Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013

Sales and Use Tax Annotations

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545.0000 "TAX-PAID PURCHASES RESOLD"—Regulation 1701

Annotation 545.0013

545.0013 Claimant as Successor in Interest. A group of entities were participants in an oil drilling operation. One of the participants, A, was the operator of this joint drilling operation. Equipment was purchased from out-of-state suppliers on which A paid the use tax. This tax and other operating costs were passed on to the participants prorated based on their respective interest in the operation.

B, not a retailer, became the successor in interest to A, a retailer. A substantial amount of the equipment was never used and was later sold at an auction. B does not qualify to obtain a refund for tax-paid purchases resold since B is not a retailer and, pursuant to Regulation 1701, the person claiming the refund must be a retailer.

B may be the successor in interest of an agent for the participants in the drilling operation for other purposes. However, that fact does not cause it to have the ability to replace A as a retailer in the state of California. A person may do by agent any act which he might do himself. Thus, an agent is limited to acts which its principal might otherwise do. In order to qualify for the refund, the person claiming the refund must be a retailer. If other participants could qualify for a refund on their own as retailers, then B could act on their behalf and claim a refund. If only a portion of the participants qualify as retailers, then only the pro-rata portion of the credit may be refunded. 7/20/93.