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BTLG Table of Contents > Sales and Use Tax Annotations > I > 325.0000 Interstate and Foreign Commerce > Annotation 325.0040

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325.0000 Interstate and Foreign Commerce—Regulation 1620

Annotation 325.0040

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

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325.0040 Horses. Breeding a mare and selling the foal can be consistent with holding the mare for resale because it proves to potential buyers that the mare is healthy and capable of reproduction. However, the taking of depreciation deductions on the mare for income tax purposes is inconsistent with holding it for sale in the regular course of business. If the mare was purchased outside the state and was purchased for breeding purposes in California, the purchaser is liable for use tax.

If the purchaser can show that the mare was not purchased for use in California, tax does not apply. See Sales and Use Tax Regulation 1620(b)(3). The breeding of the mare or the giving birth to a foal by the mare outside this state is a "functional use" of the mare outside the state within the meaning of the Regulation. 5/11/87.