Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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495.0000 SALE

Annotation 495.0610


495.0610 Photo Plots and Drill Tapes. A corporation designs, manufactures, and sells "Burn-In Boards" (BIBs) which are used to test the components of electronic equipment. The BIBs are designed in accordance with the customer's specifications. When the design is complete, a "photo plot" of the design is made on paper or mylar. Upon the customer's approval, the corporation's computer reads the photo plot and fabricates a drill tape for use as a template in manufacturing the BIBs. The corporation does not transfer possession of either the photo plots or the drill tape to its customers. The corporation's invoices included separately stated charges labeled "artwork blue-lines" which are intended as charges for the design and fabrication of the photo plot and drill tape. Tax reimbursement was charged and reported on the charges for BIBs and artwork blue-lines on sales to California customers. However, when the BIBs were sold to and delivered to customers outside California, tax reimbursement was not charged nor reported on any part of the sale.

The documents of sale indicate that the corporation was selling the photo plots and drill tapes to customers because, pursuant to the contracts of sale, title to these items passed to the customers prior to being used in manufacturing the BIBs in California. As such, tax is due on the sales of photo plots and drill tapes to both the California customers and also to those customers outside California. However, the selling price of the BIBs shipped in interstate commerce pursuant to the contract of sale are not subject to tax. 11/7/91.