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330.0000 Leases of Tangible Personal Property—In General—Regulation 1660

Annotation 330.2541

(a) In General

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330.2541 Out-of-State Lessor. A foreign lessor leases equipment to a British firm. The British firm has an affiliated corporation operating in California. The lease permits the transfer of the equipment only after it has been delivered and leased in the United Kingdom. The British firm plans to ship the equipment to California and sublease it to the affiliate for the same amount as it pays the foreign lessor.

Under these circumstances, the sublease by the British firm is subject to tax unless the foreign firm opts to pay California use tax on the purchase price of the equipment, or the British firm opts to pay California use tax on its lease payments. The foreign lessor may not elect to pay use tax on cost unless the equipment was purchased for use in California. Thus, if the property is purchased outside the state and first functionally used outside the state and it is not brought into the state within ninety days, there is no election to pay use tax on cost by the foreign lessor. 11/29/95.