Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2016
Sales and Use Tax Annotations
315.0000 INSTALLING, REPAIRING, RECONDITIONING IN GENERAL—Regulation 1546
(a) IN GENERAL
315.0308 Spare Parts—Optional Maintenance Contracts. A taxpayer purchased spare parts ex-tax from out-of-state vendors or from California vendors under a resale certificate. The parts were stored in the taxpayer's California facility pending need. The parts in question were subsequently used in performing repairs on optional maintenance contracts on leased equipment located out of state and were transferred to an out-of-state facility for storage or use there. The taxpayer claimed depreciation deduction on the parts held for use in performing maintenance contracts on its income tax return.
Property purchased in California under a resale certificate or from out-of-state vendors and subsequently shipped to a point outside the state without any use other than that outlined in section 6009.1 is not subject to use tax.
With respect to the taxpayer's income tax depreciation deductions on this property, there is no income tax rule which precludes a taxpayer from claiming depreciation deductions on such property merely because the holding of the property is excluded from "use" for sales and use tax purposes. Thus, the claiming of depreciation deductions does not preclude the taxpayer from obtaining the benefits of section 6009.1.
However, when the taxpayer is aware, at the time of purchase, that it will be a consumer of parts purchased for use on its optional maintenance contracts, it should not issue a resale certificate for this type of property. If it does issue resale certificates, it will be liable for tax under section 6094.5. 2/29/88.