Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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G

295.0000 GROSS RECEIPTS

Annotation 295.0368

(a) GENERAL

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).