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 325.1190

(c) Shipments from California to Points Outside State

(5) Exports

325.1190 Exports of Structural Steel. A company, which fabricates structural steel and acts as a construction contractor throughout the United States, is planning to sell its structural steel to other construction contractors. Some of the steel produced will be sold for export to foreign countries. When the steel is sold for export, it will be delivered to a customs broker or common carrier FOB California. Documentary evidence will be obtained showing the destination of the steel.

The purchases of steel and other raw materials combined during the fabrication process and sold for export as structural steel, will not be subject to sales or use tax in California. The property that is incorporated into the finished structural steel without prior use, may be purchased ex-tax for resale. If some of the raw materials, such as chemicals used as catalysts, are used to produce a chemical or physical reaction during the manufacturing process, those items may not be purchased for resale even if some of the chemicals are incidentally incorporated into the finished product. For example, if flux is used as a cleaning agent or as a means of reducing oxidation, it is considered consumed in the manufacturing process; however, if the flux is primarily used for transmitting desirable alloys, from the flux, into the metal, it may be purchased for resale.

Sales of structural steel for export, will not be subject to the sales tax in California, provided documentary evidence in the form of bills of lading and marine insurance policies are obtained. This applies whether or not the company is responsible for making the arrangements to transport the steel out-of-state. As such, if the sale satisfies the requirements of section 6396, the exemption applies even though title to the steel is transferred in California. However, if the purchaser obtains possession of the property within the state, the exemption is eliminated. This includes any transfer to a third person, except a common carrier, customs broker, export packer etc., for subsequent shipment outside the state. For example, if the property was transferred to a third person for storage prior to shipment, the sale occurs in California and does not qualify as a sale in interstate or foreign commerce. 1/7/91; l/17/91.