Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Transactions and Use Tax Annotations
800.0000 APPLICATION OF TRANSACTIONS (SALES) TAX AND USE TAX—Regulation 1823
800.0981 Shipments of Warehoused Merchandise. Taxpayer has offices in Sonoma and Contra Costa Counties. A customer located in Santa Clara County sends a purchase order for products which contain its logo to the taxpayer. Taxpayer bills the customer and holds the goods in its Sonoma County warehouse. At customer's direction, taxpayer sends the products to customer's offices located throughout the world. Once a month the customer is billed for fulfillment and shipping costs. The products shipped are intended as gifts to new employees.
Assuming that title passed to customer upon delivery to the taxpayer's Sonoma County warehouse, sales tax would apply to the products purchased unless the contract specifically required the property to be shipped outside California. Since shipments are made based on future instructions, it appears that the contract does not require shipment outside of California or to any other county. Consequently, the tax rate in Sonoma County (including the ¼ percent district tax) is the applicable rate since subsequent shipments are not made pursuant to the contract of sale. However, shipments to other counties are also subject to the destination county's district tax (if any). Since taxpayer ships the property to the customer in the destination county, and the customer makes the gift in that county, the use occurs in the destination county.
Taxpayer is required to collect the district tax in any district in which it is engaged in business (e.g., sales persons operating in the destination county such as in its Contra Costa County office would be required to collect the BART District Tax and two Contra Costa transit authority taxes). Credit for the Sonoma County district tax is applicable against another county's district tax the taxpayer is required to collect. Also, the purchaser is entitled to a credit against and district use tax, not required to be collected by the seller, for the district sales tax reimbursement paid to the seller. (See Regulation 1823.) 1/13/93.