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 325.0935

(c) Shipments from California to Points Outside State

(4) Delayed Shipment; Use Prior to Shipment; "Bailee Clauses"

325.0935 Obligation Under Contract. One of the requirements that qualifies a sale to be exempt as a sale in interstate commerce under Regulation 1620 (a)(3)(B) is that shipment by the retailer is required under the contract of sale. This requirement is satisfied in a situation where there is storage prior to shipment and the contract of sale has a provision as follows: "Title to the stored product will remain with the retailer until delivery by the retailer to the transportation company when removed from storage for shipment."

While title passes to the customer upon shipment from the storage facility to the customer at an out-of-state location, it is not the transfer of title provision which indicates that the retailer has complied with the shipment requirements of the Regulation. Rather, the contract provision appears to be at least minimally adequate to meet the requirement that there be a provision in the contract of sale which requires the retailer to ship the property sold to the customer at an out-of-state location. Although the contract provision does not expressly require the retailer to ship the property out of state, it does provide that title will not pass until the retailer does ship the property out of state. In this delayed shipment, regardless of when title or risk of loss passes, the retailer has obligated itself to ship the property sold to the customer out of state. 3/28/90.