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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
A B C D E F G H I J L M N O P R S T U V W X
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330.0000 Leases of Tangible Personal Property—In General—Regulation 1660
Annotation 330.3176
(b) Rental Receipts—Items Included and Excluded
330.3176 Booking Agent Fees. A rental car company (lessor) operating in California has established a separate legal entity to act as a booking agent for renting cars. The lessor's rentals are continuing sales and purchases subject to use tax measured by rentals payable. The booking agent represents only the lessor, and does not arrange bookings for other rental car companies or other forms of transportation.
The booking agent negotiates a reduced rental rate with the lessor on behalf of the lessee. The subsequent rental transaction is between the lessor and lessee, with the lessee paying the agreed amount plus applicable taxes directly to the lessor. The booking agent separately bills the lessee a fee for negotiating the reduced rate with the lessor. The booking fee is 20–25% of the amount which the lessee pays to the lessor for the car rental.
The booking agent fee is part of the rental receipts of the lessor, and is subject to tax. The lessor cannot decrease the measure of tax on its rentals by establishing a separate legal entity to perform part of the administrative functions of their rental business and then separately stating a fee for this function and requiring the lessee to pay the fee to a separate entity. 7/31/97. (M98–3).