Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 295.0368


295.0368 Liquidated Damages. The stated contract price of tangible personal property sold is the "sales price" subject to use tax without regard to the fact that a breach of certain terms of the contract by the seller may occasion the operation of a liquidated damages provision. The selling price of tangible personal property is not affected by a payment by the seller to the purchaser in settlement for claims for damages by the purchaser. (See Southern California Edison Co. v. State Board of Equalization (1972) 7 Cal.3d 652). This same rule applies even where the parties characterize the settlements as "voluntary price adjustments." A liquidated damages provision may not be regarded for sales and use tax purposes as a pricing mechanism. 7/30/76; 8/26/04. (Am. 2004–2).