Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
490.0000 RETURNS, DEFECTS AND REPLACEMENTS—Regulation 1655
(a) RETURNED MERCHANDISE
(1) In General
490.0030 Interdivisional Returns. An out-of-state manufacturing division of a corporation transferred tangible personal property to a division located in California for use by the California division. Use tax was paid with respect to the cost of the property to the manufacturing division when it purchased the component parts from third party suppliers. The property proved to be defective and was returned to the manufacturing division. That division replaced the defective property. The taxpayer claimed a returned merchandise deduction for return of the defective property.
Since there was no sale by the manufacturing division, there is no basis for regarding the transfers as being within the provisions for returned merchandise deduction. 8/31/76. (Am. 2000–1).