(3) The taxpayer purchases logs and lumber from surrounding states and has the product shipped directly to customers located within California.

(4) The taxpayer may hold product in the State of California which has been sold but cannot be accepted by the buyer immediately. The product may be held 30 days or longer.

In each situation, the taxpayer purchases the lumber. Therefore, although the taxpayer calls itself a broker who did not take title to the lumber, it was not a true broker and did, in fact, purchase and resell the lumber on its own account.

The application of tax depends on whether the taxpayer is regarded as engaged in business in California. If so, it must report the applicable sales or use tax on these transactions. The taxpayer will be regarded as engaged in business in this state if any person in California acts as its representative for purposes related to sales of tangible personal property. The facts indicate that the taxpayer may be in this state and would be required to pay sales tax on its sales in which its location in this state participates, and to collect and remit use tax on its other sales; however, there is insufficient information to make this determination. If the taxpayer is not regarded as engaged in business in this state, then the California supplier in situation 1, the third party performing improvements in situation 2, and any suppliers in situation 3 who are themselves engaged in business in California would be regarded as making the retail sale under the second paragraph of section 6007. It also appears that there would be a person who would be classified as the retailer under section 6007 in situation 4; however, there is insufficient information to make this determination. 12/14/95. (Am. M99–1).