Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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U

570.0000 USE OF PROPERTY IN STATE AND USE TAX GENERALLY

Annotation 570.0410

(a) IN GENERAL

570.0410 Testing and Training. Machinery is purchased from a California retailer or an out-of-state vendor, delivered to a California location, and set up alongside a counterpart for:

(1) Testing to insure it performs as required.

(2) Training key employees from the out-of-state facility.

(3) "Burning-in."

Upon completion of these functions, the machinery will be shipped to the out-of-state facility.

If the machinery is purchased from California vendors, delivered in this state, and later shipped out-of-state, the transaction is subject to sales tax. If the machinery is purchased outside this state and shipped to a California location, the matter of interest is whether any taxable use occurs in this state.

(1) The testing of machinery, by itself, would not be a taxable use.

(2) The training of the key employees from an out-of-state facility would be a taxable use.

(3) The installation of machinery in this state used to produce a product which is used in R&D labs or placed in inventory for the "burn-in" period would constitute a taxable use of machinery.

Thus, any use of the machinery, other than testing for defects before it is shipped out-of-state is a taxable use of the machinery in this state. 8/23/93.