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(continued)
(c) Proof of Exemption.
(1) Common Carrier. Any seller claiming a transaction as exempt from sales tax under section 6385(a) must receive at the time of the transaction, and retain, a properly executed bill of lading, or copy thereof, pursuant to which the goods are shipped. The bill of lading must show the seller as consignor. It must indicate that the described goods are consigned to the common carrier at a specified destination outside this state. Where the form of the transaction is "freight collect," no specific freight charge need be shown on the bill of lading, inasmuch as such charges are not ordinarily shown thereon in "freight collect" transactions. Furthermore, the carrier need not actually collect freight charges from itself. The form and language of the bill of lading should be similar to the form and language normally used where the purchaser and carrier are not the same. A bill of lading will be considered obtained at the time of the transaction if it is received either before the seller bills the purchaser for the property, within the seller's normal billing and payment cycle, or upon delivery of the property to the purchaser.
In addition to a bill of lading, the seller must obtain from the purchaser prior to or at the time of the transaction, and retain, a certificate in writing that the property shall be transported and used in the manner described in subdivision (b)(1) of this regulation. The certificate shall be in substantially the same form as Certificate A or B, appearing in the appendix of this regulation. Certificate B may be used when multiple transactions claimed as exempt are made between a seller and a carrier and may be included as part of a transaction by reference to the certificate on the purchase order or other appropriate documentation for each transaction.
(2) Foreign Air Carrier. Any seller claiming a transaction as exempt from sales tax pursuant to section 6385(b) of the Revenue and Taxation Code must receive from the purchaser a certificate in writing that the property shall be transported and used in the manner described in section (b)(2) of this regulation. The certificate shall be in substantially the same form as Certificate C, appearing in the appendix to this regulation. Effective January 1, 1990, if a seller does not have a certificate on hand at the time the board requests it be made available for verification of a transaction claimed to be exempt from sales tax, the seller will have 45 calendar days from the date of the board's written request to obtain the certificate from the purchasing foreign air carrier. A "blanket" certificate, i.e., on issued to cover future transactions, may be issued by a foreign air carrier and included as part of a transaction by reference to the certificate on the purchase order or other appropriate documentation for each transaction.
The provisions of (c)(3) and (d)(3) of this regulation shall apply with respect to sales of aircraft fuel and petroleum products to foreign air carriers.
(3) Fuel and Petroleum Products. Any seller claiming a transaction as exempt from sales tax pursuant to Section 6357.5 or 6385(c) of the Revenue and Taxation Code should timely obtain an exemption certificate in writing from the purchasing common carrier. The exemption certificate will be considered timely if obtained by the seller within the seller's normal billing and payment cycle or within 45 days from the date of delivery, whichever is later. The exemption certificate must show either the purchaser's seller's permit number, or if the purchaser is not required to hold a seller's permit, the purchaser's fuel exemption registration number. The exemption certificate must conform in substance with one of the following, appearing in the appendix to this regulation.
(A) Certificate D is to be used for purchases of fuel or petroleum products within Section 6357.5 by air common carriers (including foreign air carriers) operating under authority from the Federal Aviation Administration. One certificate may be provided for each regularly scheduled flight number which has a foreign destination as its final destination. Such certificate will remain valid until revoked in writing.
(B) Certificate E is to be used for purchases of fuel or petroleum products within Section 6385(c) by a steamship company which is a common carrier. This includes any vessel engaged, for compensation, in transporting persons or property in interstate or foreign commerce.
(d) Effect of Exemption Documents.
(1) Common Carriers. Copies of the bill of lading and supporting certificate described in (c)(1) of this regulation, accepted in good faith, constitute prima facie evidence of the facts entitling the seller to the exemption provided under section 6385(a) of the Revenue and Taxation Code.
Unless both of these documents are received and retained, the seller is liable for sales tax on the transaction.
(2) Foreign Air Carriers. A copy of the exemption certificate described in (c)(2) of this regulation, accepted in good faith, relieves the seller from liability for the sales tax.
(3) Fuel and Petroleum Products. A copy of the exemption certificate described in subdivision (c)(3) of this regulation, accepted timely in good faith, shall relieve the seller from liability for the sales tax on fuel and petroleum products delivered by the seller directly into a ship or an aircraft. If the seller does not obtain an exemption certificate, or does not obtain an exemption certificate within the time specified by paragraph (c)(3) of this regulation, the seller will be relieved of liability for the tax only if the seller presents satisfactory evidence that the sale met the requirements of Sections 6357.5 or 6385(c) of the Revenue and Taxation Code, including the requirement that the purchaser held a valid seller's permit at the time of the sale or a fuel exemption number with the Board at the time of sale or within 45 days after taking the fuel on board.
(e) Liability of Purchaser. A purchasing common carrier or foreign air carrier who gives a certificate of exemption which entitles the seller to regard the gross receipts from the sale as exempted from sales tax under section 6357.5 or 6385 of the Revenue and Taxation Code, but uses the property in some other manner or for some other purpose, or fails to document the transportation of the property to the first out of state destination, is liable for sales tax under section 6357.5(h) or 6385(k) of the Revenue and Taxation Code.
A common carrier or foreign air carrier who gives a certification of exemption which entitles the seller to regard the gross receipts from the sale as exempt from sales tax under section 6357.5 of the Revenue and Taxation Code shall make available to the Board, upon request, records, including, but not limited to, a copy of a log abstract, an air waybill, or a cargo manifest, documenting its consumption or transportation of the fuel or petroleum product to a foreign destination and the amount claimed as exempt.
A foreign air carrier, who gives a certificate of exemption which entitles the seller to regard the gross receipts from the sale as exempt from tax under section 6385(b) of the Revenue and Taxation Code must maintain records in this state, such as a copy of a bill of lading, an airway bill or cargo manifest, documenting its transportation of the tangible personal property to a foreign destination and the amount claimed as exempt.
A common carrier who gives a certificate of exemption which entitles the seller to regard the gross receipts from the sale as exempt from sales tax under Section 6385(c) of the Revenue and Taxation Code shall make available to the Board, upon request, records, including, but not limited to, a copy of a log abstract or a cargo manifest, documenting its transportation of the fuel or petroleum product to an out-of-state destination and the amount claimed as exempt.
A purchaser liable for tax under this paragraph (e) must report and pay the sales tax as if the purchaser were a retailer making a retail sale of the property at the time of the use or failure to provide supporting documentation. If the purchaser does not report and pay tax, the purchaser will be subject to a deficiency determination which will include applicable penalties and interest.
CERTIFICATE A

CALIFORNIA SALES TAX EXEMPTION CERTIFICATE

SUPPORTING BILL OF LADING

Sales of tangible personal property free from sales tax under Section 6385(a) of the California Revenue and Taxation Code.
This is to certify, that the XYZ Company, the purchaser of the tangible personal property described herein, is a common carrier lawfully authorized and permitted to operate as such under the laws of the United States, having been issued (here insert permit or certificate number) by the (here insert name of agency issuing certificate or permit), that the personal property purchased exempt from sales tax reimbursement is to be shipped by the seller via the purchasing carrier's facilities under a bill of lading from (here insert point of origin) to (here insert point of destination), the out-of-state destination, for use by the XYZ Company in the conduct of its business as a common carrier, and that the XYZ Company is legally authorized to transport cargo under the aforementioned common carrier rights over the routes in or through this state by which it will transport the personal property.
This is also to certify that the property purchased will not be used to carry a payload or for any other purpose prior to its delivery at the destination point.
Description of property to be purchased:
_______________________________________________________________
_______________________________________________________________
Purchaser ___________________________
By __________________________________
Address _____________________________
Date ________________________________
CERTIFICATE B

CALIFORNIA BLANKET SALES TAX EXEMPTION

CERTIFICATE SUPPORTING BILL OF LADING

Sales of tangible personal property free from sales tax under Section 6385(a) of the California Revenue and Taxation Code.
_________________________
(Name of Purchaser)
_________________________
(Address of Purchaser)
This is to certify that the above named company is a common carrier lawfully authorized and permitted to operate as such under the laws of the United States; that the personal property for use in the conduct of our business as a common carrier to be purchased from __________________________________________________is to be shipped by (Name of Vendor) the seller via our facilities under a bill of lading to an out-of-state destination using routes in or through the State of California over which we are legally authorized to transport cargo; that any property purchased from you for which a bill of lading is issued showing __________________________________________________ as shipper and (Name of Vendor) showing an out-of-state destination will not be used to carry a payload or for any other purpose prior to its delivery at the destination point shown on the bill of lading.
In the event any of the property purchased is used for any purpose prior to its delivery at the out-of-state destination, it is understood that the purchaser is required by the Sales and Use Tax Law to report and pay tax, measured by the purchase price of such property.
Description of property to be purchased:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
Purchaser ___________________________
By __________________________________
Title _______________________________
Date ________________________________
CERTIFICATE C

CALIFORNIA SALES TAX EXEMPTION CERTIFICATE

Sales of tangible personal property to a foreign air carrier free from sales tax under Section 6385(b) of the California Revenue and Taxation Code.
This is to certify that the purchaser of tangible personal property described herein is a foreign air carrier as that term was defined in Section 1301 of Title 49 of the United States Code on January 1, 1980, and that the sale of tangible personal property to the purchaser is exempt from California state and local sales tax. The tangible personal property shall be or has been transported by the purchaser's facilities to a foreign destination for use by the purchaser in the conduct of its business as a common carrier by air of persons or property.
In the event any of such property is used for any purpose other than that specified in the certificate, it is understood that the purchaser is required by the Sales and Use Tax Law to report and pay tax, measured by the purchase price of such property.
Description of property to be purchased:
______________________________________________________________
______________________________________________________________
Purchaser _____________________________
By ____________________________________
Address _______________________________
Date __________________________________
CERTIFICATE D

CALIFORNIA BLANKET SALES TAX EXEMPTION CERTIFICATE

SUPPORTING EXEMPT PURCHASES UNDER

SECTION 6357.5 - AIR COMMON CARRIERS

Sales of aviation fuel or petroleum products to an air common carrier (including a foreign air carrier) free of sales tax under Section 6357.5 of the California Revenue and Taxation Code.
1. Purchasing Common Carrier: __________________________________
2. Fuel Exemption Registration No.
or Seller's Permit No. of Purchaser:________________________
3. Flight No.:_________________________
4. Final Destination:___________________________________________
5. Airport Where Loaded:________________________________________
6. Description of Property Purchased:___________________________
_____________________________________________________________
7. Retailer:____________________________________________________
The undersigned certifies that the purchaser of the tangible personal property described above is an air common carrier or foreign air carrier lawfully operating as such, and that the aviation fuel or other petroleum product described above which is purchased exempt from sales tax is to be consumed on a flight to a foreign destination or shipped to a foreign destination for use by said Company in the conduct of its business as an air common carrier, and that the undersigned purchasing carrier is lawfully engaged in transporting persons or cargo as an air common carrier or foreign air carrier operating under authority of the Federal Aviation Administration.
In the event any of such property is used for any purpose other than that specified in this certificate, it is understood that the purchaser is required by the Sales and Use Tax Law to report and pay tax, measured by the purchase price of such property. To qualify for the exemption a common carrier who is not otherwise required to hold a valid seller's permit must register with the Board and obtain a fuel exemption number no later than 45 days after taking the fuel on board.
This certificate will remain valid and in effect until revoked by the purchaser in writing. However, this certificate will not be valid for sales of fuel or other petroleum products loaded onto flights of which the seller is aware the final destination is not a foreign destination.
Purchaser:____________________________________
(Company Name)
Signed By:______________________________ Date:________________
(Signature of Authorized Agent)
Title:________________________________________________________
(Owner, Partner, Purchasing Agent, etc.)
CERTIFICATE E

EXEMPTION CERTIFICATE

SUPPORTING EXEMPT FUEL PURCHASES

UNDER SECTION 6385(c) - WATER CARRIERS

Sales of petroleum products free of sales tax under Section 6385(c) of the California Revenue and Taxation Code.
1. Purchasing Common Carrier: ________________________________
2. Fuel Exemption Registration No.
or Seller's Permit No. of Purchaser:______________________
3. Vessel Name:_______________________________________________
4. Voyage No.:________________________________________________
5. Port of Loading:___________________________________________
6. Delivery Date:_____________________________________________
7. First Out-of-State Destination:____________________________
8. Retailer of the Petroleum Product:_________________________
9. [FNa1] Invoice No. of Purchase:____________________________
[FNa1] To be completed by retailer.
ANALYSIS

Fuel Oil Other
Bunker C/ MDO/ Petroleum
HFO MGO Products
(Metric Tons) (Gallons)
10. Quantity consumed to first
out-of-state destination. ______________ _________
11. Quantity used while in port ______________ _________
12. Total of Lines 10 and 11 above. ______________ _________
13. Quantity on board on arrival at port. ______________ _________
14. Quantity subject to sales tax
[Line 12 less Line 13. If Line 13 is
more than Line 12, show zero (0).] ______________ _________
15. Quantity loaded this loading. ______________ _________
16. Quantity shown on Line 14 above. ______________ _________
17. Quantity exempt from sales tax
(Line 15 less Line 16.) ______________ _________

The undersigned certifies that it is a common carrier lawfully operating as such, and that the fuel oil or other petroleum products purchased exempt from sales tax reimbursement are to be shipped to an out-of-state destination for use by said Company in the conduct of its business as a common carrier, and that the undersigned purchasing carrier is lawfully engaged in transporting cargo as a common carrier over the route in this state by which it will transport the fuel oil or other petroleum products. In the event any of such property is used for any purpose other than that specified in the certificate, it is understood that the purchaser is required by the Sales and Use Tax Law to report and pay tax, measured by the purchase price of such property. To qualify for the exemption, a common carrier who is not otherwise required to hold a valid seller's permit must register with the Board of Equalization and obtain a fuel exemption number no later than 45 days after taking the fuel on board.
Purchaser:___________________________________________________
(Company Name)
Signed By:________________________________ Date:_____________
(Signature of Authorized Agent)
Title:_______________________________________________________
(Owner, Partner, Purchasing Agent, etc.)

Note: Authority: Section 7051, Revenue and Taxation Code. Reference: Sections 6357.5 and 6385, Revenue and Taxation Code.


s 1628. Transportation Charges.
(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.
(c) Transportation of Landfill Material. Operative January 1, 1989, tax does not apply to separately stated charges for transportation of landfill material, e.g., sand, dirt or gravel, removed from the ground and transported from the excavation site to a landfill site specified by the purchaser if:
(1) the amount of transportation charges excluded from the measure of tax does not exceed a reasonable charge for transportation by facilities of the retailer or the cost of the transportation by other than facilities of the retailer, or
(2) the consideration received is solely for the purpose of transporting the material to a specified site and the material is transferred without charge. If such transportation charges are in excess of a reasonable charge for transportation by facilities of the retailer or in excess of the cost of the transportation by other than facilities of the retailer, the provisions of this paragraph will not apply.
For purposes of this paragraph, it is immaterial when title passes to the purchaser of the landfill material.


Appendix
(a) Examples of Contract for Delivered Price.
(1) The contract for sale provides for the sale of property for $100 per unit delivered to the purchaser.
(2) The contract for sale provides for the sale of property for $100 per unit "which includes cost of delivery at $10 per unit."
(3) The contract for sale provides for the sale of property for $100 per unit delivered, freight prepaid.
(4) The contract for sale provides for the sale of property for $100 per unit freight collect and allowed.
(5) The contract for sale calls for the sale of property for a guaranteed price of $100 consisting of $90 plus $10 freight.
(b) Examples of Contracts Which Are Not for a Delivered Price.
(1) The contract for sale provides for the sale of property for $100 per unit freight collect.
(2) The contract for sale provides for the sale of property for $100 per unit actual freight prepaid and added to the sales price.
(c) Examples of Application of Tax. All deliveries are by independent carrier.
All billings are in accordance with the terms of the contract.
(1) The contract for sale provides for the sale of property for $100 per unit delivered to the purchaser with freight prepaid.
Tax applies to sales price of $100 per unit with no deduction for freight charge since the freight charges are not separately stated. The contract is for a delivered price and requires delivery to the purchaser. Title does not pass to the purchaser prior to delivery.
(2) Contract for sale provides for the sale of property for $100 per unit. The retailer is required to ship the property to the purchaser freight collect.
Tax applies to $100 per unit since the responsibility for the payment of the freight is upon the purchaser, and the seller makes no charge for freight. Since the carrier will bill the purchaser for the actual freight charge, there will be a separate statement of the freight. The property is not sold for a delivered price.
(3) The contract for sale provides for the sale of property for $100 per unit freight collect and allowed.
The measure of tax is $100 per unit less the amount of the freight paid to the carrier and shown on the payment voucher sent to the retailer by the purchaser.
The sale is for a delivered price. Separately stated transportation charges are excludable from the measure of tax since the transportation occurred after the sale of the property. If the contract for sale explicitly provided for passage of title upon delivery to the destination, then the measure of tax would be $100 per unit since the sale was for a delivered price and title did not pass prior to transportation.
(4) The contract for sale provides for the sale of property for $100 per unit plus actual freight of $10 per unit. Any increase or decrease in the freight is for the account of the buyer.
Tax applies to $100 per unit since the contract is not for a delivered price and shipment is by independent carrier.
(5) The contract for sale provides for the sale of property for $100 plus freight of $10, and the seller guarantees the price will not exceed $110.
Tax applies to $100 because the sale is for a delivered price and there is no showing that title was to pass upon delivery at the destination. A contract will be construed as a shipment contract unless it expressly requires delivery at destination point. If the contract for sale explicitly provided for passage of title upon delivery to the destination, then the measure of tax would be $110 since the sale was for a delivered price and title did not pass prior to transportation.
(6) The contract for sale provides for the sale of property for $100 per unit freight equalized with x city. The invoice shows 10 units at $100 per unit, $1,000, freight from x city $100, total $1,100.
Under these circumstances, tax applies to $1,000 since the only separate statement of freight is the freight equalized with x city in the amount of $100. If the actual freight paid to the carrier for the transportation of the property from the retailer's place of business or other point from which shipment is made directly to the purchaser is less than $100, the exclusion will be limited to the amount paid to the carrier.
(7) Assuming the same facts as above, except the invoice shows 10 units at $100 per unit, $1,000, freight equalized with x city $100, total $1,100. The invoice also shows the notation, "Actual freight prepaid from point of shipment to destination is $200."
The sale is not for a delivered price. On the basis of the above billing, a separate statement of freight is made in the amount of $200. Accordingly, the measure of tax is $1,100 minus $200, or $900.

Note: Authority cited: Section 7051, Revenue and Taxation Code. Reference: Sections 6010, 6010.5, 6011 and 6012, Revenue and Taxation Code.


s 1629. Goods Damaged in Transit.
(a) Sales Tax. If damage to goods in transit to the consumer occurs after the "sale" as defined in section 6006 of the Revenue and Taxation Code is made, sales tax applies to the sale. If the damage occurs prior thereto, sales tax applies as follows:
(1) If the goods are destroyed, tax does not apply to damages paid the retailer for their destruction.
(2) If the goods are not destroyed, and are sold at retail in their damaged condition, tax applies to that portion of the total amount paid to the retailer representing the fair retail value of the goods in their damaged condition.
(b) Use Tax. Use tax does not apply with respect to goods destroyed before the purchaser makes any storage or use of the goods. If the goods are damaged but are nevertheless stored or used by the purchaser, tax applies to that portion of the total amount paid to the retailer representing the fair retail value of the goods in their damaged condition.

Note: Authority cited: Section 7051, Revenue and Taxation Code. Reference: Sections 6006, 6010, Revenue and Taxation Code.


s 1630. Packers, Loaders, and Shippers.
(a) In General -Definitions. Packers, loaders, and shippers (hereinafter collectively called "shippers") purchase tangible personal property to be used in conditioning the goods to be shipped and to preserve, protect, and contain the goods during transportation. Such property includes, but is not limited to, the following:
(1) Property Used to Condition the Goods for Shipment or to Preserve and Protect the Goods During Shipment.
bracing materials ice and dry ice car strips miscellaneous pre- cleaning compounds servatives degreasing compounds rust preventing com- derusting compounds pounds dunnage or "loose" salt lumber solvents (except as otherwise tarpaulin (weather specified in (2) below protection) gas (including dispensers)
(2) Property Used as Containers or as Parts of Containers of the Goods Shipped.
bags gummed tape barrels kegs bottles lumber (including boxes "loose" lumber cans used in the same carboys manner and for the cartons same purpose as crates pallets) cylinders pallets drums sacks excelsior and other strapping packing and crating twine material wrapping paper
(3) Property that when Physically Incorporated in the Final Product Being Sold is a Sale for Resale.
wax and fungicide post harvest protective shields protective coatings salt, acids & caustics
(b) Application of Tax.
(1) Property Used to Condition, Preserve or Protect Goods During Shipment.
(A) General. Tax applies to sales to shippers of property used in conditioning the goods to be shipped, or to preserve and protect the goods during transportation. It is immaterial whether or not a separate charge or separate billing is made by the shipper for the particular item, that it may not be returned to or reused by the shipper, that the goods are shipped in interstate or foreign commerce, or that the shipper's contract is with the United States. The property is purchased by the shipper for a purpose other than resale, i.e., conditioning the goods, or preserving and protecting the goods during shipment. Thus, the sale to the shipper is a retail sale, even though he or she may not retain title to the property used by him or her.
(B) Ice, Carbon Dioxide and Preservatives.
1. Ice. The sale or use of ice or dry ice used in packing and shipping or transporting food products for human consumption is exempt from tax when the food products are shipped or transported in intrastate, interstate or foreign commerce by common carriers, contract carriers, or proprietary carriers.
2. Carbon Dioxide. Operative January 1, 1995, the sale or use of carbon dioxide used in packing and shipping or transporting fruits or vegetables for human consumption is exempt from tax when the fruits or vegetables are shipped or transported in intrastate, interstate, or foreign commerce by common carriers, contract carriers, or proprietary carriers, provided the fruits or vegetables are not sold to the ultimate consumer in the package that contains the carbon dioxide.
3. Preservatives. Tax does not apply to the sale or purchase of preservative products under the following two circumstances:
a. The preservative product is included in the shipping container of exempt food products when they serve a beneficial purpose in preserving the food products during shipment or storage. These include moisture-absorbing desiccants, gas-absorbing ethylene sachets, and gas emitting sulfur dioxide pads or similar products.
b. The preservative product serves a beneficial purpose in preserving the food product and remains in the packaged food product until opened by the ultimate consumer. This includes nitrogen gas used to maintain an inert atmosphere in packaged food products which remains in the packaged food as a preservative until opened by the consumer; and moisture absorbing desiccants included in individual packages of beef jerky which remain sealed until opened by the consumer.
(2) Property Used as Containers or Parts of Containers of Goods Shipped.
(A) General. Tax applies to the sale or use of containers or container materials under the provisions of regulation 1589, "Containers and Labels", (18 CCR 1589). However, except as provided in paragraph (b)(2)(C), when the shipper is not the seller of the contents, the sale of the containers or container materials or parts to the shipper is a taxable retail sale unless the shipper expressly contracts with his or her customer for the sale to his or her customer of the container or container material, making a separate charge therefor, with title passing from the shipper to his or her customer before any use of the material is made, and without any understanding or trade custom that the property will be returned to the shipper for reuse. When all of these conditions exist, the shipper may purchase the property for resale by giving a resale certificate to the supplier of the property. The sale of the property by the shipper is taxable unless exempt as a sale to the United States, as a sale in interstate or foreign commerce, or exempt for any other reason.
(B) Carbon Dioxide. Operative January 1, 1995, the sale or use of nonreturnable container materials containing carbon dioxide atmosphere is exempt from the tax when used in packing and shipping or transporting fruits or vegetables in intrastate, interstate, or foreign commerce by common carriers, contract carriers, or proprietary carriers, whether or not the shipper is the seller of the fruits or vegetables.
(C) Packing Food Products for Human Consumption. Operative April 1, 2000, the sale of, and the storage, use, or other consumption of, all containers is exempt from tax when sold or leased without the contents to persons who place food products for human consumption in the containers for shipment, provided the food products will be sold. The exemption applies without regard to whether the food products are sold in the same container or not, or whether the food products are remanufactured or repackaged prior to their sale.
(3) Disposable Temperature Recording Devices. The sale or storage, use or other consumption of a disposable temperature recording device in this state is subject to tax unless an exemption or exclusion from taxation applies. When a shipper of perishable food products purchases for resale a disposable temperature recording device for the sole purpose of shipping the device along with the products it ships, the shipper of the perishable food products does not make a taxable use of the disposable temperature recording device merely by starting the recording device in this state. If, pursuant to a perishable food product shipper's contract with its customer, the shipper provides a recording device along with perishable food products to an out-of-state point, the shipper's sale of the device constitutes an exempt sale in interstate commerce pursuant to Revenue and Taxation Code section 6396. The provisions of this paragraph do not, however, apply to the sale or lease of non-disposable temperature recording devices.

Note: Authority cited: Section 7051, Revenue and Taxation Code. Reference: Sections 6007, 6359.7, 6359.8 and 6364, Revenue and Taxation Code.


s 1632. C.O.D. Fees.
On and after July 1, 1970, tax applies to any C.O.D. fee paid by the retailer's customer on taxable C.O.D. sales except where the C.O.D. fee is not included in the invoice and the carrier collects it from the retailer's customer and retains it.

Note: Authority cited: Section 7051, Revenue and Taxation Code. Reference: Sections 6011 and 6012, Revenue and Taxation Code.







(Also See Article 30)


s 1641. Credit Sales and Repossessions.
(a) In General. If tangible personal property is sold on credit, either under a security agreement, or otherwise the whole amount of the contract is taxable, unless the retailer keeps adequate and complete records to show separately the sales price of the tangible personal property, and the insurance, interest, finance, and carrying charges made in the contract. If such records are kept by the retailer, the insurance, interest, finance and carrying charges may be excluded from the computation of the tax.
(b) Contracts Designated as Leases. If tangible personal property is, for all intents and purposes, sold, but the transaction is designated as a lease or rental for the purpose of retaining title in the seller as security for payment of the purchase price, or for the purpose of avoiding the tax, the transaction is taxable as a sale under a security agreement.
(c) Due Date of Tax. The total amount of the tax on the entire sales price in credit transactions is due and payable on the due date of the return to be filed after the close of the reporting period in which the sale is made. No reduction in the amount of tax payable by the retailer is allowable by reason of his transfer at a discount of a sale under security agreements or other evidence of indebtedness.
(d) Repossessions. No deduction is allowable in the event that property sold on credit is repossessed except where the entire consideration paid by the purchaser is refunded to him or where a credit for a worthless account is allowable.


Note: Authority cited: Section 7051, Revenue and Taxation Code. Reference: Sections 6006, 6011 and 6012, Revenue and Taxation Code. Bad Debts, see regulations 1642, Returns, defects, replacements, see regulation 1655, Personal Property Leases Generally, see regulation 1660.


s 1642. Bad Debts.
(a) In General. A retailer is relieved from liability for sales tax (section 6055 of the Revenue and Taxation Code) or from liability to collect use tax (section 6203.5 of the Revenue and Taxation Code) insofar as the measure of the tax is represented by accounts found worthless and charged off for income tax purposes (which include circumstances where the retailer's income is reported on a related person's income tax return and the bad debt is charged off on that return) or, if the retailer is not required to file income tax returns and the retailer's income is not reported on another person's return, charged off in accordance with generally accepted accounting principles. A retailer may claim a bad debt deduction provided that the sales tax, or amount of use tax, was actually paid to the state.
This deduction should be taken on the return filed for the period in which the amount was found worthless and charged off for income tax purposes or, if the retailer is not required to file income tax returns, charged off in accordance with generally accepted accounting principles.
Failure to take the deduction on the proper return will not in itself prevent the allowance of a refund measured by an amount for which a retailer could have taken a timely deduction provided a claim for refund is filed with the board within the limitation periods specified in section 6902 of the Revenue Taxation Code.
(b) Amount Subject to Deduction.
(1) Taxable Receipts. If the amount of an account found to be worthless and charged off is comprised in part of nontaxable receipts such as interest, insurance, repair, or installation labor and in part of taxable receipts upon which tax has been paid, a bad debt deduction may be claimed only with respect to the unpaid amount upon which tax has been paid. In determining that amount, all payments and credits to the account may be applied ratably against the various elements comprising the amount the purchaser contracted to pay (pro rata method), may be applied as provided in the contract of sale (contract method), or may be applied by another method which reasonably determines the amount of the taxable receipts (alternative method). When claiming a bad debt deduction or refund using an alternative method, the retailer must include a clear explanation of that method along with the claiming of the deduction or refund. After having applied payments and credits using one method and claiming a deduction or refund based on such method, a retailer shall not thereafter reapply the payments or credits using another method with respect to such losses previously claimed.
(2) Expenses of Collection. No deduction is allowable for expenses incurred by the retailer in attempting to enforce collection of any account receivable, or for that portion of a debt recovered that is retained by or paid to a third party as compensation for services rendered in collecting the account.
(c) Reporting. All retailers must report sales tax liability on an accrual basis. Bad debt deductions will not be disallowed solely for the reason that a retailer is on a cash reporting basis for income tax purposes.
(d) Worthless Account Subsequently Collected. If any account found worthless and charged off is thereafter collected by the retailer, in whole or in part, the taxable percentage of the amount so collected shall be included in the first return filed after such collection and tax shall be paid on such amount with the return. The same percentage of the account which the retailer claimed as an allowable bad debt deduction or refund shall be used to determine the taxable percentage of the recovery. The taxable percentage of any amounts received from a third party for the sale of an account after the retailer has found them to be worthless and has claimed a bad debt deduction or refund are regarded as amounts subsequently collected for purposes of this provision, and the retailer must include such amounts in the first return filed after receipt of such amounts and pay tax thereon.
(e) Records. In support of deductions or claims for refund for bad debts, retailers must maintain adequate and complete records showing:
(1) Date of original sale.
(2) Name and address of purchaser.
(3) Amount purchaser contracted to pay.
(4) Amount on which retailer paid tax.
(5) The jurisdiction(s) where the local taxes and, when applicable, district taxes were allocated.
(6) All payments or other credits applied to account of purchaser.
(7) Evidence that the uncollectible portion of gross receipts on which tax was paid actually has been legally charged off as a bad debt for income tax purposes (whether or not the income tax return has yet been filed) or, if the retailer is not required to file income tax returns and the retailer's income is not reported on another person's return, charged off in accordance with generally accepted accounting principles.
(8) The taxable percentage of the amount charged off as a bad debt properly allocable to the amount on which the retailer reported and paid tax. (See Appendix 1.)
(f) Allowable Methods of Computing Loss.
(1) In General. When there is a repossession, a bad debt deduction is allowable only to the extent that the retailer sustains a net loss of gross receipts upon which tax has been paid. This will be when the amount of all payments and credits allocated to the purchase price of the merchandise, including the wholesale value of the repossessed article, is less than that price. If the pro rata method is used to apply payments, a retailer incurs an allowable bad debt deduction if the wholesale value of the repossessed merchandise is less than the net contract balance (after excluding unearned insurance and finance charges) at the date of repossession. If the contract method is used to apply payments, a retailer incurs an allowable bad debt deduction if the wholesale value of the repossessed merchandise is less than the net contract balance at the date of repossession. An alternative method of computing a bad debt loss may be used subject to approval by the Board.
(2) Method of Computing Loss -Pro Rata Method.
(A) Loss Per Records. The loss per records is the bad debt loss the retailer writes off for income tax purposes. An estimate of bad debt losses based in part upon the history of the business or industry averages, may not be used to claim bad debt deductions or refunds for sales and use tax purposes.
(B) Taxable Portion of Loss Per Records.
Only that portion of a bad debt loss attributable to the amount on which the retailer paid tax may be used to claim a bad debt deduction or refund for sales and use tax purposes. Even an account with all sales subject to tax may include some amounts on which tax was not paid, such as the tax or tax reimbursement charged to the consumer which is included in the account balance. The percentage of loss on which tax was paid for an account which is secured by the merchandise purchased, or which represents a single purchase of a significant amount, should be calculated on an actual basis. The percentage of loss on which tax was paid for accounts involving a large volume of small transactions may be calculated based on an analysis of the composition of the accounts receivable. All accounts of the retailer for which this calculation is made should use the same method of applying payments for the calculation (e.g., use FIFO for all accounts or use LIFO for all accounts). Examples using the pro rata method are attached as Appendices 1 and 2.
(3) Method of Computing Loss -Contract Method. The allowable bad debt deduction is calculated by subtracting all payments and credits from the purchase price of the merchandise pursuant to the method of applying payments set forth in the applicable contract(s) with the customer and, to the extent the contract is silent on the method of applying payments, the loan accounting systems used by the retailer in the ordinary course of business, and from that amount subtracting the proceeds of the sale of any repossessed merchandise in accordance with (4) below. (continued)