Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2015
Sales and Use Tax Annotations
325.0000 INTERSTATE AND FOREIGN COMMERCE—Regulation 1620
(c) SHIPMENTS FROM CALIFORNIA TO POINTS OUTSIDE STATE
(2) Delivery to Purchaser in State
325.0670 Lease of Trailer by Bank. A California bank purchases a trailer chassis from a California manufacturer with delivery in California. The bank is acquiring title for purposes of security. The bank will immediately lease the chassis to a corporation which will sublease it to an affiliate. The chassis will have an unladened weight of 6,000 pounds or more, will be registered out of state, and will be used exclusively outside California or exclusively in interstate or foreign commerce, or both, and will be moved, loaded with cargo, from California to a point outside the state within 75 days after delivery by the manufacturer. The bank will provide affidavits pursuant to section 6388.5 to the manufacturer.
Based on the above circumstances, questions relating to the above transaction and its corresponding answer follows:
(1) Since the bank is making the purchase solely of security, will the exemption available under section 6388.5 apply to the purchase and immediate lease of the chassis by the bank?
The above lease by the bank is a lease of mobile transportation equipment and, accordingly, is not a sale. Either the sale of the equipment to the lessor or its use in this state may be subject to tax. In this situation, the exemption provided by section 6388.5 applies even though the sale is to a lessor and the mobile transportation equipment is delivered to and is thereafter used by the lessee.
The same result follows with use by the sublessee. Since it is the intention of the lessor to immediately sublease the chassis to an affiliate, the use in interstate or foreign commerce, or both, by the sublessee would be imputed to the lessee/sublessor which would in turn be imputed to the bank and the exemption of section 6388.5 would apply to the sale by the manufacturer.
(2) Will the exemption provided by section 6388.5 be applicable if the chassis carries a load on their initial movement out of California?
The chassis may carry a payload out of the state without loss of the exemption provided it is a payload in interstate or foreign commerce, or both.
(3) Can the chassis, if purchased within the exemption of section 6388.5 and used exclusively in interstate or foreign commerce, be assigned to a California depot?
The chassis may return to California and may be assigned to a California depot, without loss of exemption, provided, however, that the use of the chassis is exclusively the carriage of interstate or foreign commerce goods, or both. After leaving the state, the chassis may return to California, and even remain in California, as long as they are exclusively carrying interstate or foreign commerce goods, or both. However, if so much as one carton is for intrastate commerce, the exemption will be lost. 4/19/85.