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 11 - Interstate and Foreign Commerce › Section 1620 - Interstate and Foreign Commerce

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Sales Tax.
(1) In General. When a sale occurs in this
				  state, the sales tax, if otherwise applicable, is not rendered inapplicable
				  solely because the sale follows a movement of the property into this state from
				  a point beyond its borders, or precedes a movement of the property from within
				  this state to a point outside its borders. Such movements prevent application
				  of the tax only when conditions exist under which the taxing of the sale, or
				  the gross receipts derived therefrom, is prohibited by the United States
				  Constitution or there exists a statutory exemption. If title to the property
				  sold passes to the purchaser at a point outside this state, or if for any other
				  reason the sale occurs outside this state, the sales tax does not apply,
				  regardless of the extent of the retailer's participation in California in
				  relation to the transaction. The retailer has the burden of proving facts
				  establishing his right to exemption.
(2) Sales Following Movement of Property Into
				  State From Point Outside State.
(A) From Other
				  States--When Sales Tax Applies. Sales tax applies when the order for the
				  property is sent by the purchaser to, or delivery of the property is made by,
				  any local branch, office, outlet or other place of business of the retailer in
				  this state, or agent or representative operating out of or having any
				  connection with, such local branch, office, outlet or other place of business
				  and the sale occurs in this state. The term "other place of business" as used
				  herein includes the homes of district managers, service representatives, and
				  other resident employees, who perform substantial services in relation to the
				  retailer's functions in this state. It is immaterial that the contract of sale
				  requires or contemplates that the goods will be shipped to the purchaser from a
				  point outside the state. Participation in the transaction in any way by the
				  local office, branch, outlet or other place of business is sufficient to
				  sustain the tax.
(B) From Other
				  States--When Sales Tax Does Not Apply. Sales tax does not apply when the order
				  is sent by the purchaser directly to the retailer at a point outside this
				  state, or to an agent of the retailer in this state, and the property is
				  shipped to the purchaser, pursuant to the contract of sale, from a point
				  outside this state directly to the purchaser in this state, or to the
				  retailer's agent in this state for delivery to the purchaser in this state,
				  provided there is no participation whatever in the transaction by any local
				  branch, office, outlet or other place of business of the retailer or by any
				  agent of the retailer having any connection with such branch, office, outlet,
				  or place of business.
(C) Imports.
				  Sales tax applies to sales of property imported into this state from another
				  country when the sale occurs after the process of importation has ceased,
				  regardless of whether the property is in its original package, if the
				  transaction is otherwise subject to sales tax under subdivision (a)(2)(A) of
				  this regulation.
(3)
				  Sales Preceding Movement of Goods From Within State to Points Outside State.
(A) To Other States--When Sales Tax Applies.
				  Except as otherwise provided in (B) below, sales tax applies when the property
				  is delivered to the purchaser or the purchaser's representative in this state,
				  whether or not the disclosed or undisclosed intention of the purchaser is to
				  transport the property to a point outside this state, and whether or not the
				  property is actually so transported. It is immaterial that the contract of sale
				  may have called for the shipment by the retailer of the property to a point
				  outside this state, or that the property was made to specifications for
				  out-of-state jobs, that prices were quoted including transportation charges to
				  out-of-state points, or that the goods are delivered to the purchaser in this
				  state via a route a portion of which is outside this state. Regardless of the
				  documentary evidence held by the retailer (see (3)(D) below) to show delivery
				  of the property was made to a carrier for shipment to a point outside the
				  state, tax will apply if the property is diverted in transit to the purchaser
				  or his representative in this state, or for any other reason it is not
				  delivered outside this state.
(B)
				  Shipments Outside the State--When Sales Tax Does Not Apply. Sales tax does not
				  apply when the property pursuant to the contract of sale, is required to be
				  shipped and is shipped to a point outside this state by the retailer, by means
				  of:
1. Facilities operated by the retailer
				  or
2. Delivery by the retailer to a
				  carrier, customs broker or forwarding agent, whether hired by the purchaser or
				  not, for shipment to such out-of-state point. As used herein the term "carrier"
				  means a person or firm regularly engaged in the business of transporting for
				  compensation tangible personal property owned by other persons, and includes
				  both common and contract carriers. The term "forwarding agent" means a person
				  or firm regularly engaged in the business of preparing property for shipment or
				  arranging for its shipment. An individual or firm not otherwise so engaged does
				  not become a "carrier" or "forwarding agent" within the meaning of this
				  regulation simply by being designated by a purchaser to receive and ship goods
				  to a point outside this state. (This subsection is effective on and after
				  September 19, 1970, with respect to deliveries in California to carriers, etc.,
				  hired by the purchasers for shipment to points outside this state that are not
				  in another state or foreign country, e.g., to points in the Pacific
				  Ocean.)
(C) Exports.
1. When Sales Tax Applies. Except for certain
				  new motor vehicles delivered to a foreign country pursuant to paragraph
				  (b)(2)(D) of Regulation 1610 (18 CCR 1610), sales
				  tax applies when the property is delivered in this state to the purchaser or
				  the purchaser's representative prior to an irrevocable commitment of the
				  property into the process of exportation. It is immaterial that the disclosed
				  or undisclosed intention of the purchaser is to ship or deliver the property to
				  a foreign country or that the property is actually transported to a foreign
				  country.
Sales of property such as fuel oil and other items consumed
					 during a voyage to a foreign country are not exempt even though they are
					 transported out of, and are not returned to this country. It is immaterial that
					 the ship to which the property is delivered is of foreign
					 registry.
2. When Sales Tax
				  Does Not Apply. Sales tax does not apply when the property is sold to a
				  purchaser for shipment abroad and is shipped or delivered by the retailer to
				  the foreign county. To be exempt as an export the property must be intended for
				  a destination in a foreign country, it must be irrevocably committed to the
				  exportation process at the time of sale, and must actually be delivered to the
				  foreign country prior to any use of the property. Movement of the property into
				  the process of exportation does not begin until the property has been shipped,
				  or entered with a common carrier for transportation to another country, or has
				  been started upon a continuous route or journey which constitutes the final and
				  certain movement of the property to its foreign destination.
There has been an irrevocable commitment of the property to
					 the exportation process when the property is sold to a purchaser for shipment
					 abroad and is shipped or delivered by the retailer in a continuous route or
					 journey to the foreign country by means of:
a. Facilities operated by the
				  retailer,
b. A carrier, forwarding
				  agent, export packer, customs broker or other person engaged in the business of
				  preparing property for export, or arranging for its export, or
c. A ship, airplane, or other conveyance
				  furnished by the purchaser for the purpose of carrying the property in a
				  continuous journey to the foreign country, title to and control of the property
				  passing to the purchaser upon delivery. Delivery by the retailer of property
				  into a facility furnished by the purchaser constitutes an irrevocable
				  commitment of the property into the exportation process only in those instances
				  where the means of transportation and character of the property shipped provide
				  certainty that the property is headed for its foreign destination and will not
				  be diverted for domestic use. The following are examples of deliveries by the
				  retailer into facilities furnished by the purchaser which demonstrate an
				  irrevocable commitment of the property into the exportation process:
Example 1. Sale of fuel oil delivered into the hold of a
					 vessel provided by the purchaser. The fuel is to be unloaded at the foreign
					 destination.
Example 2. Sale of jewelry delivered aboard a scheduled
					 airline with a scheduled departure to a foreign destination.
Example 3. Sale of equipment, designed specifically for use
					 in the foreign destination, delivered to a foreign purchaser's aircraft. The
					 foreign purchaser has filed a flight plan showing that the aircraft will be
					 transporting the property on a continuous journey to its foreign
					 destination.
The following are examples of sales which do not
					 demonstrate sufficient indicia of an irrevocable commitment to the exportation
					 process and do not qualify as exports:
Example 4. Sale of jewelry delivered to a foreign purchaser
					 at the retailer's place of business or to the purchaser or his representative
					 at the airport prior to boarding the plane. The tax applies even though the
					 purchaser may hold tickets for the foreign destination.
Example 5. Sale of a television set delivered into the
					 trunk of a passenger vehicle or into the storage area of a pickup truck.
Example 6. Sale of equipment delivered to a foreign
					 purchaser's aircraft even though a flight plan had been filed showing that the
					 aircraft was to be flown to a foreign destination. If the equipment sold had
					 been altered or specifically designed for use in the foreign destination, then
					 the combined factors of the character of the property and the means of
					 transportation would provide certainty of export and the sale would qualify as
					 an export as described in (3) above.
Export has not begun where property is transported from a
					 point within this state to a warehouse or other collecting point in this state
					 even though it is intended that the property then be transported, and in fact
					 is transported, to another country. Nevertheless, sales of property are exempt
					 if transported under the circumstances described in 2.b. above to a warehouse
					 or other collecting point of a carrier, forwarding agent, export packer,
					 customs broker, or other person engaged in the business of preparing property
					 for export, or arranging for its export. Property is regarded as transported
					 under the circumstances described in 2.b. above, when the property is sold to a
					 purchaser for shipment abroad and is shipped or delivered to a point in this
					 state to a person who is not the purchaser, whether or not that person is a
					 legal entity related to the purchaser, who ships or delivers the property to a
					 foreign destination as provided in paragraph (a)(3)(C)2.b. of this
					 regulation.
(D) Proof of Exemption. Bills of lading or
				  other documentary evidence of the delivery of the property to a carrier,
				  customs broker, or forwarding agent for shipment outside this state must be
				  retained by the retailer to support deductions taken under (B) above. Bills of
				  lading, import documents of a foreign country or other documentary evidence of
				  export must be obtained and retained by retailers to support deductions taken
				  under (C) above.
(E) Particular
				  Applications.
1. Property Mailed to Persons
				  in the Armed Forces. Tax does not apply to sales of property which is mailed by
				  the retailer, pursuant to the contract of sale, to persons in the armed forces
				  at points outside the United States, notwithstanding the property is addressed
				  in care of the postmaster at a point in this state and forwarded by him to the
				  addressee.
When mail is addressed to Army Post Offices (A.P.O.'s) or
					 to Fleet Post Offices (F.P.O.'s) in care of the postmaster, it will be presumed
					 that it is forwarded outside California. The retailer must keep records showing
					 the names and addresses as they appear on the mailed matter and should keep
					 evidence that the mailing was done by him.
2. Property for Defense Purposes Delivered to
				  Offices of the United States. Tax does not apply to sales of property shipped
				  to a point outside this state pursuant to the contract of sale when the
				  property is marked for export and delivered by retailer to the "contracting
				  officer," "officer in charge," "port quartermaster," or other officer of the
				  United States for transportation and delivery to the purchaser at such a
				  point.
3. Airplanes Delivered to
				  Agencies of the United States. Tax does not apply to sales of airplanes and
				  parts and equipment for airplanes transported to a point outside this state
				  pursuant to the contract of sale when such property is delivered to the United
				  States Air Force or any other agency or instrumentality of the United States
				  for transportation and delivery to the purchaser or someone designated by him
				  at that point.
4. Repairers. When
				  repairers of property in California, in fulfillment of their repair contracts
				  with their customers, ship the repaired property to points outside this state
				  by one of the methods set forth under (a)(3)(B) and (C) above, tax does not
				  apply to the sale by the repairer of the repair parts and materials affixed to
				  and becoming a component part of the repaired property so
				  shipped.