Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
280.0000 GIFTS, MARKETING AIDS, PREMIUMS AND PRIZES— Regulation 1670
280.0769 Marketing Aids—Purchased for Resale. If the seller purchases a type of fungible marketing aids, some of which will be sold for 50 percent or more of the purchase price and some for less than 50 percent of the purchase price, the seller may purchase the aids for resale. Aids which are consumed (sold for less than 50 percent of the purchase price) would be subject to use tax at the time of their initial consumption.
If the seller purchases one type of marketing aid which the seller will provide for more than 50 percent of the cost, those aids may be purchased for resale. But if the seller also purchases a different type of marketing aids which will be provided for less than 50 percent of cost, those aids will be consumed and may not be purchased for resale.
If the seller does not know at the time of purchase which will be sold (for 50 percent or more), the aids may be purchased for resale.
If purchased for resale, use tax must be paid for all aids provided for less than 50 percent of cost, even if sent to out-of-state consumers. Marketing aids provided to out-of-state consumers for less than 50 percent are taxable (subject to use tax on cost) because there is an initial use and, therefore, the moment of taxation is in California at the time the seller delivers the aids to the carrier and transfers title. Marketing aids for which the seller is the consumer which are sent to its out-of-state distribution center and shipped to buyers from the out-of-state location are not subject to tax because the seller does not transfer title to another person in California. 6/4/87.