Opinion ID: 1155601
Heading Depth: 1
Heading Rank: 4

Heading: Use Taxes

Text: (1) The use tax (§ 6201 et seq.) complements the sales tax (§ 6051 et seq.). The sales tax levies a tax upon the gross receipts of California retailers from sales of tangible personal property, while the use tax imposes an excise on the consumer at the same rate [as the sales tax] for the storage, use or other consumption in the state of such property when purchased from any retailer. As property covered by the sales tax is exempt under the use tax, all tangible personalty sold or utilized in California is taxed once for the support of the state government. ( Southern Pac. Co. v. Gallagher (1939) 306 U.S. 167, 171 [83 L.Ed. 586, 590, 59 S.Ct. 389]; § 6401.) Thus, for example, the use tax is applied to goods purchased from out-of-state retailers (which are not subject to California sales tax), thereby preventing such out-of-state retailers from enjoying an unfair advantage over local retailers. [12] The sale of a vehicle by a private party (i.e., not a licensed dealer) is exempted from the sales tax but is subject to the use tax, unlike the occasional sale of other types of personal property by a private party which is exempt from all tax. (§§ 6282, 6367.) The DMV collects the use tax on vehicles on behalf of the SBE. (Veh. Code, §§ 4750.5, 38211.) Payment of the use tax must accompany an application to transfer ownership of a vehicle registered in California or to register a vehicle purchased outside the state. (Veh. Code, §§ 38211, 4300.5.) The use tax, like the sales tax, is based upon a percentage of the sales price of the item (§§ 6012, 6051, 6201) but, until recently, where use tax on a vehicle is concerned, former section 6276 declared that the sales price shall be presumed to be an amount equal to the market value of the vehicle at the time of the purchase as that value is determined to measure vehicle license fees. ... (Italics added.) [13] This presumption did not apply, however, to vehicles purchased outside this state from the manufacturer or from a vehicle dealer.... ( Ibid. ) The statute further provided that this presumption may be rebutted by evidence which establishes that the sales price was other than that amount. (Former § 6276.) Former section 6276, therefore, established a rebuttable presumption, applicable to the purchase of vehicles from private parties, that the sales price on which the use tax was based was equivalent to the market value used to determine vehicle license fees. The trial court found that from 1967 to November 1976, the DMV utilized this presumption in calculating the use tax due on the sale of vehicles by private parties in California. The DMV would calculate the current market value, as determined for vehicle license fee purposes, using the classification code assigned to the vehicle when it was new, and would base the use tax due on this depreciated market value. As noted above, however, a vehicle originally purchased outside the state was not assigned such a classification code, because the DMV did not receive a report of sale from out-of-state dealers. When an out-of-state vehicle was registered in California, therefore, the market value used to determine the vehicle license fee was based on the actual cost of the vehicle, as shown by a certificate of cost provided by the owner. In such a case, the use tax also was based on the actual cost of the vehicle as shown by a certificate of cost. Thus, during this period, vehicles purchased from dealers within and outside California were taxed equally. If a vehicle was sold by a dealer in California, a sales tax was assessed based on the sales price. If a vehicle was sold by a dealer outside the state, a use tax based on the sales price was assessed when the owner registered the vehicle in California. The amount of the use tax imposed on vehicles purchased from private parties, however, depended upon where they were purchased. If a vehicle originally sold in California was purchased as a used vehicle from a private party in California, the DMV used the former section 6276 presumption and would base the use tax on the market value as determined for vehicle license fee purposes. If a vehicle originally sold outside the state was purchased as a used vehicle from a private party in another state, however, the DMV would base the use tax on the actual cost of the vehicle to the person registering the vehicle in California. Accordingly, the DMV's practice during this period of determining the market value of a vehicle originally sold in California based upon its sticker price but determining the market value of a vehicle originally sold elsewhere based upon its actual cost, resulted not only in higher license fees for out-of-state vehicles, but also in higher use taxes for vehicles purchased in other states from private parties. In November 1976, after Woosley had purchased and attempted to register his vehicle, the DMV and the SBE concluded lengthy discussions and, relying upon an opinion of the Attorney General (59 Ops.Cal.Atty.Gen. 47 (1976)), agreed that the DMV would begin calculating the use tax on all vehicles purchased from private parties on the basis of their actual cost, as shown by a certificate of cost provided by the owner, rather than the depreciated sticker price, as reflected in the classification code assigned to vehicles first sold in California. This change brought to an end the discrepancy which existed in the calculation of the use tax between vehicles purchased from private parties in California and vehicles purchased outside the state, but raised the issue whether this change in practice constituted a regulation, requiring the DMV to comply with the provisions of the Administrative Procedure Act pertaining to the enactment of regulations. (Gov. Code, § 11340 et seq.)