Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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475.0000 RESALE CERTIFICATES—Regulation 1668

Annotation 475.0228

475.0228 Timely Issued Certificate. A vendor receives a purchase order from a customer for computer equipment. The equipment is shipped and invoiced to a customer in California. Sales tax is charged on the invoice. Four months after the initial invoice, a lessor contacts the vendor stating that it is leasing the equipment to the customer. The lessor requests that the vendor bill the lessor directly without sales tax for the equipment and that the vendor credit the customer for the initial invoice and sales tax. The lessor sends the vendor a resale certificate dated four months after the original invoice.

Under this scenario, there appears to have been a binding contract between the vendor and the customer for the sale of the equipment to the customer. The customer had a binding obligation to pay the vendor for the equipment. It also appears that the customer sold the equipment to a lessor and leased the equipment back. Under these circumstances, a resale certificate would not relieve the vendor of liability for tax since a certificate, even if issued by the customer, would not be timely. Rather, it must be shown that the customer actually sold the property prior to using it. If the customer did, in fact, resell the property prior to use, it would be entitled to a tax-paid purchases resold deduction with respect to the tax paid vendor. 10/23/89.