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 325.1377

(c) Shipments from California to Points Outside State

(5) Exports

325.1377 Property for Export. A foreign company purchases property for export from various California vendors but the property is delivered prior to its ultimate removal from this state to a California company for the purpose of being consolidated for shipment with other property similarly purchased by the foreign company for export. Nearly all the items ordered by the foreign company are shipped to the California company for the purpose of being repacked into more economical units to save air freight fees. There is minimum freight charge up to 60 lbs., and the California company consolidates merchandise to exceed the minimum weight. The property is owned by the foreign company while it is in the possession of the California company. From the California company, the repacked goods are taken by a delivery service to the airport where an air carrier carries the goods by air from California to the foreign destination. Each item is purchased by the foreign company with the intent that the item will be removed from California and each item is in fact ultimately exported to the foreign destination.

The movement of the goods from the various vendors to the California company for consolidation relating to the transportation of the goods to a foreign destination is not independent of the journey in foreign commerce where all parties know and contemplate that the shipment is to go to a foreign destination. The packing and consolidation done by the California company is only "… an incidental part of the total export journey" (Gough Industries v. State Board of Equalization 51 Cal.2d 746, p. 749). Accordingly, the sales are nontaxable as sales for export. 5/26/69.