Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 330.2887


330.2887 Sublease—Without Collecting Use Tax Reimbursement from Sublessor. A California bank purchased property without payment of sales tax reimbursement or without paying use tax, as measured by the purchase price of the property. The bank then leased the property to a sublessor who in turn, subleased the property to users. The sublessor did not tender a resale certificate to the bank; however, they did collect use tax from the sublessee's, as measured by the rental receipts.

Since the bank had not obtained a resale certificate from the sublessor, it voluntarily paid the Board an amount equal to the tax it would have owed, had the lease to the sublessor been a retail transaction. However, the bank did not reimburse itself for the tax it paid, by charging it to the sublessor.

Since the sublessor did not pay sales tax reimbursement or use tax, as measured by the purchase price of the property, the sublessor's lease of the property to the sublessee's were "sales" and "purchases" and subject to tax. The banks lease to sublessor was not taxable as it was a sale for resale. Accordingly, the bank is entitled to a refund of the amounts it (erroneously) paid to the Board. 7/13/84.