Laws, Regulations & Annotations


Business Taxes Law Guide – Revision 2021

Sales And Use Tax Court Decisions

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Dell, Inc. v. Superior Court … (2008)

Tax Does Not Apply to Sale of Optional Computer Service Contracts

The court concluded that the optional service contracts were not taxable. The service contracts were not tangible personal property and were not part of the sale of computers, but a separate object of the transaction at a readily ascertainable value. While the company's computers and service contracts were sold concurrently for an aggregate price, they were distinct consumer items and each was a significant object of the transaction. The service contracts had readily ascertainable values, even without itemized invoices.

The court rejected the argument made by both the company and real party in interest tax agency that taxation of the service contracts was proper because the company sold its computers and service contracts for a single lump-sum price, without a separate statement on the invoice of the charge for the service contract. The agency could not decree that the exclusive means to establish a tax exemption for the service contract sold together with a computer was that the service contract's value be separately stated on the retailer's invoice, absent a statute, regulation, or consistent administrative interpretation of the laws mandating a separate statement of value. Dell, Inc. v. Superior Court (2008) 159 Cal.App.4th 911.