Laws, Regulations and Annotations


Business Taxes Law Guide—Revision 2024

Sales and Use Tax Annotations

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325.0000 Interstate and Foreign Commerce—Regulation 1620

Annotation 325.0012

(a) In General—Shipments Into California from Points Outside State

325.0012 Delivery of Tractor—Trailers to Interstate Carriers. An interstate carrier (lessor) purchased certain tractors, trailers, and converter gears out of state and leased them to its three subsidiaries. Two of the subsidiaries are interstate common carriers operating between points outside this state to points within this state. The other subsidiary is a radial carrier operating in California. Certain pieces of equipment were delivered to the lessor out of state and placed in revenue service of the lessee there. Other equipment was delivered to the lessor in California and placed in service of the lessee in this state. When in revenue service of the subsidiary lessee, the equipment was variously used in interstate commerce or intrastate commerce in California.

When the first functional use of an instrumentality of interstate commerce takes place in California, regardless of whether the property is used thereafter exclusively in interstate commerce and used more outside the state than within, it is proper to assert the use tax. Accordingly, use tax applies to all deliveries of the tractor-trailers in California to the subsidiary lessees.

However, when the first functional use takes place outside of California and after the first use it is employed continuously and principally in interstate commerce, the use tax does not apply. Of course, use tax applies to out-of-state deliveries of tractor-trailers to the lessee operating as a radial carrier in California since the property was immediately brought into California for use in intrastate commerce. 10/13/65.

(Note.—Subsequent statutory change re trailers, see section 6388.5.)