Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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480.0000 RETAILER

Annotation 480.0095

480.0095 European Delivery of Motor Vehicle. A person orders a car, which is manufactured in Europe, through a California dealership for delivery in Europe. The dealership arranges the delivery through the automobile manufacturer's corporate representative in the United States. The dealership has the customer fill out a standard purchase order form, showing the dealer as the seller of the vehicle. The order form is signed by the customer. The dealership also has the customer execute a form called "Delivery in Europe Car Order" which specifies the date and place requested for the delivery. This latter form states that the customer is ordering the vehicle from the manufacturer's corporate representative. Either the dealership or the customer sends this to the representative. The dealership and the manufacturer's representative have actual knowledge that the purchaser was a California resident, and that the vehicle would be shipped to California within 90 days of the delivery in Europe.

Since the "Delivery in Europe Car Order" identifies the manufacturer's representative as the seller, there is a strong case for treating that company as a retailer responsible for collecting the tax. However, other evidence indicates that the dealership is also a retailer. The dealership is an independent contractor which apparently has no agency agreement with the manufacturer's representative. It handles all negotiations with the customer and prepares standard purchase orders showing itself as the seller. It collects payments from customers and arranges for shipment of the vehicles to California. In the manufacturer's sales literature and internal documents, local dealers are referred to as sellers.

Both the dealership and the manufacturer's representative are acting as sellers and retailers of these vehicles and, since they are acting in combination as a unit, they can be regarded as a single person for sales and use tax purposes. Therefore, the duty to collect use tax could properly be asserted against either company or both.

Other factors affecting whether the dealership or the manufacturer's representative is the retailer are as follows:

(1) Does the dealership record these transactions as purchases and sales on its books?

(2) Does the manufacturer's representative in fact set the price, or does it merely "approve" the price negotiated by the dealership?

(3) Does the dealership accept trade-ins?

(4) If sales are financed, how is the financing arranged?

(5) If commissions are involved, how are they determined?

(6) Other pertinent information from the manufacturer's representative instructional pamphlet. 1/13/86.