Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2015
Sales and Use Tax Annotations
280.0000 GIFTS, MARKETING AIDS, PREMIUMS AND PRIZES— Regulation 1670
280.1165 Use of Property Purchased for Resale—Promotional Gifts Property purchased ex-tax for resale and subsequently shipped free of charge as a promotional gift to an out-of-state customer is subject to California use tax. The taxable "use" occurs in California when the property is transferred to a common carrier, prior to its shipment to the out-of-state customer. At the time of shipment, the donor has made all the use of that property that it ever will and has given up all power incident to ownership.
On the other hand, property shipped from ex-tax inventory in California to one of the donor's out-of-state business locations for use as a gift at that location is not subject to use tax. The tax does not apply because the use to which the tax would otherwise attach occurs outside of California. 10/6/93.