Local Taxes – Special Allocation Procedures

Sales and Purchases Of $500,000 or More Subject to Use Tax

Background:

In general terms, an interstate sale is a sale in which the goods are delivered from out-of-state inventory directly to the California consumer by common carrier with title passing out of state or a sale that is negotiated instate with shipment of goods to an out-of-state location with title passing out-of-state. In either case, the sale is not subject to sales tax since the sale occurs outside California. Generally, however, interstate sales made by out-of-state retailers to California consumers are subject to use tax unless otherwise exempt. The local use tax on such interstate sales into California is usually reported on Form BOE-531 (Schedule B) opposite the county to which the goods are shipped.

Special Reporting Procedure:

Out-of-state retailers who are engaged in business in this state and collect use tax on single interstate sales of $500,000 or more, must report the local tax on the transaction on Form BOE-531F (Schedule F) to the specific jurisdiction in which the first functional use of the property occurs. This generally is deemed to be the jurisdiction to which the goods are shipped. See Regulation 1802 (c) for details.

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Construction Contractors

Background:

Generally, construction contractors are required to report the local use tax on materials consumed and the local sales tax on fixtures furnished and installed opposite the county of the jobsite on Form BOE-531 (Schedule B) resulting in the indirect distribution of the tax through the countywide pools. Construction contractors who make over-the-counter retail sales of materials or fixtures are required to segregate such sales from their construction contracts and provide a detailed allocation by place of sale for direct distribution to the local jurisdiction.

Special Reporting Procedure:

In December of 1994, the Board adopted a resolution, allowing for the direct distribution of the local tax on materials consumed and fixtures furnished and installed to the local jurisdiction of the construction site for certain qualifying contracts. Under the resolution, a construction contractor who enters into a construction contract equal to or greater than $5,000,000 may elect to obtain a sub permit for the jobsite of the qualifying contract resulting in a direct allocation of tax to the jurisdiction in which the jobsite is located rather than an indirect allocation through the countywide pool. It is important to note that participation by contractors in this special procedure is strictly voluntary and limited to the installing contractor or subcontractor. See Compliance Policy and Procedures Manual, (CPPM) Chapter 2, "Registration," Section 260.020 - Contractors, for more information.

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Sales of Jet Fuel

Background:

Generally, if a retailer has more than one place of business in California that participates in the sale, the sale occurs at the place of business where the principal negotiations take place.

Special Reporting Procedure:

If both of the following conditions are met, the place of sale or purchase of jet fuel is the city, county or city and county where the fuel is delivered to the aircraft (wing-tip):

  • The principal negotiations for the sale of jet fuel are conducted in this state, and,
  • The retailer has more than one place of business in this state. Regulation 1802 provides specific details regarding the proper allocation of the sales tax on jet fuel.

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Auctioneers

Background:

Generally, the place of sale by an auctioneer is the place at which the auction is held. Auctioneers who conduct all of their auctions at their permanent place of business allocate their local tax to the corresponding local jurisdiction. For auction sales held at a location other than the auctioneer's regular place of business, the local tax is reported on Schedule B to the countywide pool in which the auction is held.

Special Reporting Procedure:

Auctioneers conducting auction events at locations other that their regular place of business when the taxable sales total $500,000 or more must use Form BT-530-B to report the local tax attributable to such events to the specific jurisdiction in which the auction occurs.

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Long Term Leases of Motor Vehicles

Background:

Generally, the use tax derived from short-term leases of motor vehicles is reported to the location of the lessor's place of business, or in certain circumstances to the countywide pool where the vehicle is registered. Prior to 1996, the local use tax derived from long-term leases of motor vehicles was reported opposite the county of the registration address on Form BOE-531, Schedule B resulting in the indirect distribution of the tax through the countywide pools.

Special Reporting Procedures:

Special procedures involve long-term leases (greater than four months) of motor vehicles where the vehicles are either purchased from a California dealer or are leased by a California dealer-lessor. The allocation procedures for leases of these vehicles are outlined in the following table. Definitions of the terms "motor vehicle", "leasing company" and "mobile transportation equipment (MTE)" as used for these special procedures are footnotes to the table. See Regulation 1803.5 for details.

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Type of Lessor
Type of Transaction
1% Local Tax Allocation to:
Leases Exceeding Four Months
Leases of Four Months or Less
California New Motor Vehicle Dealer/Lessor Lease of motor vehicle* Dealer/Lessor's sales location Dealer/Lessor's sales location
California Leasing Company (as defined)** Lessor's place of business Lessor's place of business
California Lessor (other than a new motor vehicle dealer or leasing company as defined)**: Lease of a motor vehicle* purchased from a California new motor vehicle dealer Dealer/Lessor's place of business (Schedule F)
Lease of a motor vehicle* purchased from someone other than a California new motor vehicle dealer Lessee's place of registration (Schedule B)
Lease of MTE*** purchased from a California new motor vehicle dealer (except new pick up trucks rated less than one ton) Lessor's place of business
Out-of-State Lessor: Lease of a motor vehicle* purchased from a California new motor vehicle dealer California Dealer's place of business (Schedule F) Lessee's place of registration (Schedule B)
Lease of a motor vehicle* and MTE*** purchased from someone other than a California vehicle dealer Lessee's place of registration (Schedule B)

* Motor Vehicle means any (new or used) self-propelled passenger vehicle (other than a house car) or pick up truck rated less than one ton.

** Leasing company means a motor vehicle dealer/lessor that originates lease contracts and does not sell or assign the lease contracts and that has annual motor vehicle lease receipts of $15 million or more annually for each business location.

*** MTE (Mobile Transportation Equipment) means equipment used for transporting persons or property for substantial distances such as railroad cars, buses, trucks and truck trailers. For a complete listing of MTE, please see Regulation 1661.