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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 1. Sales and Use Taxes
Chapter 1. General Provisions and Definitions
Section 6006
6006. "Sale." "Sale" means and includes: (a) Any transfer of title or possession, exchange, or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration. "Transfer of possession" includes only transactions found by the board to be in lieu of a transfer of title, exchange, or barter.
(b) The producing, fabricating, processing, printing, or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing, or imprinting.
(c) The furnishing and distributing of tangible personal property for a consideration by social clubs and fraternal organizations to their members or others.
(d) The furnishing, preparing, or serving for a consideration of food, meals, or drinks.
(e) A transaction whereby the possession of property is transferred but the seller retains the title as security for the payment of the price.
(f) A transfer for a consideration of the title or possession of tangible personal property which has been produced, fabricated, or printed to the special order of the customer, or of any publication.
(g) Any lease of tangible personal property in any manner or by any means whatsoever, for a consideration, except a lease of:
(1) Motion pictures or animated motion pictures, including television, films, and tapes.
(2) Linen supplies and similar articles when an essential part of the lease agreement is the furnishing of the recurring service of laundering or cleaning the articles.
(3) Household furnishings with a lease of the living quarters in which they are to be used.
(4) Mobile transportation equipment for use in transportation of persons or property as defined in Section 6023.
(5) Tangible personal property leased in substantially the same form as acquired by the lessor or leased in substantially the same form as acquired by a transferor, as to which the lessor or transferor has paid sales tax reimbursement or has paid use tax measured by the purchase price of the property. For purposes of this paragraph, "transferor" shall mean the following:
(A) A person from whom the lessor acquired the property in a transaction described in subdivision (b) of Section 6006.5.
(B) A decedent from whom the lessor acquired the property by will or the laws of succession.
(6) A mobilehome, as defined in Sections 18008 and 18211 of the Health and Safety Code, other than a mobilehome originally sold new prior to July 1, 1980, and not subject to local property taxation.
(7) Paragraphs (1) and (5) and Section 6094.1 shall not apply to rentals or leases of video cassettes, video tapes, and video discs for private use under which the lessee or renter does not obtain or acquire the right to license, broadcast, exhibit, or reproduce the video cassette, video tape, or video disc.
History—Stats. 1945, p. 1722, operative July 1, 1945, rearranged wording for clarification. Stats. 1953, p. 3384, in effect September 9, 1953, deleted former (b) relating to a withdrawal for delivery to a point in this state and relettered remaining subdivisions. Stats. 1965, p. 5444 (First Extra Session) operative August 1, 1965, added "or" and deleted "lease or rental" from the first sentence and " lease or rental " from the second sentence, and added (g). Stats. 1966, p. 190, in effect April 26, 1966, operative as to all transactions occurring after July 1, 1965 (except that retroactive operation shall not affect the states right to any tax which vested prior to the effective date), added "or leased in substantially the same form as acquired by a transferor," "or transferor", and the definition of transferor to (g) (4). Stats. 1967, p. 2720, in effect November 8, 1967, renumbered former (g) (4) as (g) (5) and added new (g) (4). Stats. 1970, p. 2132, in effect November 23, 1970, reworded (g) (4). Stats. 1971, p. 590, in effect July 7, 1971 operative October 1, 1971, added the phrase commencing with "except when such food, meals, or drinks …" to (d). Stats. 1971, p. 3832 in effect December 16, 1971 operative January 1, 1972 amended the former section as follows: Deleted the words "for hire" following "equipment for use in", made reference to section 6023 and deleted examples of mobile transportation equipment under (g) (4). Stats. 1971, p. 5142 (First Extra Session), operative January 1, 1972, repealed and re-enacted the section. Section 53(d) of that act provided that it is the intent of the Legislature in enacting sections 19 and 20 of the act [applicable to section 6006] that the provisions of Stats. 1971, Ch. 284, and Stats. 1971, Ch. 1777, of the regular session both be given effect as they amended section 6006 of the Revenue and Taxation Code. Stats. 1974, Ch. 709, effective September 6, 1974, deleted a provision in (d) relating to certain mentally retarded persons. Stats. 1978, Ch. 1211, effective January 1, 1979, in subdivision (g) (5) deleted "or transferor has paid sales tax reimbursement pursuant to Section 6052 or" following "as to which the lessor" and substituted "establishes to the satisfaction of the board that the lessor or his transferor acquired the property in a transaction that was a retail sale with respect to which the retailer has reported and paid the sales tax to the board or as to which the lessor or the transferor". Stats. 1980, Ch. 285, operative July 1, 1980, added (g) (6). Stats. 1980, Ch. 1068, effective September 26, 1980, deleted "establishes to the satisfaction of the board that the lessor" following "transferor, as to which the lessor" and substituted "lessor or transferor has paid the sales tax" for "retailer has reported and paid the sales tax to the board" following "with respect to which the" in (g) (5). Stats. 1982, Ch. 1589, in effect January 1, 1983, substituted "transferor has paid sales tax reimbursement" for "his transferor … the transferor" before "has paid use tax" in subsection (5) of subdivision (g). Stats. 1983, Ch. 323, in effect July 21, 1983, operative September 1, 1983, added subsection (7) to subdivision (g). Stats. 1983, Ch. 1102, in effect September 27, 1983, added the balance of the first sentence after "videodiscs" to subdivision (g)(7). Stats. 1987, Ch. 915, in effect September 21, 1987, in subdivision (a), deleted comma after "Transfer of possession"; in subdivision (g)(1), deleted "picture" following "Motion" and substituted "pictures or animated motion pictures"; in subdivision (g)(5), deleted "hereof, transferor" following "For purposes" and substituted "of this paragraph, transferor "; and in subdivision (g)(7), inserted spaces after "video".
Note.—Stats. 1976, Ch. 1384, operative September 30, 1976, provides in part: "Sale" and "purchase", for the purposes of Part 1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation Code, do not include any transfer of title of tangible personal property constituting any project or pollution control facility to the California Pollution Control Financing Authority by any participating party, nor any lease or transfer of title of tangible personal property constituting any project or pollution control facility by the authority to any participating party, when the transfer or lease is made pursuant to Division 27 (commencing with Section 44500) of the Health and Safety Code. The terms "project", "pollution control facility", and "participating party" as used in this section have the meanings ascribed to them in Sections 44506 and 44508 of the Health and Safety Code.
Dyeing of fabrics.—The dyeing of new fabrics furnished to the dyer by the consumer is a "processing" within the meaning of (b) of this section, and the sales tax therefore applies to the gross receipts from such dyeing. Banken v. State Board of Equalization (1947) 79 Cal.App.2d 572.
Processing of radiographs by lay laboratory.—The taking and processing of radiographs for the use of doctors and dentists results in a sale within the meaning of this section despite the fact that the radiographs, after being used, are returned to and stored by the laboratory. Maranville v. State Board of Equalization (1950) 99 Cal.App.2d 841. See, however, Section 6020 under which producers of X-ray films are consumers on and after June 1, 1951.
Fixture.—The fabrication and installation by a contractor of a 521-ton turbine generator unit is a sale of tangible personal property although it becomes a part of the real property of the purchaser. General Electric Co. v. State Board of Equalization (1951) 111 Cal.App.2d 180. The furnishing of fixtures by a contractor in the course of fabricating and installing an elevator system are retail sales of tangible personal property even though the property in the hands of the purchaser becomes a part of the real property. The distinctions made by the Board between materials and fixtures incorporated into elevator systems must be upheld in the absence of a showing that the action of the Board is arbitrary or unreasonable. Coast Elevator Company v. State Board of Equalization (1975) 44 Cal.App.3d 576. Elevators are properly classified by the Board as fixtures pursuant to Regulation 1521, the manufacture and installation of which is a taxable sale. Oliver and Williams Elevator Corp. v. State Board of Equalization (1975) 48 Cal.App.3d 890. The classification of air conditioning control devices by the Board as fixtures is neither arbitrary nor unreasonble. The installation of the devices by the manufacturer under a lump sum contract does not prevent an allocation of a part of that sum to the fixtures that are subject to tax. Honeywell, Inc. v. State Board of Equalization (1975) 48 Cal.App.3d 897.
Oil well drilling tools.—The use by the board of the "substantial consumption" test in determining whether a lease or rental is in lieu of a sale is reasonable and valid. Under that test, the rental to an oil well driller of a "rock bit" having an effective life of but one rental is a transaction in lieu of a transfer of title within the meaning of (a)of this section. Universal Engineering Co., Ltd. v. State Board of Equalization (1953) 118 Cal.App.2d 36. X-ray techniciansprior law.The furnishing of films to physicians by an X-ray technician for diagnostic purposes only, prior to June 1, 1951, was a sale under paragraph (f) of this section. People v. Grazer (1956) 138 Cal.App.2d 274. But see Section 6020.
Aircraft wings exchange.—Where the taxpayer modified aircraft wings, installed them on the customers aircraft, and took the aircrafts original wings in exchange as trade-ins, the court held that since the wings were the taxpayers property at all times prior to installation on the customers aircraft, the exchange was a retail sale and not repair. Aircraft Tank Service, Inc. v. State Board of Equalization (1964) 224 Cal.App.2d 582.
Sale of sand and gravel.—Where a supplier agreed to furnish sand and gravel to a highway contractor "f.o.b. job site," title did not pass until the goods reached the place agreed upon and the providing of asphaltic material by the supplier from its pit was a sale of tangible personal property and not a transfer of an interest in real property. Santa Clara Sand and Gravel Co. v. State Board of Equalization (1964) 225 Cal.App.2d 676.
Draftsmans drawings.—Since the true object of transactions, in which a draftsman makes detailed drawings based upon specifications furnished by the person placing the order, are the drawings and not the designs or specifications pictured therein, such transactions are sales of tangible personal property under subdivision (f). Albers v. State Board of Equalization (1965) 237 Cal.App.2d 494, cert. den. (1966) 383 U.S. 960.
Certain deep well agricultural pumps are not fixtures.—A pump company which sells and installs such pumps is not a construction contractor furnishing and installing fixtures, but is a retailer of machinery and equipment, with respect to the pumps which do not become an integral part of an irrigation system, have a useful life of only a few years, and are not affixed to the land in a permanent fashion but are set in open spaces, usually on timbers, held in place by gravity and are often moved from one well to another. City of San Joaquin v. State Board of Equalization (1970) 9 Cal.App.3d 365.
Electrical Power Transmission Lines.—See Section 6016.5. Revenue and Taxation Code Section 6006(g)(5) Not Discriminatory.On August 1, 1965, the definition of "sale" in the Sales and Use Tax Law was extended to include the lease of property rented in a form substantially different from that acquired by the lessor [Rev. and Tax. Code Sec. 6006(g)(5)]. Taxpayer thereafter paid a "use" tax measured by his receipts from the rental of powered houseboats constructed prior to August 1 of materials on which he had previously paid sales or use tax. Taxpayer sought a refund of the amounts paid by him subsequent to August 1, 1965, contending, on appeal, that Section 6006(g)(5) discriminated upon lessees who leased property in a different form from that in which it was acquired by the lessor. The court, in holding that there was a rational basis for the distinction drawn by the challenged section, stated that since the labor cost would not otherwise be includable within the measure of sales and use tax, the Legislature could properly conclude that the rental to the lessee, and not the cost of tangible items to the lessor, was the amount most likely to result in a measure of tax equitable with that paid by others under the statutory scheme. Ladd v. State Board of Equalization (1973) 31 Cal.App.3d 35.
Regulation 1521 is valid.—Regulation 1521 treating construction contractors as consumers of materials and as retailers of fixtures furnished and installed by them, is valid. Honeywell, Inc. v. State Board of Equalization (1975) 48 Cal.App.3d 907.
Timeliness of Reporting Tax on Purchase Price of Property Leased.—The Board may validly require a lessor of tangible personal property which is leased in substantially the same form as acquired by the lessor to pay tax measured by rental receipts if he does not, at the time the property is first placed in rental service, pay tax or tax reimbursement measured by the purchase price of the property. Action Trailer Sales, Inc. v. State Board of Equalization (1975) 54 Cal.App.3d 125.
Transactions between related entities.—Where a corporations sole function was to fabricate devices designed by its corporate parent using materials furnished by its corporate grandparent which retained title to all ideas, materials, and completed devices, and where the corporation served only as a conduit for the payment of salaries and acted solely on orders from the corporate grandparent, with a long-time employee of the corporate grandparent supervising the day-today operations, the transactions between the related entities did not constitute sales within the meaning of (b) of this section so as to justify imposition of sales tax. Mapo, Inc. v. State Board of Equalization (1975) 53 Cal.App.3d 245. Lease Renewals.Tax applies to leases executed before August 1, 1965, if such leases are extended or modified, either through action or inaction, subsequent to that date. International Business Machines v. State Board of Equalization (1980) 26 Cal.3d 923.
Materials Consumed by Construction Contractor.—Where a contractor supervises and directs the installation of the materials that he furnishes on a construction job and is responsible for necessary corrections, he is the consumer rather than the seller of such materials under Regulation 1521, even though the employees supervised and directed are employed by the general contractor or by a subcontractor of the general contractors. Western Concrete Structures, Inc. v. State Board of Equalization (1977) 66 Cal.App.3d 543.
Sale Occurs When Security for Goods Retained by Seller.—A taxable sale takes place notwithstanding the fact that a contract provides for retention of legal titles to tooling by the seller as security for the purchase price of the parts sold, when provisions of the sale agreement give the buyer substantially absolute control over the use and disposition of the tooling including an irrevocable power of attorney from the seller to execute in its name any documents appropriate to transfer of the tooling. Northrop Corporation v. State Board of Equalization (1980) 110 Cal.App.3d 132.
Fabrication of keypunch cards.—Computer service bureaus transfer of data by keypunch cards is taxable fabrication of property to special order of customer, and is not a service, despite minimal cost of blank cards. Intellidata, Inc. v. State Board of Equalization (1983) 139 Cal.App.3d 594.
Mobile transportation equipment purchased.—Leasing companies purchased mobile transportation equipment, not just existing leases of the equipment, when all indicia of ownership were transferred. Newco Leasing, Inc. v. State Board of Equalization (1983) 143 Cal.App.3d 120.
Alterations of new clothing.—Where taxpayer altered new clothing for customers who purchased the clothing elsewhere, alteration charges were taxable under section 6006(b) as a step in fabricating a product. Transfer of title to tangible property is not necessary to constitute a taxable sale. Fabrication labor is taxable even though customer does not furnish all the material necessary to fabricate a product. Board regulation using words "new clothing" not unconstitutionally vague. Duffy v. State Board of Equalization (1984) 152 Cal.App.3d 1156.
Transfer to PartnershipAssumption of Indebtedness.—A general partner in a commencing partnership made a taxable sale when it transferred equipment to the partnership. The taxable measure was the partnerships assumption of indebtedness on the equipment. Cal-Metal Corp. v. State Board of Equalization (1984) 161 Cal.App.3d 759.
Regeneration of water purification tanks.—The replacement of depleted tanks with regenerated tanks constitutes a taxable "sale" as defined under 6006. A taxable sale includes the reconditioning of tangible personal property by delivery to the customer of reconditioned property which has been commingled with the same kind of property as the customer originally delivered to the reconditioner. Continental Water Conditioning Company of the Bay Area, Inc. v. State Board of Equalization (1989) 207 Cal.App.3d 783.
Assumption of liabilities by a commencing partnership.—A taxable sale occurs when a commencing partnership assumes the liabilities of its partners in exchange for tangible personal property. Industrial Asphalt, Inc.v.State Board of Equalization (1992) 5 Cal.App.4th 1237.
Sales and LeasebacksFinancing Transactions.—No taxable sale occurred, despite transfer of title to equipment, where the object of transactions between equipment owner and leasing companies was to obtain financing for the purchase of the equipment, not to make sales and leasebacks. Cedars-Sinai Medical Center v. State Board of Equalization (1984) 162 Cal.App.3d 1182.
Marketing aids not sold if no consideration is received.—Board regulation 1670(c) was valid in requiring evidence that supplier received consideration of at least 50% of purchase price of marketing aids from its customers, in order to prove sales of marketing aids occurred. Wallace Berrie and Co. v. State Board of Equalization (1985) 40 Cal.3d 60. Cranes affixed to buyers real property was a sale.In the hands of seller, cranes were personal property, and transfer to buyer was a sale, even though sale occurred after affixation of cranes to buyers real property. U. S. Lines, Inc. v. State Board of Equalization (1986) 182 Cal.App.3d 529.
Promotional displays used as marketing aids.—Where seller packaged displays with merchandise and sold both for a single price, seller was the consumer of the marketing aids since there was no clear evidence of a sale. Parfums- Corday, Inc. v. State Board of Equalization (1986) 187 Cal.App.3d 630.
Unpaid rental receipts included in sales price.—When buyer wanted to own equipment outright rather than lease it for the remainder of the lease term, the resulting sale terminated the original lease and brought about a redetermination of the value of the equipment. The sales price included the unpaid rental receipts balance paid by buyer for the transfer of title. Framingham Acceptance Corp. v. State Board of Equalization (1987) 191 Cal.App.3d 461.
Assumption of indebtednessjoint liability.—Where taxpayer transferred assets and liabilities of its divisions to existing subsidiaries, but remained jointly liable for those liabilities, there was no consideration and thus no sale. Macrodyne Industries, Inc. v. State Board of Equalization (1987) 192 Cal.App.3d 579 [disapproved in Beatrice Co. v. State Board of Equalization (1993) 6 Cal.4th 767].
Identical but different property.—Leases of duplicates of master tapes and acetate tapes are not tax exempt as property leased in substantially the same form as acquired. The court agreed with the Board that the Sec. 6006(g)(5) exemption does not include identical but different property. A and M Records, Inc. v. State Board of Equalization (1988) 204 Cal.App.3d 358.
Power system is a taxable fixture.—Taxpayer, an electrical contractor, furnished and installed an emergency standby uninterruptible power system for the military. The court rejected the taxpayers contention that the equipment it purchased should be classified as machinery or equipment for which no tax need be paid holding that a system so essential and integral to the operation of the facility must be classified as a taxable fixture. Overhead Electric Co. v. State Board of Equalization (1991) 227 Cal.App.3d 1230.
Telephone paging services.—Taxpayer, who provided paging service, was the consumer, and not the seller, of paging devices provided as part of the service where there was no separate charge for the devices and taxpayer maintained ownership and responsibility for maintenance, because the devices were provided only incidentally to the paging service. MCI Airsignal, Inc. v. State Board of Equalization (1991) 1 Cal.App.4th 1527.
Assumption of liabilities is consideration.—The assumption of liabilities by a subsidiary was consideration as between the transferor (the plaintiff) and the transferee (the subsidiary) even if the plaintiff remained primarily and jointly liable for debts and obligations assumed by its subsidiary. Since the transfer was for consideration, it was a sale subject to sales tax. Beatrice Co. v. State Board of Equalization (1993) 6 Cal.4th 767.
Transfer of drawings and designs.—Taxpayer sold drawings and designs embodying technology as well as manuals and procedures for use as technical guides. A sale does not become nontaxable simply because its principal purpose is to transfer intellectual content of a physical object. Here, there was a taxable sale because the transfer was not incidental to the providing of a service and the purchaser acquired the physical items for their own sake and not only for their intangible value. Navistar Internat. Transportation Corp. v. State Board of Equalization (1994) 8 Cal.4th 868.
Supplies consumed in repairs.—Sales of supplies to repair shops were taxable retail sales even when the repair shops made a separate charge itemized as "paints and materials" for the purpose of recovering their costs of supplies consumed during the repairs. The repair shops did not furnish the supplies to their customers but consumed them in making the repairs and thus did not purchase the supplies for resale. Modern Paint and Body Supply, Inc. v. State Board of Equalization (2001) 87 Cal.App.4th 703.
Fixtures.—The Board properly applied Regulation 1521 in determining that the signs at issue were fixtures. Richard Boyd Industries, Inc. v .State Board of Equalization (2001) 89 Cal.App.4th 706.