Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 440.0056


(1) In General

440.0056 Resold Prior to Use—Resale Certificates. Special manufacturing aids are sold by a manufacturer to Customer A who will resell the product produced through the use of the special manufacturing aid to Customer B. Tax applies to the manufacturing aids as follows:

(1) A specific resale certificate is given to the manufacturer stating that the special manufacturing aid is purchased by Customer A for resale. Sales of the special manufacturing aids are allowable as sales for resale since Customer A issued a resale certificate for the items. If, however, the items were used for the benefit of A prior to A's sale of the items to B, then A would be liable for payment of use tax measured by its purchase price of the property. The above applies regardless of whether A or B are located outside of California and neither holds a California seller's permit.

(2) The resale certificate issued by Customer A refers to each purchase order for guidance as to the tax status on items being purchased. The purchase order calls for a manufactured product and also for tooling. The order is merely marked "resale" without distinguishing between manufactured products and manufacturing aids. In this situation, the receipts from the sale of the manufacturing aids to Customer A are subject to tax unless the manufacturer establishes that A resold the special manufacturing aids prior to their use in the manufacturing process. The blanket resale certificate is ineffective for purposes of relieving the manufacturer from the burden of establishing that the sale of the manufacturing aid was not a sale at retail. 6/24/75.