California Code of Regulations › Title 18 - Public Revenues › Division 2 - California Department of Tax and Fee Administration- Business Taxes (State Board of Equalization- Business Taxes, See Ch. 6 and 9.9) › Chapter 4 - Sales and Use Tax › Article 16 - Resale Certificates; Demonstration; Gifts and Promotions › Section 1669 - Demonstration, Display, and Use of Property Held for Resale-General

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) In General. A
				  purchaser of tangible personal property who gives a resale certificate
				  therefor, and who uses the property solely for demonstration or display while
				  holding it for sale in the regular course of business, is not required to pay
				  tax on account of such use. Except as otherwise provided in this regulation, if
				  the property is used for any purpose other than or in addition to demonstration
				  or display, such as making deliveries, personal use of employees, etc., the
				  purchaser must include in the measure of the tax reported the purchase price of
				  the property. Tax applies to the subsequent retail sale of the
				  property.
(b) Sale to Sales
				  Representatives for Demonstration. Tax applies to sales by dealers to their
				  sales representatives of tangible personal property to be used for
				  demonstration. It is presumed that any such tangible personal property will be
				  used for purposes in addition to demonstration, and any resale certificates
				  given for such property by sales representatives to dealers will be questioned,
				  even if the sales representatives hold seller's permits.
(c) Rental to Sales Representatives for
				  Demonstration. A dealer who rents property to sales representatives is regarded
				  as making a continuous sale of the property and must collect and pay tax on the
				  rental receipts unless tax has been paid measured by the purchase price of the
				  property rented. The dealer must also include in the measure of the tax
				  reported the gross receipts from the retail sale of such property following its
				  rental to the sale representatives.
(d) Loans to Schools for Educational or
				  Training Program. The loan by any retailer of any tangible personal property to
				  any school district for an educational program conducted by the district is
				  exempt from the use tax.
(e)
				  Donations of Property.
(1) In General.
				  Operative January 1, 1989, use tax does not apply to tangible personal property
				  withdrawn from a resale inventory for the purpose of making a charitable
				  contribution to a qualified organization located in this state. This exemption
				  applies only to property which has been purchased for resale and subsequently
				  donated without any use other than retention, demonstration or display while
				  holding it for sale in the regular course of business. For purposes of this
				  regulation, property purchased for the purpose of incorporation into a
				  manufactured article is regarded as having been purchased for resale. For the
				  period January 1, 1989 through October 1, 1989, this exemption is available
				  only to retailers. Effective October 2, 1989, this exemption is available to
				  all sellers.
Property purchased specifically for donation to a qualified
					 organization remains subject to the tax. As provided in section
					 6094.5
					 of the Revenue and Taxation Code, a person is guilty of a misdemeanor if a
					 resale certificate is issued for property which he or she knows at the time of
					 purchase will be donated rather than resold. Such improper use of a certificate
					 may cause the person to become liable for penalties called for by sections
					 6072,
					 6094.5,
					 6484
					 or
					 6485
					 of the Revenue and Taxation Code.
(2) "Qualified Organization". For purposes of
				  this regulation, "qualified organization" means and includes any organization
				  described in section
				  170(b)(1)(A) of
				  the Internal Revenue Code, including but not limited to:
A. religious organizations, e.g., synagogues,
				  churches and associations of churches;
B. charitable organizations, e.g., the Red
				  Cross, the Salvation Army, nonprofit schools and hospitals, and medical
				  assistance and research groups;
C.
				  organizations operated for educational, scientific, or literary purposes
				  including nonprofit museums, art galleries, and performing arts
				  groups;
D. organizations operated
				  for the protection of children or animals;
E. fraternal lodges if the donated property
				  is to be used for charitable purposes and not for the benefit of the members;
				  and
F. the United States, this
				  state and any political subdivisions of this state.
Effective January 1, 1990, a nonprofit museum will not be
					 considered a "qualified organization" unless the donated property is used
					 exclusively for purposes of display to the public within the museum and the
					 museum either;
(1) has a significant
				  portion of its display space open to the public without charge during its
				  normal operating hours;
(2) has its
				  entire display space open to the public without charge for at least six of its
				  normal operating hours during each month of operation; or
(3) has its entire display space open without
				  charge to a segment of the student or adult population for educational
				  purposes.