Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 565.0038


565.0038 "Delivery" Defined in United States Construction Contracts. In our opinion, the term "delivery," as used in United States construction contracts, refers to receipt by the person to whom the property is shipped. We believe that the usual meaning of this term in the context of the vendor's delivery is that delivery occurs upon receipt by the contractor of physical possession of the delivered product.

Accordingly, a construction contractor would owe use tax on purchases delivered to it in California from out-of-state firms notwithstanding that the contract provides for "title to material purchased from a vendor shall pass to and vest in the government upon the vendor's delivery of such material . . ." While under Uniform Commercial Code title passes from the vendor to the contractor upon delivery to the carrier, the "delivery" contemplated by the contract with the United States is the physical possession by the contractor. Thus title did not pass to the United States outside of California. Under Regulation 1521(b)(1)(A) the contractor is the consumer of materials and fixtures which it furnishes under a construction contract. 12/30/91.