(a)
Transportation by Carrier. Except as provided in paragraph (c) below, in the
case of a sale, whether by lease or otherwise, tax does not apply to
"separately stated" charges for transportation of property from the retailer's
place of business or other point from which shipment is made "directly to the
purchaser," provided the transportation is by other than facilities of the
retailer, i.e., by United States mail, independent contract or common carrier.
The place where the sale occurs, i.e., title passes to the customer or the
lease begins, is immaterial, except when the property is sold for a delivered
price or the transportation is by facilities of the retailer, as explained in
(b) below. The amount of transportation charges excluded from the measure of
tax shall not exceed the cost of the transportation to the retailer.
Transportation charges will be regarded as "separately
stated" only if they are separately set forth in the contract for sale or in a
document reflecting that contract, issued contemporaneously with the sale, such
as the retailer's invoice. The fact that the transportation charges can be
computed from the information contained on the face of the invoice or other
document will not suffice as a separate statement. If a separately stated
charge is made designated "postage and handling" or "shipping and handling"
only that portion of the charge which represents actual postage or actual
shipment may be excluded from the measure of tax. Such amounts may be excluded
from the measure of tax even though such amounts are not affixed to, or noted
on, the package. A separately stated charge designated "handling" or "handling
charge" is not a separate statement of transportation charges. Tax applies to
such charges, notwithstanding the fact that postage or shipment charges may or
may not be affixed to or noted on the package.
Property will not be considered delivered "directly to the
purchaser" if it is shipped to the retailer, to the retailer's agent or
representative, or to anyone else acting in the retailer's behalf. Any
separately stated charges by the retailer for the transportation of property
to, rather than from, the retailer's place of business, or to another point
from which the property will then be "delivered directly to the purchaser," are
included in the measure of tax. Such charges represent incoming freight and are
taxable as part of the cost of the property sold by the
retailer.
(b) Transportation
by Retailer's Facilities or Property Sold for Delivered Price.
(1) Definition. "Delivered Price." Property
is sold for a delivered price when the price agreed upon in the contract for
sale includes whatever cost or charge may be made for transportation of the
property directly to the purchaser. A sale for a "guaranteed price" including a
separately stated amount for transportation is a sale for a "delivered price."
Property is not sold for a delivered price when the price is agreed upon and to
this price is added a separately stated amount representing the cost or charge
for transportation of the property directly to the purchaser and any increase
or decrease in the actual cost of transportation is borne by or credited to the
purchaser.
(2) In General. Except
as provided in paragraph (c) below, when transportation is by facilities of the
retailer or the property is sold for a delivered price, tax applies to charges
for transportation to the purchaser, unless (A) the transportation charges are
separately stated, (B) are for transportation from the retailer's place of
business or other point from which shipment is made directly to the purchaser,
and (C) the transportation occurs after the sale of the property is made to the
purchaser. When the sale occurs before the transportation to the purchaser
commences, the tax does not apply to separately stated charges for the
transportation. The amount that may be excluded from the measure of the tax
cannot exceed a reasonable charge for transportation by facilities of the
retailer or the cost of transportation by other than facilities of the
retailer.
(3) Determination of When
Sale Occurs.
(A) Security Agreements. When a
sale is made pursuant to a security agreement in which the retailer retains the
title as security for the payment of the price, the sale occurs when possession
of the property is transferred by the retailer to the purchaser or other person
at the purchaser's direction.
(B)
Leases. When the sale is by lease, the sale occurs upon the transfer of
possession or granting of the right of possession of the property by the lessor
to the lessee or other person at his direction.
(C) Sale on Approval. When the sale is on
approval, the sale does not occur until the purchaser accepts the
property.
(D) Other Sales. Unless
explicitly agreed that title is to pass at a prior time, the sale occurs at the
time and place at which the retailer completes his performance with reference
to the physical delivery of the property, even though a document of title is to
be delivered at a different time or place. If the contract requires or
authorizes the retailer to send the property to the purchaser but does not
require him to deliver it at destination, the retailer completes his
performance with reference to the physical delivery of the property at the time
and place of shipment e.g., delivery of the property to a carrier for delivery
by the carrier to the purchaser; but if the contract expressly requires
delivery at destination, including cases where one of the terms of the contract
is F.O.B. place of destination, the retailer completes his performance with
reference to the physical delivery of the property on tender to the purchaser
there. When delivery of the property is by facilities of the retailer, title
passes when the property is delivered to the purchaser at the destination
unless there is an explicit written agreement executed prior to the delivery
that title is to pass at some other time.
(4) Place of Sale. For the purposes of the
state Sales and Use Tax Law (but not for the purposes of the Bradley-Burns
Uniform Local Sales and Use Tax Law nor for the purposes of the Transactions
and Use Tax Law) the place of the sale or purchase of tangible personal
property is the place where the property is physically located at the time the
act constituting the sale or purchase takes place.
(c) Transportation of Landfill Material.
Operative January 1, 1989, tax does not apply to separately stated charges for
transportation of landfill material, e.g., sand, dirt or gravel, removed from
the ground and transported from the excavation site to a landfill site
specified by the purchaser if:
(1) the amount
of transportation charges excluded from the measure of tax does not exceed a
reasonable charge for transportation by facilities of the retailer or the cost
of the transportation by other than facilities of the retailer, or
(2) the consideration received is solely for
the purpose of transporting the material to a specified site and the material
is transferred without charge. If such transportation charges are in excess of
a reasonable charge for transportation by facilities of the retailer or in
excess of the cost of the transportation by other than facilities of the
retailer, the provisions of this paragraph will not apply.
For purposes of this paragraph, it is immaterial when title
passes to the purchaser of the landfill material.Appendix
(a) Examples of Contract for Delivered Price.
(1) The contract for sale provides for the
sale of property for $100 per unit delivered to the purchaser.
(2) The contract for sale provides for the
sale of property for $100 per unit "which includes cost of delivery at $10 per
unit."
(3) The contract for sale
provides for the sale of property for $100 per unit delivered, freight
prepaid.
(4) The contract for sale
provides for the sale of property for $100 per unit freight collect and
allowed.
(5) The contract for sale
calls for the sale of property for a guaranteed price of $100 consisting of $90
plus $10 freight.
(b)
Examples of Contracts Which Are Not for a Delivered Price.
(1) The contract for sale provides for the
sale of property for $100 per unit freight collect.
(2) The contract for sale provides for the
sale of property for $100 per unit actual freight prepaid and added to the
sales price.
(c) Examples
of Application of Tax. All deliveries are by independent carrier.
All billings are in accordance with the terms of the
contract.
(1) The contract for sale
provides for the sale of property for $100 per unit delivered to the purchaser
with freight prepaid.
Tax applies to sales price of $100 per unit with no
deduction for freight charge since the freight charges are not separately
stated. The contract is for a delivered price and requires delivery to the
purchaser. Title does not pass to the purchaser prior to
delivery.
(2) Contract for
sale provides for the sale of property for $100 per unit. The retailer is
required to ship the property to the purchaser freight collect.
Tax applies to $100 per unit since the responsibility for
the payment of the freight is upon the purchaser, and the seller makes no
charge for freight. Since the carrier will bill the purchaser for the actual
freight charge, there will be a separate statement of the freight. The property
is not sold for a delivered price.
(3) The contract for sale provides for the
sale of property for $100 per unit freight collect and allowed.
The measure of tax is $100 per unit less the amount of the
freight paid to the carrier and shown on the payment voucher sent to the
retailer by the purchaser.
The sale is for a delivered price. Separately stated
transportation charges are excludable from the measure of tax since the
transportation occurred after the sale of the property. If the contract for
sale explicitly provided for passage of title upon delivery to the destination,
then the measure of tax would be $100 per unit since the sale was for a
delivered price and title did not pass prior to
transportation.
(4) The
contract for sale provides for the sale of property for $100 per unit plus
actual freight of $10 per unit. Any increase or decrease in the freight is for
the account of the buyer.
Tax applies to $100 per unit since the contract is not for
a delivered price and shipment is by independent carrier.
(5) The contract for sale provides for the
sale of property for $100 plus freight of $10, and the seller guarantees the
price will not exceed $110.
Tax applies to $100 because the sale is for a delivered
price and there is no showing that title was to pass upon delivery at the
destination. A contract will be construed as a shipment contract unless it
expressly requires delivery at destination point. If the contract for sale
explicitly provided for passage of title upon delivery to the destination, then
the measure of tax would be $110 since the sale was for a delivered price and
title did not pass prior to transportation.
(6) The contract for sale provides for the
sale of property for $100 per unit freight equalized with x city. The invoice
shows 10 units at $100 per unit, $1,000, freight from x city $100, total
$1,100.
Under these circumstances, tax applies to $1,000 since the
only separate statement of freight is the freight equalized with x city in the
amount of $100. If the actual freight paid to the carrier for the
transportation of the property from the retailer's place of business or other
point from which shipment is made directly to the purchaser is less than $100,
the exclusion will be limited to the amount paid to the
carrier.
(7) Assuming the
same facts as above, except the invoice shows 10 units at $100 per unit,
$1,000, freight equalized with x city $100, total $1,100. The invoice also
shows the notation, "Actual freight prepaid from point of shipment to
destination is $200."
The sale is not for a delivered price. On the basis of the
above billing, a separate statement of freight is made in the amount of $200.
Accordingly, the measure of tax is $1,100 minus $200, or
$900.
Notes
Cal. Code Regs. Tit. 18, §
1628
1.
Renumbering from Section 2028 filed 11-3-71; effective thirtieth day thereafter
(Register 71, No. 45). For prior history see Register 65, No. 23.
2.
Amendment filed 11-16-71; effective thirtieth day thereafter (Register 71, No.
47).
3. Amendment filed 11-13-84; effective thirtieth day thereafter
(Register 84, No. 46).
4. Amendment filed 5-22-89; operative 6-21-89
(Register 89, No. 21).
5. Amendment filed 6-19-95; operative 7-19-95
(Register 95, No. 25).
Note: Authority cited: Section
7051,
Revenue and Taxation Code. Reference: Sections
6010,
6010.5,
6011
and
6012,
Revenue and Taxation Code.
1.
Renumbering from Section 2028 filed 11-3-71; effective thirtieth day thereafter
(Register 71, No. 45). For prior history see Register 65, No. 23.
2.
Amendment filed 11-16-71; effective thirtieth day thereafter (Register 71, No.
47).
3. Amendment filed 11-13-84; effective thirtieth day thereafter
(Register 84, No. 46).
4. Amendment filed 5-22-89; operative 6-21-89
(Register 89, No. 21).
5. Amendment filed 6-19-95; operative 7-19-95
(Register 95, No. 25).
