Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 570.0037


570.0037 Charitable Donations. Company A, a wholly owned subsidiary of out-of-state company B, operates a warehouse in California that is the center for the receipt of goods purchased from out-of-state companies. Company A mails numerous charitable donations to tax exempt organizations throughout the United States. Company A estimates 80% of the donations are made to entities located outside California. All donated goods, prior to shipment, either have been stored at the California facility or have been shipped to the California facility from the Seattle, Los Angeles, or Denver sub distribution centers of Company B for reshipment to the charitable recipients. The donees generally contact a common carrier and refer it to Company A to arrange for shipment. In other instances, the donees pick up the goods at Company A's California facility or Company A's employees will deliver the goods from the California facility to the donee. Some of the goods are shipped to Indian tribes both inside and outside California.

Company A delivers its gifts to the donees and/or their agents (the common carriers) within this state. At the time the property is transported, Company A no longer has any right, title, or interest in the property. Company A often ships out-of-state inventory into California, not for purposes of resale, but specifically to facilitate making its donation from one place in one load. The storage of the merchandise for donation is storage for a purpose other than "subsequently transporting it outside the state for use thereafter solely outside the state" by the purchasers. Instead, it is a taxable use inside this state by company A. The donations are complete at the time the items are loaded onto the common carriers and/or personal conveyances of the donee. Since there is a transfer of title and actual delivery in this state, the local act or taxable event occurs at the point of delivery to the donee or its agent.

The fact that some of the merchandise is shipped to Indian tribes does not affect the application of the use tax. Company A's reliance on Regulation 1616 is misplaced since the transactions under consideration involve gifts to Indians not sales to Indians or a use of property sold to Indians. 4/23/92.