Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 220.0241

220.0241 Representative Accepting Payment in State. Two foreign corporations, who are in the equipment rental business, are in the process of liquidating their business through an auction. This auction will be conducted live from an out-of-state location and will be transmitted simultaneously via satellite to various cities including one city in California. All of the property for sale is located outside of California. If a bidder in California is the high bidder, he will immediately pay the bid amount to a California representative of the seller. However, the bidder will be responsible for traveling to the out-of-state location to accept delivery of the property and to arrange transportation to the location of his desire.

The sale to the successful bidder in California will not be subject to sales tax because the sale transaction will not take place in California, but rather out of state upon delivery of the property to the purchaser. However, the seller is responsible for the collection of use tax. The seller is considered to be doing business in this state as set forth under section 6203(b), because of the presence of a representative for the purpose of accepting orders for purchase. The presence here is intended to enhance and facilitate sales.

Section 6247 provides that tangible personal property delivered outside California, to a purchaser known by the retailer to be a resident of this state, will be presumed to have been purchased for use in California. Since the bidders submit their successful bids in California, it would be self-evident that the sellers should be aware that some, if not most, of these purchasers are California residents. In those cases where the sellers know, or should be aware, that a purchaser is a California resident, the sellers will be responsible to collect the use tax unless they in good faith accept a statement from the purchaser to the effect that the property has been purchased for use outside California. 3/21/86.