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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 6009
6009. "Use." "Use" includes the exercise of any right or power over tangible personal property incident to the ownership of that property, and also includes the possession of, or the exercise of any right or power over, tangible personal property by a lessee under a lease, except that it does not include the sale of that property in the regular course of business.
History—Stats. 1965, p. 5445 operative August 1, 1965, added "and also includes the possession of, or the exercise of any right or power over, tangible personal property by a lessee under a lease." First substantial use.Substantial use of property in state provides a taxable moment subjecting property to use tax, disregarding formal use in other states. Western Pacific RR Co. v. State Board of Equalization (1963) 213 Cal.App.2d 20.
Sale outside state and leased back in state.—Where a California retailer sold two oil tankers with title and possession passing out of state and the vessels were immediately leased back to the retailer and were used in California in intrastate commerce, the leasing of the vessels in California was a taxable use by the lessor. Union Oil Co. v. State Board of Equalization (1963) 60 Cal.2d 441, appeal dismissed (1964) 377 U.S. 404.
Special Test Equipment Purchased for Resale by Government Contractor.—In order for tax to apply under this section, the taxable "use" must occur while the purchaser is the owner, since the taxable use is that which is incident to ownership of the property. Lockheed Aircraft Corp. v. State Board of Equalization; Aerojet General Corp. v. State Board of Equalization (1978) 81 Cal.App.3d 257.
Packing Materials.—A custom packer is the consumer of, rather than the seller of, packing materials used to package items for shipping where there is no express provision in the packers billings, invoices or other contract writings passing title of the materials to the customer prior to use. Sternoff v. State Board of Equalization (1980) 103 Cal.App.3d 828.
Primary purpose test.—Taxpayer failed to prove that its manufacture of computer components was for the primary purpose of selling the components, where it first used the components to test other components. Materials purchased under resale certificates but used to manufacture the components were subject to use tax. Burroughs Corp. v. State Board of Equalization (1984) 153 Cal.App.3d 1152.