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 12 - Matters Involving Transportation of Property › Section 1628 - Transportation Charges

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a)
				  Transportation by Carrier. Except as provided in paragraph (c) below, in the
				  case of a sale, whether by lease or otherwise, tax does not apply to
				  "separately stated" charges for transportation of property from the retailer's
				  place of business or other point from which shipment is made "directly to the
				  purchaser," provided the transportation is by other than facilities of the
				  retailer, i.e., by United States mail, independent contract or common carrier.
				  The place where the sale occurs, i.e., title passes to the customer or the
				  lease begins, is immaterial, except when the property is sold for a delivered
				  price or the transportation is by facilities of the retailer, as explained in
				  (b) below. The amount of transportation charges excluded from the measure of
				  tax shall not exceed the cost of the transportation to the retailer.
Transportation charges will be regarded as "separately
					 stated" only if they are separately set forth in the contract for sale or in a
					 document reflecting that contract, issued contemporaneously with the sale, such
					 as the retailer's invoice. The fact that the transportation charges can be
					 computed from the information contained on the face of the invoice or other
					 document will not suffice as a separate statement. If a separately stated
					 charge is made designated "postage and handling" or "shipping and handling"
					 only that portion of the charge which represents actual postage or actual
					 shipment may be excluded from the measure of tax. Such amounts may be excluded
					 from the measure of tax even though such amounts are not affixed to, or noted
					 on, the package. A separately stated charge designated "handling" or "handling
					 charge" is not a separate statement of transportation charges. Tax applies to
					 such charges, notwithstanding the fact that postage or shipment charges may or
					 may not be affixed to or noted on the package.
Property will not be considered delivered "directly to the
					 purchaser" if it is shipped to the retailer, to the retailer's agent or
					 representative, or to anyone else acting in the retailer's behalf. Any
					 separately stated charges by the retailer for the transportation of property
					 to, rather than from, the retailer's place of business, or to another point
					 from which the property will then be "delivered directly to the purchaser," are
					 included in the measure of tax. Such charges represent incoming freight and are
					 taxable as part of the cost of the property sold by the
					 retailer.
(b) Transportation
				  by Retailer's Facilities or Property Sold for Delivered Price.
(1) Definition. "Delivered Price." Property
				  is sold for a delivered price when the price agreed upon in the contract for
				  sale includes whatever cost or charge may be made for transportation of the
				  property directly to the purchaser. A sale for a "guaranteed price" including a
				  separately stated amount for transportation is a sale for a "delivered price."
				  Property is not sold for a delivered price when the price is agreed upon and to
				  this price is added a separately stated amount representing the cost or charge
				  for transportation of the property directly to the purchaser and any increase
				  or decrease in the actual cost of transportation is borne by or credited to the
				  purchaser.
(2) In General. Except
				  as provided in paragraph (c) below, when transportation is by facilities of the
				  retailer or the property is sold for a delivered price, tax applies to charges
				  for transportation to the purchaser, unless (A) the transportation charges are
				  separately stated, (B) are for transportation from the retailer's place of
				  business or other point from which shipment is made directly to the purchaser,
				  and (C) the transportation occurs after the sale of the property is made to the
				  purchaser. When the sale occurs before the transportation to the purchaser
				  commences, the tax does not apply to separately stated charges for the
				  transportation. The amount that may be excluded from the measure of the tax
				  cannot exceed a reasonable charge for transportation by facilities of the
				  retailer or the cost of transportation by other than facilities of the
				  retailer.
(3) Determination of When
				  Sale Occurs.
(A) Security Agreements. When a
				  sale is made pursuant to a security agreement in which the retailer retains the
				  title as security for the payment of the price, the sale occurs when possession
				  of the property is transferred by the retailer to the purchaser or other person
				  at the purchaser's direction.
(B)
				  Leases. When the sale is by lease, the sale occurs upon the transfer of
				  possession or granting of the right of possession of the property by the lessor
				  to the lessee or other person at his direction.
(C) Sale on Approval. When the sale is on
				  approval, the sale does not occur until the purchaser accepts the
				  property.
(D) Other Sales. Unless
				  explicitly agreed that title is to pass at a prior time, the sale occurs at the
				  time and place at which the retailer completes his performance with reference
				  to the physical delivery of the property, even though a document of title is to
				  be delivered at a different time or place. If the contract requires or
				  authorizes the retailer to send the property to the purchaser but does not
				  require him to deliver it at destination, the retailer completes his
				  performance with reference to the physical delivery of the property at the time
				  and place of shipment e.g., delivery of the property to a carrier for delivery
				  by the carrier to the purchaser; but if the contract expressly requires
				  delivery at destination, including cases where one of the terms of the contract
				  is F.O.B. place of destination, the retailer completes his performance with
				  reference to the physical delivery of the property on tender to the purchaser
				  there. When delivery of the property is by facilities of the retailer, title
				  passes when the property is delivered to the purchaser at the destination
				  unless there is an explicit written agreement executed prior to the delivery
				  that title is to pass at some other time.
(4) Place of Sale. For the purposes of the
				  state Sales and Use Tax Law (but not for the purposes of the Bradley-Burns
				  Uniform Local Sales and Use Tax Law nor for the purposes of the Transactions
				  and Use Tax Law) the place of the sale or purchase of tangible personal
				  property is the place where the property is physically located at the time the
				  act constituting the sale or purchase takes place.