Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 465.0095


(2) Claims for Refund

465.0095 Ability to File Claim. A common carrier purchased bunker fuel for use in its common carrier operations and sometimes issued its vendor exemption certificates prior to the vendor's billings. These certificates were inexplicably ignored and the vendor billed the carrier for sales tax reimbursement which the carrier paid. The vendor paid the sales tax to the Board on the sales to the carrier. During an audit of the carrier, it sought a credit for "taxes" it paid to its vendor on transactions it alleged were exempt under Revenue and Taxation Code section 6385. The carrier relied on Delta Airlines, Inc. v. State Board of Equalization (1989) 214 Cal.App.3d 518 in arguing that since Delta in that case had standing to sue, the carrier also had standing to obtain the credit for the "taxes" it paid its vendor on exempt transactions. The Board disagreed.

The vendor did not rely on exemption certificates in order to report the sales as exempt, or partially exempt, from sales tax. Neither did the carrier since it paid sales tax reimbursement to the vendor with respect to these transactions. Since the vendor treated itself as a retailer making sales that were fully taxable, the carrier does not have standing to file a claim for refund on its own behalf by virtue of exemption certificates not relied upon by the retailer.

Unlike the situation in Delta Airlines, this carrier's vendor did not treat the sales as exempt pursuant to exemption certificates. When a retailer makes a retail sale of fuel in California to a purchaser, such as this carrier, who will use that fuel both inside and outside California, the applicable tax is a sales tax and not a use tax. With respect to the transactions involved here, there is no basis to treat the carrier as a "retailer." The carrier did not issue exemption certificates to the vendor upon which the vendor relied; the vendor reported its own sales tax liability on these sales. The carrier paid sales tax reimbursement to the vendor, but this was not sales tax. The payment of sales tax reimbursement does not provide the carrier with standing to file a claim for refund for sales tax paid by another person. The vendor has standing to file a claim for refund for any taxes it believes were overpaid. 8/21/90; 9/11/90.