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Transactions And Use Tax Regulations

Title 18. Public Revenues
Division 2. California Department of Tax and Fee Administration — Business Taxes (State Board of Equalization — Business Taxes — See Chapters 6 and 9.9)
Chapter 4. Sales and Use Tax
Article 20. Transactions (Sales) and Use Taxes

• 1821 Foreword
• 1822 Place of Sale for Purposes of Transactions (Sales) and Use Taxes
• 1823 Application of Transactions (Sales) Tax and Use Tax
• 1823.4 Place of Delivery of Tangible Personal Property Generally
• 1823.5 Place of Delivery of Certain Vehicles, Aircraft and Undocumented Vessels
• 1825 Aircraft Common Carriers
• 1826 Construction Contractors
• 1827 Collection of Use Tax by Retailers
• 1828 Petitions for Distribution or Redistribution of Transactions and Use Tax [Repealed.]

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Regulation 1821. Foreword.

Reference: Sections 7251–7273, inclusive, Revenue and Taxation Code.

Transactions (sales) and use taxes imposed by certain special taxing districts are administered by the State Board of Equalization. These taxes incorporate most of the provisions of the State Sales and Use Tax Law and generally have the same tax base as the Bradley-Burns uniform local sales and use taxes adopted in accordance with the provisions of Part 1.5 of Division 2 of the Revenue and Taxation Code.

The primary differences between the transactions (sales) and use taxes and the state and Bradley-Burns uniform local sales and use taxes are:

(1) The transactions (sales) tax of a district is not applicable to the gross receipts from the sale or lease of tangible personal property which the seller or the lessor is obligated to furnish for a fixed price pursuant to a contract entered into prior to the operative date of the district transactions (sales) and use taxes ordinance.

(2) The transactions (sales) tax does not apply to gross receipts from the sale of property to be used outside the district when the property is shipped to a point outside the district, pursuant to the contract of sale, by delivery to such point by the retailer or his agent, or by delivery by the retailer to a carrier for shipment to a consignee at such point. If thereafter the purchaser brings the property into the district for use there and uses it there, the district use tax may apply and the purchaser may be required to pay that tax.

(3) The use tax of a district is not applicable to the storage, use or other consumption in the district of tangible personal property which the purchaser or lessee is obligated to purchase or lease for a fixed price pursuant to a contract or lease entered into prior to the operative date of the district transactions (sales) and use tax ordinance.

(4) The district use tax must be collected by retailers engaged in business in the district and paid to the board when the retailer ships or delivers the property sold into the district or participates within the district in making the sale. The state and Bradley-Burns uniform local use tax must be collected by retailers engaged in business in this state.

(5) Beginning January 1, 1988, retailers of vehicles, aircraft, or undocumented vessels described in paragraph (c)(4) of Regulation 1827 (18 CCR 1827) are engaged in business in a district imposing a state-administered transactions use tax and are required to collect the use tax from the purchaser and pay it to the board when such vehicles, aircraft or undocumented vessels are registered or licensed in that district.

The district use tax applies to the storage, use or other consumption in the district of tangible personal property purchased after the operative date of the ordinance for storage, use or other consumption in the district.

History—Adopted January 6, 1970, effective February 25, 1970.

Amended March 9, 1970, effective March 10, 1970.

Amended December 12, 1973, effective January 18, 1974.

Amended June 22, 1976, effective July 25, 1976.

Amended December 6, 1978, effective January 28, 1979. Adopts Section (b)(3) which adds Santa Cruz Metropolitan Transit District to the transit districts imposing the transactions and use tax.

Amended July 27, 1983, effective October 13, 1983. Deleted "(a) In General" and subdivision (b).

Amendments adopted June 5, 1991, effective August 11, 1991.

Amended the first paragraph to make clear that the Transactions (Sales) and Use Tax Law is not imposed only for transit purposes.

Added paragraph (5) to explain the primary differences between the transactions and use taxes and the state and the Bradley-Burns Uniform Local sales and use taxes.

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Regulation 1822. Place of Sale for Purposes of Transactions (Sales) and Use Taxes.

Reference: Sections 6012.6, 6015, 6359, 6359.45, and 7263, Revenue and Taxation Code.

Auctioneers, see Regulation 1565.

Vending Machine Operators, see Regulation 1574.

(a) In General.

(1) Retailers having one place of business. For the purposes of the Transactions (Sales) and Use Tax Law, if a retailer has only one place of business in this state, all California retail sales of that retailer occur at that place of business unless the tangible personal property sold is delivered by the retailer or his or her agent to an out-of-state destination, or to a common carrier for delivery to an out-of-state destination.

(2) Retailers Having More Than One Place of Business. If a retailer has more than one place of business in this state which participate in the sale, the sale occurs at the place of business where the principal negotiations are carried on. If this place is the place where the order is taken, it is immaterial that the order must be forwarded elsewhere for acceptance, approval of credit, shipment, or billing. For the purposes of this regulation, an employee's activities will be attributed to the place of business out of which he or she works.

(3) Place of Passage of Title Immaterial. If title to the tangible personal property sold passes to the purchaser in California, it is immaterial that title passes to the purchaser outside the taxing jurisdiction in which the retailer's place of business is located.

(b) Place of Sale in Specific Instances.

(1) Vending Machine Operators. The place of sale is the place at which the vending machine is located. If an operator purchases property under a resale certificate or from an out-of-district seller without payment of tax and the operator is the consumer of the property, for purposes of the use tax, the use occurs at the place where the vending machine is located.

(2) Itinerant Merchants. The place of sale with respect to sales made by sellers who have no permanent place of business and who sell from door to door for their own account shall be deemed to be at the location of the seller's permanent address as shown on the seller's permit issued to him or her. If this address is in a district imposing transactions (sales) and use taxes, the district transactions (sales) tax applies with respect to all sales unless otherwise exempt (i.e., when the property sold is shipped or delivered to a purchaser outside the district for use outside the district). If the address is outside such a district but the merchant solicits orders in a district imposing transactions (sales) and use taxes, he or she must collect the district use tax with respect to property sold and delivered or shipped to customers in the district.

(3) Retailers Under Section 6015. Persons regarded as retailers under Section 6015(b) are regarded as selling tangible personal property through salespersons, representatives, peddlers, canvassers, or agents who operate under or obtain the property from them. The place of sale is the place from which the salesperson, representative, peddler, canvasser, or agent who makes the sale operates. If this place is in a district imposing transactions (sales) and use taxes, the district transactions (sales) tax applies to all retail sales unless otherwise exempt (i.e., when property is shipped or delivered to a purchaser outside the district for use outside the district). If this place of business is outside such a district, but if any salesperson or representative solicits orders in a district imposing transactions (sales) and use taxes, the district use tax applies and must be collected with respect to property sold and delivered or shipped to customers in the district.

(4) Auctioneers. The place of sale by an auctioneer is the place at which the auction is held.

(5) Out-of-State Retailers who Maintain a Stock of Tangible Personal Property in California. If an out-of-state retailer does not have a place of business in this state other than a stock of tangible personal property, the place of sale is the location of the stock of property from which delivery or shipment is made.

(6) Factory-Built School Buildings. The place of sale or purchase of a factory-built school building (relocatable classroom) as defined in paragraph (c)(4)(B) of Regulation 1521 (18 CCR 1521). "Construction Contractors", is the place of business of the retailer of the factory-built school building regardless of whether sale of the building includes installation or whether the building is placed upon a permanent foundation.

History—Adopted January 6, 1970, effective February 25, 1970.

Amended May 9, 1984, effective September 12, 1984. Subdivision (b)(1) completely revised.

Amendments adopted June 5, 1991, effective August 18, 1991.

Amended to reference Regulation 1521(c)(4)(B) and to explain place of sale.

Amended February 19, 1992, effective July 1, 1992.

Amended subdivision (b)(3) to delete reference to last paragraph of Section 6015, Revenue and Taxation Code; Amended (a)(1) to clarify that paragraph applies only to the California retail sales of a retailer who has only one place of business in the state.

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Regulation 1823. Application of Transactions (Sales) Tax and Use Tax

Reference: Sections 6008, 6009.1, 6203, 6352, 6385, 7202, 7203, 7261, 7262, and 7263,

Revenue and Taxation Code.

(a) Transactions (Sales) Tax.

(1) In General. Except as stated below, in any case in which state sales tax is applicable, state-administered transactions (sales) tax is also applicable, if the place of sale is in a district imposing such a tax. In any case in which state sales tax is inapplicable, state-administered transactions (sales) tax is also inapplicable. Thus, if title to the property sold passes to the purchaser at a point outside this state, state-administered transactions (sales) tax does not apply regardless of participation in the transaction by a California retailer. As explained in paragraph (b), the use tax may apply. If so and if the retailer is engaged in business in the taxing jurisdiction, he is required to collect the use tax and pay it to the board when the retailer ships or delivers the property sold into the district or participates within the district in making the sale. Additionally, on and after January 1, 1988, any retailer of vehicles subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, or undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code, is a retailer engaged in business in any district where a transactions (sales) and use tax is imposed and is required to collect the use tax from the purchaser and pay it to the board when the vehicle, aircraft or undocumented vessel is registered or licensed in that district.

Gross receipts from sales of tangible personal property subject to the transactions (sales) tax shall include delivery charges, when such charges are subject to the state sales or use tax.

(2) Exceptions. State-administered transactions (sales) tax does not apply to gross receipts from sales of tangible personal property:

(A) To certain operators of aircraft common carriers to be used or consumed directly and exclusively in the operation of such aircraft common carriers and principally outside the county of sale;

(B) To be used outside the district when the property sold is shipped to a point outside the district pursuant to the contract of sale, by delivery to such point by the retailer or his agent, or by delivery by the retailer to a carrier for shipment to a consignee at such point. If the purchaser uses the property in a district imposing transactions (sales) and use taxes, the use tax may apply;

(C) If the seller is obligated to furnish the property for a fixed price pursuant to a contract entered into prior to the operative date of the ordinance imposing the transactions (sales) and use taxes; or

(D) Which are continuing sales of such property under a lease of such property, if the lessor is obligated to lease the property for an amount fixed by the lease prior to the operative date of the ordinance imposing the transactions (sales) and use taxes.

(b) USE TAX.

(1) In General. State-administered district use tax applies if tangible personal property is purchased from a retailer on or after the operative date of the district taxing ordinance and the property is purchased for use in the district and is actually used there, provided any one of the following conditions exist:

(A) Title to the property purchased passes to the purchaser at a point outside this state;

(B) The place of sale is in this state but not in a district having state-administered transactions (sales) and use taxes;

(C) The place of sale is in a district having state-administered transactions (sales) and use taxes and there is an exemption of the sale of the property from the transactions (sales) tax but there is no exemption of the use of the property from the use tax;

(D) The property is purchased under a valid resale certificate; or

(E) The place of sale is in a district having state-administered transaction (sales) and use taxes, but at a rate lower than the rate (or combined rate) in effect in the district (or districts) in which the property is purchased for use and actually used. The person liable for the use tax is entitled to a credit against the use tax liability equal to but not exceeding the transactions (sales) tax or transactions tax reimbursement paid to a district or to a retailer in the district where the sale occurred. If the taxable use occurs in two or more districts whose boundaries are overlapping or coextensive, the amount of the credit shall be applied as follows: first, against the use tax liability imposed in the district having the earliest enacted state-administered transactions (sales) and use tax ordinance; second, against the use tax liability imposed in the district having the next earliest state-administered transactions (sales) and use tax ordinance; and so forth, until the amount of the credit is exhausted.

(2) Exceptions. State-administered district use tax does not apply to:

(A) The storing, keeping, retaining, processing, fabricating or manufacturing of tangible personal property for subsequent use solely outside the state or for subsequent use solely outside any district imposing a use tax;

(B) The storage, use or other consumption of tangible personal property, the gross receipts from the sale of which have been subject to a transactions (sales) tax by the district in which the tangible personal property is stored, used, or consumed;

(C) The storage, use or other consumption of tangible personal property by certain operators of aircraft common carriers;

(D) The storage, use or other consumption of tangible personal property if the purchaser is obligated to purchase the property for a fixed price pursuant to a contract entered into prior to the operative date of the ordinance; or

(E) The possession of, or the exercise of any right or power over, tangible personal property under a lease which is a continuing purchase of such property for any period of time for which the lessee is obligated to lease the property for an amount fixed by a lease prior to the operative date of the ordinance.

(c) Leases. When a lease is a continuing sale or a continuing purchase, the use tax, rather than the sales tax, applies unless the lease is to the United States or an agency or instrumentality thereof, insurance company, federally chartered bank exempt from direct state taxation by federal law (such as a federal reserve bank, or federal home loan bank),1 or other lessee exempted from use tax, and the lessor is required to collect the use tax with respect to rentals collected while the property is in the district. If the lessee is exempted from use tax, the sales tax may apply. In the absence of evidence to the contrary, it shall be assumed that the use of the property by the lessee occurs in the taxing district in which the lessor delivers, or to which the lessor ships the property to the lessee.

If a lease is a continuing sale, or a continuing purchase, for the purposes of state tax, it shall be a continuing sale, or a continuing purchase, for the purposes of the transactions (sales) and use taxes. If a lease is neither a continuing sale nor a continuing purchase for the purposes of the state tax, it shall be neither a continuing sale nor a continuing purchase for the purposes of the transactions (sales) and use taxes.

If a person purchases property state tax paid prior to the operative date of the district transactions (sales) and use tax ordinance and after such date leases the property in substantially the same form as acquired, neither the transactions (sales) tax nor use tax of the district is applicable to the sales price of the property to the lessor or to the rentals.

(d) When Property is Deemed Obligated Pursuant to a Contract or Lease. For the purposes of this regulation, the sale or lease of tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not such right is exercised.

History—Adopted January 6, 1970, effective February 25, 1970.

Amended March 9, 1970, effective March 10, 1970.

Amended December 12, 1973, effective January 18, 1974.

Amended April 9, 1980, effective June 19, 1980. In (c), deleted "bank" in the first sentence, added "federally chartered bank … home loan bank, 1" and added footnote 1.

Amended June 26, 1985, effective September 19, 1985. Adds subdivision (b)(1)(E) which explains how the credit is to be applied if there is a difference in rates of tax and if the tax is imposed in areas where more than one district transactions
(sales) and use tax is imposed. In subdivision (b)(2)(B), deletes the phrase

"under any state administered transactions (sales) and use tax ordinance" and adds the phrase "by the district in which the tangible personal property is stored, used, or consumed".

Amended March 30, 1988, effective June 16, 1988. Amended subdivisions (a)(1), (2) and (b)(2) to remove references to an exemption which expired on December 31, 1987. Amended subdivision (a)(1) to add provision which defines retailers of certain vehicles, aircraft and undocumented vessels as doing business in districts imposing a transactions tax if such vehicles, aircraft and undocumented vessels are registered or licensed in that district pursuant to AB 2446 (Chapter 308, Statutes of 1987).

Amended April 5, 1989, effective June 16, 1989. Amendments to regulation made to delete references to repealed sections of the Harbors and Navigation Code and replace them with references to the appropriate sections of the Vehicle Code.

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1 State banks and national banking associations are subject to sales and use taxes.

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Regulation 1823.4. Place of Delivery of Tangible Personal Property Generally.

Reference: Sections 7261 and 7262, Revenue and Taxation Code.

(a) In General. A retailer engaged in business in a district (except retailers of certain vehicles, aircraft and vessels) is not required to collect use tax from the purchaser of tangible personal property unless the retailer ships or delivers the property into the district or participates within the district in making the sale of the property. The purpose of this regulation is to provide a sample declaration to be signed by a purchaser that retailers may use to support shipment or delivery of tangible personal property (other than vehicles, aircraft and vessels) to a purchaser outside of a district in order to be relieved of the obligation to collect the use tax imposed by that district. This regulation does not apply to the transactions (sales) tax. Under this regulation, the purchaser will be liable for and pay the use tax if the property is principally stored, used or otherwise consumed within a district.

(b) Delivery Outside District. For the purposes of the use tax, when a retailer ships or delivers tangible personal property to a purchaser's principal residence address or principal business address outside of a district, the retailer is relieved of the obligation to collect the use tax imposed by that district by accepting in good faith a declaration under penalty of perjury, signed by the buyer, stating that such address is, in fact, the buyer's principal place of residence or principal place of business; that the buyer's principal place of residence or principal place of business is located outside the boundaries of the district; and that the property was purchased for use at a designated point or points outside of a district imposing a district use tax.

(c) Records. Any seller claiming exemption under this regulation must retain in its records the declaration executed in compliance with subdivision (d).

(d) Form of Declaration. The declaration shall be in substantially the following form:

History—Adopted October 25, 2005, effective January 26, 2006.

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Regulation 1823.5. Place of Delivery of Certain Vehicles, Aircraft and Undocumented Vessels.

Reference: Sections 7261 and 7262, Revenue and Taxation Code.

(a) In General. This regulation relates to the place of delivery of certain vehicles, aircraft, and undocumented vessels for the purpose of the transactions (sales) tax only. It does not apply to the use tax. Thus, even though the sale of the vehicle, aircraft or undocumented vessel is exempt from transactions (sales) tax under this regulation, the use tax will apply if the property is principally stored, used or otherwise consumed within the district. Beginning January 1, 1988, if the vehicle, aircraft or undocumented vessel is licensed or registered in any district imposing the tax, the retailer is considered as engaged in business in that district and is required to collect the use tax and pay it to the state.

(b) Delivery Outside District. For the purposes of the transactions (sales) tax, "delivery to a point outside the district" shall be satisfied:

(1) With respect to vehicles (other than commercial vehicles) subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, and undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code by registration to an out-of-district address and by a declaration under penalty of perjury, signed by the buyer, stating that such address is, in fact, his principal place of residence, and

(2) With respect to commercial vehicles by registration to a place of business outside the district and a declaration under penalty of perjury, signed by the buyer, that the vehicle will be operated from that address.

(c) Definition—"Commercial Vehicle." For the purposes of this regulation, "commercial vehicle" means a vehicle of a type required to be registered under the Vehicle Code used or maintained for the transportation of persons for hire, compensation, or profit or designed, used, or maintained primarily for the transportation of property. Passenger vehicles which are not used for the transportation of persons for hire, compensation, or profit are not commercial vehicles.

(d) Records. Any seller claiming exemption under this regulation must retain in his records the declaration executed in the prescribed form. If the exemption claimed relates to the sale of a vehicle, the seller also must retain in his records a copy of either the Department of Motor Vehicles report of sale or other documentary evidence showing the out-of-district address to which the vehicle is registered .

(e) Form of Declaration. The declaration shall be in substantially the following form:

(1) For vehicles (other than commercial vehicles), aircraft and undocumented vessels:

History—Adopted December 8, 1970, effective January 15, 1971.

Amended March 30, 1988, effective June 16, 1988. Amended subdivision (a) to require that retailers of certain vehicles, aircraft and undocumented vessels must collect the transactions use tax from the purchaser if such vehicles, aircraft and undocumented vessels are licensed or registered in any district imposing a transactions (sales) and use tax pursuant to AB 2446 (Chapter 308, Statutes of 1987).

Amended April 5, 1989, effective May 28, 1989. Amendment explains that transactions tax will not apply to a vessel registered under the Harbors and Navigation Code to an address out of the district of sale and purchaser declares under penalty of perjury that such address is his/her principal residence. Replaces repealed sections of the Harbors and Navigation Code with the appropriate Vehicle Code sections.

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Regulation 1825. Aircraft Common Carriers.

Reference: Sections 7261 and 7262, Revenue and Taxation Code.

(a) Definition—"Common Carriers." As used herein, the term "common carriers" means persons who engage in the business of transporting persons or property for hire or compensation and who offer their services indiscriminately to the public or to some portion of the public.

(b) Aircraft Common Carriers.

(1) State-administered district transactions (sales) tax does not apply to sales of tangible personal property to operators of aircraft to be used or consumed principally outside the county in which the sale is made if such property is to be used or consumed directly and exclusively in the use of such aircraft as common carriers of persons or property under the laws of this state, the United States, or any foreign government. Tax applies, however, to sales of fuel and petroleum products on and after July 29, 1991.

(2) State-administered district use tax does not apply to the storage, use, or other consumption of tangible personal property purchased by operators of aircraft when such property is used or consumed by such operators directly and exclusively in the use of such aircraft as common carriers of persons or property for hire or compensation under a certificate of public convenience and necessity issued pursuant to the laws of this state, the United States, or any foreign government. Effective July 29, 1991, this exemption is not available for the storage, use, or other consumption of fuel and petroleum products. This exemption is in addition to that provided in sections 6366 and 6366.1 of the Revenue and Taxation Code.

(c) Conditions of Exemption. The exemption for operators of aircraft common carriers applies only if the property is used directly and exclusively in the exempt activity. This exemption is limited to supplies and equipment (excluding fuel and petroleum products effective July 29, 1991) used or consumed directly in the carriage of persons or property. It does not include office or shop equipment or supplies or any other property not directly used or consumed in the carriage of persons or property.

(d) Leases. If property is leased to an operator of an aircraft common carrier under a lease which is a continuing sale or a continuing purchase, unless otherwise exempted, either the use tax or transactions (sales) tax applies to the gross receipts from the lease during such period of time that the property is in a taxing jurisdiction.

History—Adopted January 6, 1970, effective February 25, 1970.

Amended December 12, 1973, effective January 18, 1974.

Amended September 24, 1974, effective October 26, 1974.

Amended October 22, 1975, effective November 29, 1975.

Amended February 6, 1980, effective March 29, 1980. In (c) added exemption expiration date.

Amended April 16, 1985, effective May 16, 1985. Amended heading to subdivision (c) by changing date to 1986, and added footnote.

Amended March 30, 1988, effective June 8, 1988. Amended subdivisions (b) and (c) and Appendix (b)(2) to remove reference to a specific exemption of sales to operators of waterborne vessels from the transactions (sales) tax which expired on December 31, 1987.

Amended September 30, 1992, effective January 8, 1993. Amended to repeal the exemption from the transactions tax for the sale of use of fuel or petroleum products to or by operators of aircraft effective July 29, 1991.

Amended August 24, 2004, effective January 13, 2005. Subdivision (b)(2)—word "Section" changed to "section." Appendix— (a), second sentence—words "county tax" and "county" deleted and phrases "of the Bradley-Burns local taxes," "of the 1.25% local tax … to 75 percent," "1 percent local," and "(i.e., .75%)" added. (b)—phrase "under Regulation 1825," "district … from," "local … is," and "; and, … percent" added and phrase "local … 1825" deleted. (b), first unnumbered paragraph—phrase "(check which is applicable)" added to body and deleted from option (3). (b), third unnumbered paragraph—phrase "exemption from" delete and ":" and phrase "(check which is applicable)" added to body; (1) phrases " added to body; (1) phrases—"Partial exemption from" and "local … is .75" and phrase "local tax only" deleted; (2) capital "D" replaced with "Exemption from d" (3) phrases "exemption from district tax and partial exemption from" and "local tax which: On or before June 30, 2004 is," "percent: … .75" added and phrases "tax and district tax," and "(check which is applicable)" deleted.

Amended October 27, 2015, effective December 16, 2015. Amended the Appendix subdivisions (a) and (b) to reflect the one-quarter percent (0.25%) reduction in the rate of local sales and use tax caused by the expiration of Revenue and Taxation Code (RTC) section 7203.1 on December 31, 2015, and the corresponding restoration of the partial 80 percent local sales and use tax exemption for aircraft common carriers provided by RTC sections 7202, subdivision (g), and 7203, subdivision (e), operative January 1, 2016.

Appendix—FORM OF EXEMPTION CERTIFICATE FOR CLAIMING EXEMPTION UNDER REGULATIONS 1805 AND 1825.

(a) Certificate Necessary to Support Exemption. All purchasers of tangible personal property claiming exemption from Bradley-Burns local taxes under the provisions of Regulation 1805 or from both Bradley-Burns local taxes and district transactions (sales) and use taxes under Regulation 1825 should file with the seller an exemption certificate in the form shown below. On and after July 1, 1972, for purposes of the Bradley-Burns local taxes, this exemption is limited to 80 percent of the 1.25 percent local tax (i.e., 1%); on and after July 1, 2004 until December 31, 2015 this exemption is limited to 75 percent of the 1 percent local tax (i.e., .75%); and, on and after January 1, 2016 this exemption is limited to 80 percent of the 1.25 percent local tax (i.e., 1%).

(b) Form of Certificate. Aircraft Common Carrier. The following certificate may be used by a purchaser claiming exemption under Regulation 1825 from district transactions (sales) and use taxes, and/or claiming partial exemption under Regulation 1805 from Bradley-Burns local taxes which: On or before June 30, 2004 is 1 percent; and, on and after July 1, 2004 until December 31, 2015 is .75 percentand, on and after January 1, 2016 is 1 percent.

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Regulation 1826. Construction Contractors.

Reference: Sections 6006–6010, inclusive, 6012.6, 6015, 6384, 7261, and 7262, Revenue and Taxation Code.

(a) In General. All of the provisions of the State Sales and Use Tax Law and regulations adopted thereunder relating to construction contractors, including subcontractors, (other than those relating to the rate of tax) are applicable to state-administered transactions (sales) and use taxes.

(b) Jobsite is Place of Business.

(1) The jobsite is regarded as a place of business of a contractor and is the place of sale of "fixtures" furnished and installed by a contractor. The place of use of "materials" is the jobsite. Accordingly, if the jobsite is in a district (or districts) having state-administered transactions (sales) and use taxes, the transactions (sales) tax applies to the sale of fixtures, and the use tax applies to the use of the materials. If the jobsite is not in a district with a state-administered tax, state-administered transactions (sales) tax will not apply to the sale of the fixtures even though the contractor's principal place of business is in a district with such a tax.

(2) The contractor is entitled to a credit against use tax liability for transactions tax reimbursement paid to the retailer of the materials in a district, under the conditions specified in paragraph (b)(1)(E) of Regulation 1823 (18 CCR 1823), Application of Transactions (Sales) Tax and Use Tax. If fixtures are purchased by a contractor tax paid in a district having state-administered transactions (sales) and use taxes, the contractor, upon installing the fixtures in a county without such a tax, is entitled to a credit for the tax of the district of purchase. If the contractor installs the fixtures in a district (or districts) imposing transactions and use taxes at a rate (or combined rate) greater than the district in which the contractor purchased the fixtures tax paid, the contractor is also entitled to a credit for the tax of the district of purchase, but is liable for the transactions tax (or taxes) of the district (or districts) where the fixtures are installed.

(3) The place of sale or purchase of a factory-built school building (relocatable classroom) as defined in paragraph (c)(4)(B) of Regulation 1521 (18 CCR 1521), Construction Contractors, is the place of business of the retailer of the factory-built school building regardless of whether sale of the building includes installation or whether the building is placed upon a permanent foundation.

The district use tax of the district (or districts) where the building is installed or placed will apply, if the rate of tax (or combined rate) is greater than the rate of tax in the district of sale, or if the place of sale is not in a district. See paragraph (b) of Regulation 1823 (18 CCR 1823).

(c) United States Contractors. United States contractors are consumers of both materials and fixtures, and the place of use of both is the jobsite. Accordingly, if the jobsite is in a district having state-administered transactions (sales) and use taxes, the use tax applies to the use of the materials and fixtures. The contractor is entitled to a credit against use tax liability for transactions tax reimbursement paid to the retailer of the materials or fixtures in a district, under the condition specified in paragraph (b)(1)(E) of Regulation 1823 (18 CCR 1823).

History—Adopted January 6, 1970, effective February 25, 1970.

Amended December 12, 1973, effective January 18, 1974.

Adopted June 5, 1991, effective August 16, 1991.

Amended paragraph (a) to clarify that provisions of the regulation apply to subcontractors as well as prime contractors.

Amended paragraph (b) to explain place of sale.

Amended paragraphs (b) and (c) with regard to tax credits when property is used by a contractor in two or more districts with overlapping boundaries.

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Regulation 1827. Collection of Use Tax by Retailers.

Reference: Sections 7051.3 and 7262, Revenue and Taxation Code.

(a) In General. In General. Except as provided in subdivision (d) below, any retailer engaged in business in a district imposing transactions (sales) and use taxes and making sales of tangible personal property, the storage, use or other consumption of which is subject to the state-administered district use tax imposed by that district is required to register with the Department, collect the use tax from the purchaser, give receipts therefor, and pay the tax to the Department. Retailers to whom seller’s permits have been or are issued under section 6067 of the Revenue and Taxation Code and who are engaged in business in the district are registered to collect the district use tax.

Any retailer who is not engaged in business in the district imposing transactions (sales) and use taxes may voluntarily collect tax from purchasers, give receipts therefor, and pay tax to the Department in the same manner as retailers engaged in business in the district.

(b) When Collection of Use Tax is Required.

(1) Deliveries Into the District. A retailer engaged in business in a district (except retailers of certain vehicles, aircraft and vessels as described in paragraph (c)(2) below) shall not be required to collect district use tax from a purchaser of tangible personal property unless the retailer ships or delivers the property into that district or participates within that district in making the sale of the property, including, but not limited to soliciting or receiving the order, either directly or indirectly, at a place of business of the retailer in the district or through any representative, agent, canvasser, solicitor, subsidiary or person in the district under authority of the retailer.

(2) Presumption of Use – Out-of-District Deliveries. It shall be presumed that tangible personal property (except for certain vehicles, aircraft and vessels described in paragraph (c)(2) below) delivered outside a district imposing transactions (sales) and use taxes to a purchaser known by the retailer to be a resident of a district imposing such taxes was purchased from a retailer for storage, use or other consumption in the district in which the purchaser resides and was stored, used or otherwise consumed in that district. If the retailer is engaged in business in that district and participates within the district in making the sale of the property, the retailer shall collect the district use tax and pay it to the Department.

The presumption may be rebutted and the retailer relieved of the duty of collecting the district use tax if the retailer, in good faith, accepts from the purchaser a statement in writing that the property was purchased for use at a designated point or points outside a district imposing a use tax. The presumption may also be rebutted by other evidence satisfactory to the Department that the property was not purchased for storage, use or other consumption in a district imposing a use tax.

(3) Vehicles, Aircraft and Undocumented Vessels. Retailers of vehicles, aircraft or undocumented vessels described in paragraph (c)(2) below are engaged in business in a district imposing a state-administered district use tax and are required to collect the use tax from the purchaser and pay it to the Department when such vehicles, aircraft or undocumented vessels are registered or licensed in that district.

(4) Trailing Nexus. A retailer engaged in business in the district is required to collect district use tax during any calendar year that it has a physical presence in the district that would be sufficient to establish a substantial nexus with this state for purposes of the Commerce Clause of the United States Constitution, including, but not limited to, a physical presence described in Regulation 1684, subdivision (c)(1), or it meets the threshold for total combined sales of tangible personal property in the state or for delivery in the state set forth in subdivision (c)(3) of this regulation, and during the following calendar year.

(c) Definition—"Retailer Engaged in Business in District."

(1) The definition of "retailer engaged in business in the district" includes the following provisions of Regulation 1684, except that the name of the district shall be substituted for that of the state:

(A) The definition set forth in Regulation 1684, subdivision (b)(1);

(B) The rebuttable presumption set forth in Regulation 1684, subdivision (b)(2);

(C) The nonexhaustive examples listed in Regulation 1684, subdivision (c);

(D) The exceptions set forth in Regulation 1684, subdivision (d).

(2) On and after January 1, 1988, the definition of "retailer engaged in business in the district" includes any retailer of vehicles subject to registration pursuant to chapter 1 (commencing with section 4000) of division 3 of the Vehicle Code, aircraft licensed in compliance with section 21411 of the Public Utilities Code, or undocumented vessels registered under division 3.5 (commencing with section 9840) of the Vehicle Code.

(3) On and after April 25, 2019, a retailer is engaged in business in a district if the total combined sales of tangible personal property in California or for delivery in California by the retailer and all persons related to the retailer exceeds five hundred thousand dollars ($500,000) in the preceding or current calendar year. For purposes of subdivision (c)(3), a person is related to another person if both persons are related to each other pursuant to Internal Revenue Code section 267(b) and the regulations thereunder.

(A) If the total combined sales of tangible personal property in California or for delivery in California by a retailer and all persons related to the retailer exceeded five hundred thousand dollars ($500,000) during calendar year 2018 or during the period from January 1, 2019, through April 24, 2019, then the retailer was required to begin collecting district use tax for all districts on April 25, 2019.

(B) If the total combined sales of tangible personal property in California or for delivery in California by a retailer and all persons related to the retailer exceeded five hundred thousand dollars ($500,000) during calendar year 2019, but after April 24, 2019, or during any subsequent calendar year, the retailer is required to begin collecting district use tax for all districts immediately after the sale was made that exceeded the five hundred thousand dollar ($500,000) threshold.

(d) Sales to Persons Holding Use Tax Direct Payment Permits. Retailers selling tangible personal property, the storage, use or other consumption of which is subject to the use tax, who take in good faith use tax direct payment exemption certificates from persons holding use tax direct payment permits shall be relieved from the duty of collecting district use tax. Use tax direct payment permits and exemption certificates must comply with the requirements of Regulation 1699.6. This subdivision applies only to transfers that are subject to state and local use tax.

(e) Tax as Debt. The district use tax required to be collected by the retailer and any amount unreturned to the customer which is not tax but was collected from the customer under the representation that it was a tax constitute debts owed by the retailer to the district.

(f) Refunds of Excess Collections. Whenever the Department ascertains that a retailer has collected district use tax from a customer in excess of the amount required to be collected or has collected from a customer an amount which was not tax but was represented by the retailer to the customer as being use tax, no refund of such amount shall be made to the retailer, even though the retailer has paid the amounts so collected to the state. Section 6901 of the Revenue and Taxation Code requires that any overpayment of use tax be credited or refunded only to the purchaser who made the overpayment.

History—Adopted January 6, 1970, effective February 25, 1970.

Amended March 9, 1970, effective March 10, 1970.

Amended March 30, 1988, effective June 16, 1988. Amended subdivisions (b) and (c) to require retailers to collect the transactions use tax from purchasers of certain vessels, aircraft and undocumented vessels when they are registered or licensed in a district which imposes a transactions (sales) and use tax pursuant to AB 2446 (Chapter 308, Statutes of 1987).

Amended April 5, 1989, effective June 21, 1989. Corrects a minor error in the California Code of Regulations by replacing the word "a" with the word "any" in subdivision (b)(3). Deletes references to repealed sections of the Harbors and Navigation Code with appropriate Vehicle Code references. Also in subdivision (b)(3), explains that when an undocumented vessel is registered in a district imposing a transactions use tax, the retailer of the vessel is considered engaged in business in that district and is required to collect the use tax.

Amended September 1, 1999, effective October 21, 1999. Added cross reference to new subdivision (d) in subdivision (a). New subdivision (d) added for provisions of Revenue and Taxation Code section 7051.3 (Statutes of 1997, Chapter 702 (SB 110)) concerning sales made to persons holding use tax direct payment permits.

Amendments filed and effective March 30, 2020. The amendments replaced "board" with "Department" throughout; replaced "apply for a Certificate of Registration – Use Tax. Holders of such certificates are required to" with "voluntarily" in the second paragraph in subdivision (a); replaced "business in the district" with "business in a district," replaced "the purchaser" with "a purchaser," and replaced "the district" with "that district" in subdivision (b)(1); added "district" before "use tax" in subdivision (b)(1) and the second paragraph in subdivision (b)(2); replaced the references to subdivision (c)(4) with references to subdivision (c)(2) throughout subdivision (b); replaced "he" with "the retailer" in the last sentence of the first paragraph in subdivision (b)(2); replaced "controverted" with "rebutted" in subdivision (b)(2); replaced "transactions" with "district" in subdivision (b)(3); added subdivision (b)(4); reformatted the first sentence in subdivision (c) as new subdivision (c)(1) and deleted old subdivision (c)(1) through (3); added "The definition of" to the beginning of new subdivision (c)(1); deleted "any of" from before "the following," added the text between "the following" and the colon, and added new subdivision (c)(1)(A) through (D) after the colon in new subdivision (c)(1); renumbered subdivision (c)(4) as new subdivision (c)(2); added "the definition of ‘retailer engaged in business in the district’ includes" to renumbered subdivision (c)(2); and added subdivisions (c)(3), (e), and (f).

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Regulation 1828. Petitions for Distribution or Redistribution of Transactions and Use Tax.

[Repealed and effective March 19, 2019.]