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Wallace Berrie and Co. v. State Board of Equalization … (1985)

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Wholesaler Did Not Resell Marketing Aids Under Board Regulation

Taxpayer, a wholesaler who sold merchandise to retailers, provided free cardboard display racks for its merchandise to the retailers as marketing aids. Taxpayer had purchased the display racks under resale certificates. The Board assessed use tax against taxpayer on its purchase price of the display racks based on Regulation 1670(c), which provides that a marketing aid will be considered resold only if the supplier obtains reimbursement for the marketing aid of 50 percent or more of its purchase price; otherwise, under the regulation the supplier is the consumer of the marketing aid.

The California Supreme Court held that the Board's regulation was not arbitrary, and that taxpayer did not satisfy the regulation's requirement of proving that a sale occurred. Accordingly, the court upheld the use tax on taxpayer's purchases of the display racks. Wallace Berrie and Co. v. State Board of Equalization (1985) 40 Cal.3d 60.