Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2019
Sales And Use Tax Law
CHAPTER 1. GENERAL PROVISIONS AND DEFINITIONS
6011. "Sales price." (a) "Sales price" means the total amount for which tangible personal property is sold or leased or rented, as the case may be, valued in money, whether paid in money or otherwise, without any deduction on account of any of the following:
(1) The cost of the property sold.
(2) The cost of materials used, labor or service cost, interest charged, losses, or any other expenses.
(3) The cost of transportation of the property, except as excluded by other provisions of this section.
(b) The total amount for which the property is sold or leased or rented includes all of the following:
(1) Any services that are a part of the sale.
(2) Any amount for which credit is given to the purchaser by the seller.
(3) The amount of any tax imposed by the United States upon producers and importers of gasoline and the amount of any tax imposed pursuant to Part 2 (commencing with Section 7301) of this division.
(c) "Sales price" does not include any of the following:
(1) Cash discounts allowed and taken on sales.
(2) The amount charged for property returned by customers when that entire amount is refunded either in cash or credit, but this exclusion shall not apply in any instance when the customer, in order to obtain the refund, is required to purchase other property at a price greater than the amount charged for the property that is returned. For the purpose of this section, refund or credit of the entire amount shall be deemed to be given when the purchase price less rehandling and restocking costs are refunded or credited to the customer. The amount withheld for rehandling and restocking costs may be a percentage of the sales price determined by the average cost of rehandling and restocking returned merchandise during the previous accounting cycle.
(3) The amount charged for labor or services rendered in installing or applying the property sold.
(4) (A) The amount of any tax (not including, however, any manufacturers or importers excise tax, except as provided in subparagraph
(B)) imposed by the United States upon or with respect to retail sales whether imposed upon the retailer or the consumer.
(B) The amount of manufacturers or importers excise tax imposed pursuant to Section 4081 or 4091 of the Internal Revenue Code for which the purchaser certifies that he or she is entitled to either a direct refund or credit against his or her income tax for the federal excise tax paid or for which the purchaser issues a certificate pursuant to Section 6245.5.
(5) The amount of any tax imposed by any city, county, city and county, or rapid transit district within the State of California upon or with respect to retail sales of tangible personal property, measured by a stated percentage of sales price or gross receipts, whether imposed upon the retailer or the consumer.
(6) The amount of any tax imposed by any city, county, city and county, or rapid transit district within the State of California with respect to the storage, use or other consumption in that city, county, city and county, or rapid transit district of tangible personal property measured by a stated percentage of sales price or purchase price, whether the tax is imposed upon the retailer or the consumer.
(7) Separately stated charges for transportation from the retailers place of business or other point from which shipment is made directly to the purchaser, but the exclusion shall not exceed a reasonable charge for transportation by facilities of the retailer or the cost to the retailer of transportation by other than facilities of the retailer. However, if the transportation is by facilities of the retailer, or the property is sold for a delivered price, this exclusion shall be applicable solely with respect to transportation which occurs after the purchase of the property is made.
(8) Charges for transporting landfill from an excavation site to a site specified by the purchaser, either if the charge is separately stated and does not exceed a reasonable charge or if the entire consideration consists of payment for transportation.
(9) The amount of any motor vehicle, mobilehome, or commercial coach fee or tax imposed by and paid the State of California that has been added to or is measured by a stated percentage of the sales or purchase price of a motor vehicle, mobilehome, or commercial coach.
(10) (A) The amount charged for intangible personal property transferred with tangible personal property in any technology transfer agreement, if the technology transfer agreement separately states a reasonable price for the tangible personal property.
(B) If the technology transfer agreement does not separately state a price for the tangible personal property, and the tangible personal property or like tangible personal property has been previously sold or leased, or offered for sale or lease, to third parties at a separate price, the price at which the tangible personal property was sold, leased, or offered to third parties shall be used to establish the retail fair market value of the tangible personal property subject to tax. The remaining amount charged under the technology transfer agreement is for the intangible personal property transferred.
(C) If the technology transfer agreement does not separately state a price for the tangible personal property, and the tangible personal property or like tangible personal property has not been previously sold or leased, or offered for sale or lease, to third parties at a separate price, the retail fair market value shall be equal to 200 percent of the cost of materials and labor used to produce the tangible personal property subject to tax. The remaining amount charged under the technology transfer agreement is for the intangible personal property transferred.
(D) For purposes of this paragraph, "technology transfer agreement" means any agreement under which a person who holds a patent or copyright interest assigns or licenses to another person the right to make and sell a product or to use a process that is subject to the patent or copyright interest.
(11) The amount of any tax imposed upon diesel fuel pursuant to Part 31 (commencing with Section 60001).
(12) (A) The amount of tax imposed by any Indian tribe within the State of California with respect to a retail sale of tangible personal property measured by a stated percentage of the sales or purchase price, whether the tax is imposed upon the retailer or the consumer.
(B) The exclusion authorized by subparagraph (A) shall only apply to those retailers who are in substantial compliance with this part.
History.—Stats. 1943, p. 2453, operative July 1, 1943, added (c) to first paragraph and (d) and former (e) to last paragraph. Stats. 1945, p. 1723, operative July 1, 1945, added "valued in money, whether paid in money or otherwise" to first paragraph and deleted same words from (a) in second paragraph; added a provision respecting return of property within 90 days from purchase. Stats. 1947, p. 506, in effect February 6, 1947, added present (e) and (f) to last paragraph and relettered former (e) in last paragraph as (g). Stats. 1953, p. 1957, in effect September 9, 1953, in (b) of last paragraph deleted "upon rescission of the contract of sale" and the provision respecting return of property within 90 days from purchase and added the language following "credit." Stats. 1957, p. 1687, in effect September 11, 1957, added last sentence to (b) of third paragraph. Stats. 1960, p. 17, in effect June 25, 1960, added (h). Stats. 1961, p. 4535, in effect September 15, 1961, added (c) to second paragraph. Stats. 1962, p. 5, in effect July 3, 1962, deleted "prior to its purchase" and added "except as excluded by other provisions of this section" in (c) of the first paragraph; and in (e) and (f) of the last paragraph deleted the words "On and after February 1, 1947," and completely revised paragraph (g). Stats. 1965, p. 5446 (First Extra Session), operative August 1, 1965, added in first paragraph "or leased or rented, as the case may be" and in the second paragraph "or leased or rented." Stats. 1968, p. 1791, in effect November 13, 1968, deleted (c) of second paragraph relating to a tax that is presumed to be on the consumer and added words "rapid transit district" in (e) and (f) of the last paragraph. Stats. 1971, p. 2780, operative July 1, 1972, relettered the section and added paragraph (b)(3). Stats. 1982, Ch. 1589, in effect January 1, 1983, added "mobilehome, or commercial coach" after each "vehicle" in subsection (8) of subdivision (c). Stats. 1983, Ch. 844, in effect September 16, 1983, operative January 1, 1984, added the third sentence in subdivision (c)(2). Stats. 1988, Ch. 500, in effect August 22, 1988, added "(A)" and ", except as provided in subparagraph (B))" in subdivision (c)(4) and added subparagraph (B). Stats. 1988, Ch. 1647, in effect October 1, 1988, operative January 1, 1989, added present subsection (8) and relettered former subsection (8) as subsection (9) in subdivision (c). Stats. 1993, Ch. 887, in effect October 8, 1993, but operative April 1, 1994, substituted "the" for "such" after "whether" in paragarph (6) of subdivision (c); substituted ". However," for "; provided, that" in paragraph (7) of subdivision (c); and added paragraph (10) to subdivision (c). Stats. 1994, Ch. 912, in effect September 28, 1994, but operative July 1, 1995, added "4081 or" after "Section" in subparagraph (B) of paragraph (4), substituted "that" for "such" after "consumption in" in paragraph (6) of subdivision (c), and added paragraph (11) to subdivision (c). Stats. 2000, Ch. 923 (AB 2894), in effect January 1, 2001, added "or for which … Section 6245.5" after "excise tax paid" in subparagraph (B) of paragraph (4) of subdivision (c). Stats. 2002, Ch. 593, (AB 2701), in effect September 16, 2002, but operative January 1, 2003, added paragraph (12).
Note.—Section 3 of Stats. 1987, Ch. 1280, added Section 1793.25 to the Civil Code to provide that the Board shall reimburse the manufacturer of a new motor vehicle for an amount equal to the sales tax which the manufacturer includes in making restitution to the buyer pursuant to subparagraph (d) (2) (B) of Section 1793.2 (commonly known as Californias "Lemon Law"), when satisfactory proof is provided that the retailer of the motor vehicle for which the manufacturer is making restitution has reported and paid the sales tax on the gross receipts from the sale of that motor vehicle. Section 1793.25 specifically states that this provision for reimbursement to manufacturers does not in any way change the general application of the sales and use tax to the gross receipts from the sale, and the storage, use or other consumption in this state of tangible personal property.
Note.—Section 4 of Stats. 1988, Ch. 500, adds an uncodified section as follows. (a) With respect to sales of diesel fuel made during the period of April 1, 1988, through September 30, 1988, a purchaser entitled to either a direct refund or credit against his or her income tax for the federal excise tax paid may so certify to the seller of the diesel fuel not later than December 31, 1988, in a form prescribed by the board.
(b) A seller receiving the certificate referred to in subdivision (a) may claim a refund or may claim credit on his or her return for the reporting period in which he or she receives the certificate with respect to sales or use tax reported by the seller which would not have been part of the sales price under subparagraph (B) of paragraph (4) of subdivision (c) of Section 6011 or part of the gross receipts under subparagraph (B) of paragraph (4) of subdivision (c) of Section 6012 if Sections 1 and 2 of this act had been in effect on and after April 1, 1988. The seller shall return the amount of the refund or credit to the purchaser.
Note.—Section 3 of Stats. 1993, Ch. 887, expressed the intent of the Legislature that the provisions of this act clarify the application of the Sales and Use Tax Law (commencing with Section 6001) to technology transfer agreements. It was also the intent not to create any inference regarding the application of the Sales and Use Tax Law to other transactions involving the transfer of both intangible rights and property and tangible personal property. Charges for Delivery to Sellers Agent are not Excluded From Sales Price.Where the sellers agent makes actual delivery to the buyer, a separately stated charge for transportation from the seller to the agent is subject to tax as a part of the sales price since only charges for transportation from the retailers place of business directly to the purchaser may be excluded from the sales price and the tax. Beeline Fashions, Inc. v. State Board of Equalizaton (1976) 56 Cal.App.3d 389.
Determining Sales Price of Fixtures.—When there is no prevailing price upon which to calculate sales tax, the cost price shall be deemed to be the amount stated in the price lists, bid sheets or other records of the contractor. Honeywell, Inc. v. State Board of Equalization (1982) 128 Cal.App.3d 739.
Establishing Sales Price.—It is not unreasonable for the board to establish a sales price for assembled components by taking into consideration the service costs incurred by taxpayer and relying on bid sheets and other records. The board could properly use contractors bid sheets and calculate all anticipated contract costs and profits to determine sales price of self-manufactured fixtures and components. Montgomery Elevator v. State Board of Equalization (1981) 118 Cal.App.3d 887.
Sales price of elevator includes pre-installation labor to assemble component fixtures.—Where taxpayer purchased components and, at its factory, assembled the components into elevator systems before installing the elevator systems at the jobsites, the taxpayer was the manufacturer of the elevator systems and the sales price included labor costs of assembling the components into the systems. Coast Elevator Co. v. State Board of Equalization (1986) 186 Cal.App.3d 206.
Technology transfer agreement.—The transfer of the right to reproduce an image subject to the transferors copyright in that image, along with tangible personal property, as part of a written agreement contemplating the making and selling of tangible personal property that incorporates a copy of the transferors copyrighted artwork constitutes a technology transfer agreement as defined in sections 6011 and 6012. Tax applies only to the charge attributable to the transfer of the tangible personal property as specified in sections 6011 and 6012 and not to the charge for the copyright interest. Preston v. State Board of Equalization (2001) 25 Cal.4th 197.
Technology transfer agreement.—In sales made pursuant to technology transfer agreements under sections 6011 and 6012 of the Revenue and Taxation Code, when licenses to use copyrighted or patented software are transferred on disposable storage media, and the storage media is not physically useful to the purchaser's post-transfer use of such copyrights or patents, then only the portion of the gross receipts attributable to the storage media and written instructions is subject to the sales and use tax. Lucent Technologies, Inc. v. State Board of Equalization (2015) 241 Cal.App.4th 19.
Telephone switching software qualifies for treatment under technology transfer agreement statutes.—Certain agreements under which the taxpayer licensed software programs to run telephone switches it sold to its customer qualified as technology transfer agreements (TTAs). The portions of the lump-sum charges attributable to licenses of intangible patent and copyright interests were excluded from tax. The Court of Appeal further held that licenses of certain prewritten programs that provided the taxpayer's customer various administrative functions in connection with the operation of the switches also qualified for TTA treatment. In so holding, the Court of Appeal held invalid a portion of Sales and Use Tax Regulation 1507 providing that sales of prewritten software could never qualify for TTA treatment. Nortel Networks Inc. v. Board of Equalization (2011) 191 Cal.App.4th 1259.