Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2021
Sales And Use Tax Law
CHAPTER 2. THE SALES TAX
Article 1. Imposition of Tax
6051. Imposition and rate of sales tax. [Repealed by Stats. 1986, Ch. 308, effective January 1, 1987.]
6051. Imposition and rate of sales tax. For the privilege of selling tangible personal property at retail a tax is hereby imposed upon all retailers at the rate of 2½ percent of the gross receipts of any retailer from the sale of all tangible personal property sold at retail in this state on or after August 1, 1933, and to and including June 30, 1935, and at the rate of 3 percent thereafter, and at the rate of 2½ percent on and after July 1, 1943, and to and including June 30, 1949, and at the rate of 3 percent on and after July 1, 1949, and to and including July 31, 1967, and at the rate of 4 percent on and after August 1, 1967, and to and including June 30, 1972, and at the rate of 3¾ percent on and after July 1, 1972, and to and including June 30, 1973, and at the rate of 4¾ percent on and after July 1, 1973, and to and including September 30, 1973, and at the rate of 3¾ percent on and after October 1, 1973, and to and including March 31, 1974, and at the rate of 4¾ percent thereafter.
History—Stats. 1943, p. 2918, in effect June 1, 1943, added provision for temporary 2½ percent rate, and added provisions for postwar reserve. Temporary reduction and postwar reserve were also provided for by Stats. 1943, p. 1581, in effect May 7, 1943. Stats. 1945, p. 1292, in effect June 5, 1945, continued temporary 2½ percent rate. Stats. 1947, p. 1866, in effect June 17, 1947, continued temporary 2½ percent rate, and deleted provisions for postwar reserve. Stats. 1948, p. 16, in effect April 9, 1948, continued temporary 2½ percent rate. Stats. 1967, p. 2471, operative August 1, 1967, increased the rate to 4 percent. Stats. 1971, p. 2783, operative July 1, 1972, decreased the tax rate to 3¾ percent, pp. 4895 and 5131, effective December 8, 1971, amended the section to decrease the rate to 3¾ percent during 1975, operative if the Legislative Analyst does not make the certification referred to in section 316.2. (p. 5131). Stats. 1972, p. 2969, effective December 26, 1972, repealed the section as amended by Ch. 1400 of Stats. 1971, and reenacted the section operative June 1, 1973, increasing the rate to 4¾ percent after May 31, 1973, and repeals this section if the Legislative Analyst does not make the certification described in subdivision (c) of section 316.2 of Ch. 1 of the 1971 First Extraordinary Session. Stats. 1973, Ch. 67, effective May 29, 1973, delayed to July 1, 1973, the rate increase to 4¾ percent; Ch. 296, effective August 23, 1973, decreased the rate to 3¾ percent on October 1, 1973, and raises it to 4¾ percent on April 1, 1974, operative October 1, 1973. On October 7, 1974, the Legislative Analyst made the certification described in section 316.2(c) of Chapter 1 of the Stats 1971. Stats. 1991, Ch. 85, in effect June 30, 1991, operative July 1, 1991, added "on and after April 1, 1974, and to and including June 30, 1991, and at the rate of 5 percent" after "March 31, 1974, and at the rate of 4¾ percent". Stats. 1991, Ch. 117, in effect July 16, 1991, deleted "on and after April 1, 1974, and to and including July 14, 1991, and at the rate of 5 percent" after "March 31, 1974, and at the rate of 4¾ percent".
Tax on retailer.—The sales tax is a charge upon the retailer and not upon the consumer. Meyer Construction Co. v. Corbett (1934) 7 F.Supp. 616; People v. Herbert's of Los Angeles (1935) 3 Cal.App.2d 482; Graham Brothers, Inc. v. City of Los Angeles (1935) 6 Cal.App.2d 203; Clary v. Basalt Rock Co. (1950) 99 Cal.App.2d 458; Pacific Coast Engineering Co. v. State of California (1952) 111 Cal.App.2d 31; Livingston Rock and Gravel Co., Inc. v. De Salvo (1955) 136 Cal.App.2d 156. In the Meyer Construction Co. case, supra, the court decided that a contractor who had undertaken to construct buildings on a military reservation under the exclusive jurisdiction of the United States, and who was considered the consumer of the personal property used in this work under a lump sum contract with the government, was not the proper party to raise any question with respect to the constitutionality of the Sales Tax Act. The court ruled that this issue could be raised only by the person upon whom the tax is levied, i.e., the retailer, and that the tax was not on the consumer, although it might be passed on to him by the retailer as a part of the purchase price of the goods sold.
Sale of retailer's equipment.—A retailer is required to pay sales tax on his receipts from the sale of equipment used in his business. Bigsby v. Johnson (1941) 18 Cal.2d 860.
Sales of capital equipment.—A railroad company holding a seller's permit and making regular sales from its "stores department" is required to pay the sales tax upon retail sales of rolling stock and a motor vehicle to its parent and other subsidiaries even though the sales are not made through that department. In view of the number, scope and character of the sales of the rolling stock and vehicle, they are not exempt from tax as casual or isolated sales. Northwestern Pacific Railroad Co. v. State Board of Equalization (1943) 21 Cal.2d 524.
Nature of liability for tax.—Liability for sales tax arises by operation of law and not by contract. Hence, the provisions of sections 700 and 707 of the Probate Code, which require that a claim against an estate arising upon contract must be presented within six months after the first publication of notice to creditors, are not effective to bar a claim of the state for additional sales taxes filed after the six months' period. People v. Hochwender (1942) 20 Cal.2d 181. In a claim against a county for sales tax the provisions of the Sales and Use Tax Law control and take priority over the general statutes dealing with the filing of claims aganst counties in ordinary cases. People v. Imperial County (1946) 76 Cal.App.2d 572.
Liquidation sale.—The tax upon the privilege of selling tangible personal property at retail applies to liquidation sales where a retailer is going out of business. Market Street Railway Co. v. State Board of Equalization (1955) 137 Cal.App.2d 87.
Title passage.—Where a sale is made under a contract which provides that title is to pass to the buyer at the out-ofstate shipping point upon delivery of the property by the seller to a common carrier consigned to the buyer, the sale does not occur in this state and is not subject to sales tax. Where a sale is made under a contract which provided for shipment from an out-of-state point f.o.b. shipping point with freight charges prepaid by seller, trial court's finding that the title passed at the destination was supported and the sales tax applied. Diebold, Inc. v. State Board of Equalization (1959) 168 Cal.App.2d 628.
Sale of sand and gravel.—Where a supplier agreed to furnish sand and gravel to a contractor "f.o.b. job site," the transaction was a sale of tangible personal property and not a transfer of an interest in real property notwithstanding that the agreement of sale referred to "royalty" for materials removed. The nomenclature does not bind the board as a third party to the contract, and the true nature of the contract must be looked to to determine whether there was a sale of personal property subject to the sales tax. Santa Clara Sand and Gravel Co. v. State Board of Equalization (1964) 225 Cal.App.2d 676.
Former Section 6376 and fixed price construction contracts prior to August 1, 1967.—Former Section 6376, added by Stats. 1967, Ch. 964, exempted construction material and fixtures from 1 percent tax rate increase where fixed price construction contract was entered into prior to August 1, 1967. Section 6376 did not also exempt construction equipment and supplies, where it is reasonable to assume the Legislature used the terms "material and fixtures" in the sense which had been given to the terms by the Board's longstanding administrative ruling. Further, plaintiff was not subjected to any unconstitutional impairment of its contract with the Department of Water Resources as a result of any additional burden falling on it by virtue of the increased tax. Western Contracting Corp. v. State Board of Equalization (1974) 39 Cal.App.3d 341.
Incidence of the Sales Tax for Federal Purposes is on the Purchaser.—The incidence of the sales tax for federal purposes is on the purchaser. Accordingly, sales to a national bank were not subject to sales tax. [The Federal law, 12 U.S.C. Section 548, was amended after the period involved in the case to allow states to tax national banks the same as state banks.] Diamond National Corp. v. State Board of Equalization (1976) 425 U.S. 268.
Incidence of the Sales Tax for Federal Purposes is on the Purchaser.—Where a lessor leases tangible personal property to the United States, the incidence of sales tax applied to the rental receipts would fall upon the United States; such tax is impermissible because it would be a violation of the constitutional immunity of the United States from state taxation. United States v. State Board of Equalization (1976) 536 F.2d 294.
Incidence of the Sales Tax is on the retailer.—Under California law, the legal incidence and the economic burden are two separate and distinct concepts. Where no federal immunity is involved, the legal incidence of the retail sales tax is on the retailer. Accordingly, article XIII, section 28(f) of the California Constitution (and Rev. & Tax. Code § 12204), which provides that the insurance tax is in lieu of other taxes, does not forbid the imposition of a sales tax on retail sales of personal property to insurance companies. Occidental Life Ins. Co. v. State Board of Equalization (1982) 135 Cal.App.3d 845.
Sales to State Banks.—Sales tax on sales to state banks was constitutional even though sales tax on sales to national banks was barred by federal law and court decision. Hibernia Bank v. State Board of Equalization (1985) 166 Cal.App.3d 393.