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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
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330.0000 Leases of Tangible Personal Property—In General—Regulation 1660
Annotation 330.3655
(c) Continuing Sale and Purchase
330.3655 Lease of Property Not Purchased for Use in California. When a person (lessor) leases property, which was purchased outside California and functionally used for more than ninety days prior to its entry into the state, the lessor is not regarded as having purchased the property for use in California. As such, the lessor owes no use tax on his/her consumption of the property in this State. However, whenever a lessor leases tangible personal property here, which was originally purchased for use elsewhere, the lease is a continuing sale and subject to tax on the lessee's use of property in California, as measured by the rentals payable.
This applies regardless of the fact that the lessor has paid tax to the other state based on the purchase price of the property. The credit provisions of section 6406 do not apply, because the lessor, who paid the tax to the other state, is not the person who owes the California use tax on the rentals payable. This is the liability of the lessee. Although the tax is owed by the lessee, the lessor would be required to collect the tax on the rentals and pay them to the Board. 4/11/91.