Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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495.0000 SALE

Annotation 495.0130


495.0130 Conditional Sale vs. Sale on Approval. The sale of property which was delivered to the out-of-state buyer's agent in California who delivered it to an out-of-state university for testing, and then delivered it to the buyer in New York does not qualify for exemption as a "sale on approval" in interstate commerce merely because the "approval" occurred in New York. Pursuant to Regulation 1628(b)(3)(C), "when a sale is on approval, the sale does not occur until the purchaser accepts the property." The Uniform Commercial Code, however, sets specific requirements for sale on approval. The recipient must have the unconditional right to return the goods, even if they meet the contract specifications. Any impediment to the exercise of this right prevents the contract from being "on approval." Examples of such impediments would be requiring the buyer to make payment upon signing of the contract, retention of title by the seller until final payment is made, rather than upon approval, making the right to return the goods conditional upon failure to conform to the contract, and requiring the recipient to accept risk of loss. If these or other impediments prevent the contract from being "on approval," the sale is a conditional sale as described in section 6006(e). 4/3/81; 7/10/96.