State of California Board of Equalization M e m o r a n d u m 460.0020 Sacramento, California To: Mr. J. S. Knight (JHMcC) August 8, 1952 From: E. H. Stetson Subject: E--- and E--- Certified Public Accountants Suite XXX, --- National Building --- --- X, California The letter from E--- and E---, copy of our reply attached, brought to light your letter of July 17, 1951, to the same firm. We had intended to mention this earlier but the copy of your letter became filed before we did so. You state on page 3 “In accordance with these sections the retailer is compelled to make an attempt to collect reimbursement for the sales tax from the vendees on all retail sales.” This is not an entirely accurate statement of the law as interpreted by the courts, not withstanding the language of Section 6052. The court holdings may be summarized by stating that the section indicates an intention that the source of the funds for payment of the tax is the purchaser, but that the seller and purchaser are free to contract in accordance with their wishes as to the total amount of the selling price. See particularly Roth Drugs, Inc. v. Johnson, 13 Cal. App. 2d. 720 and De Aryan v. Akers, 12 Cal 2d 781, cert. den. 308 U. S. 581. EHS:ja CONSTITUTION OF THE STATE OF CALIFORNIA ARTICLE XIII TAXATION Section 34 SEC. 34. Neither the State of California nor any of its political subdivisions shall levy or collect a sales or use tax on the sale of, or the storage, use or other consumption in this State of food products for human consumption except as provided by statute as of the effective date of this section. (Sec. 34 added Nov. 3, 1992, by Prop. 163. Initiative measure. Effective Jan. 1, 1993.) Summer 2019 Common Sales & Use Tax Exemptions To confirm or determine if an exemption applies, please contact Tax Reporting and Compliance. A full list of Sales and Use tax Exemptions and Exclusions is provided in CDTFA Publication 61. No. Item or Service Description 1 Artwork Original works of art purchased for display in museums and public places. 2 Animal feed for food/resale animals • Food and food additives for food and resale animals. 3 Equipment Maintenance Agreements Optional maintenance agreements are not taxable. 4 Federal government • Purchases from federal government – Federal government holds title to item purchased. Federal Acquisition Regulation (FAR) clause documenting government title is required. • Sales to the federal government – Payment must be made directly to the vendor by the U.S. government. 5 Food products • Grocery items, cold food products sold on a to-go basis, student meals. 6 Freight 1 Goods delivered by common carrier, contract carrier or U.S. mail. • Shipping charges should be separately stated from handling charges which are taxable. • See CDTFA Publication 100, Shipping & Delivery Charges for chart. 7 Human Blood Products Human plasmid, blood products or blood deriva tives are exempt from sales tax. 8 Intangible property Intangible property (patents, licenses, copyrights, etc.). 9 Labor; installation and repair Installation labor is exempt from sales tax. Repair labor is not taxable if it is separately stated on the vendor invoice 2 10 Prescription Medicines Sales of medicines are exempt from sales and use taxes if prescribed for treatment of human beings and dispensed by a registered pharmacist. Chapter 4 of Sales and Use Tax Law provides additional specificity. 11 Printed sales messages Printed material must advertise a good or service, and be delivered by vendor to recipient by common carrier or USPS at no cost to recipient. 12 Purchased for resale Item purchased for resale. Resale Certificate must be issued to vendor by Tax Reporting and Compliance. 13 Subscriptions Distributed by common carrier and issued at least 4 but not more than 60 times per year. 1 Handling charges are taxable. When shipping and handling are consolidated into a single amount, the full amount is taxable. 2 Fabrication and assembly labor is taxable. Summer 2019 14 Repair & installation labor • Repair labor is exempt if taxable parts are stated separately on invoice. • Installation labor is exempt if no tangible property is created or assembled. 15 State government (non-California) Sales to or purchases from non-California state government agencies. 16 Services Services for which no tangible personal property is received. 17 Software – canned Electronically delivered – No tangible media such as a CD or DVD received. • Vendor’s invoice should state product is delivered electronically. 18 Software – custom Custom software prepared to special order of the customer and related maintenance agreements, regardless of the method of delivery. 19 Software – optional maintenance agreements Tangible personal property received. Maintenance relates to purchase of prewritten or canned software and is optional. • Lump sum charge for “optional” software maintenance is separately stated on invoice. • Upgrades and updates are received on tangible media such as CDs during the term of the maintenance agreement. • Partial Exemption: 50% of lump sum is exempt, 50% taxable. 20 Software – optional maintenance agreements No tangible personal property received Maintenance relates to purchase of prewritten or canned software and is optional. • Lump sum charge for “optional” software maintenance is separately stated on invoice. • All maintenance received electronically during the term of the agreement, no tangible media such as CDs received. • 100% of the lump sum is exempt. 21 Software-related consulting services – optional & separately stated on invoice Purchased in connection with custom or prewritten software. 22 Use outside of California Item will be shipped by vendor to point outside California for use exclusively outside of California. Contact Information Tax Reporting and Compliance Tax Analyst Cindy Fenton Cfenton@ucdavis.edu 695 Federal Acquisition Regulation 29.305 taxes on equipment leased to the Gov- ernment. The amount of these taxes can vary considerably from jurisdiction to jurisdiction. See 29.401–1 for the pre- scription of the contract clause to be included in contracts when delivery points are not known at time of con- tracting. (d) The North Carolina State and local sales and use tax. (1) The North Carolina Sales and Use Tax Act authorizes counties and incor- porated cities and towns to obtain each year from the Commissioner of Rev- enue of the State of North Carolina a refund of sales and use taxes indirectly paid on building materials, supplies, fixtures, and equipment that become a part of or are annexed to any building or structure erected, altered, or re- paired for such counties and incor- porated cities and towns in North Caro- lina. In United States v. Clayton, 250 F. Supp. 827 (1965), it was held that the United States is entitled to the benefit of the refund, but must follow the re- fund procedure of the Act and the regu- lations to recover what it is due. (2) The Act provides that, to receive the refund, claimants must file, within 6 months after the claimant’s fiscal year closes, a written request substan- tiated by such records, receipts, and in- formation as the Commissioner of Rev- enue may require. No refund will be made on an application not filed within the time allowed and in such manner as the Commissioner may require. The requirements of the Commissioner are set forth in regulations that provide that, to substantiate a refund claim for sales or use taxes paid on purchases of building materials, supplies, fixtures, or equipment by a contractor, the Gov- ernment must secure from the con- tractor certified statements setting forth the cost of the property pur- chased from each vendor and the amount of sales or use taxes paid. In the event the contractor makes several purchases from the same vendor, the certified statement must indicate the invoice numbers, the inclusive dates of the invoices, the total amount of the invoices, and the sales and use taxes paid. The statement must also include the cost of any tangible personal prop- erty withdrawn from the contractor’s warehouse stock and the amount of sales or use tax paid by the contractor. Similar certified statements by sub- contractors must be obtained by the general contractor and furnished to the claimant. Any local sales or use taxes included in the contractor’s statement must be shown separately from the State sales or use taxes. (3) The clause prescribed at 29.401–2 requires contractors to submit to con- tracting officers by November 30 of each year a certified statement dis- closing North Carolina State and local sales and use taxes paid during the 12- month period that ended the preceding September 30. The contracting officer shall ensure that contractors comply with this requirement and shall obtain the annual refund to which the Govern- ment may be entitled. The application for refund must be filed each year be- fore March 31 and in the manner and form required by the Commissioner of Revenue. Copies of the form may be ob- tained from the State of North Caro- lina, Department of Revenue, P.O. Box 25000, Raleigh, NC 27640. [48 FR 42293, Sept. 19, 1983, as amended at 62 FR 40237, July 25, 1997] 29.305 State and local tax exemptions. (a) Evidence of exemption. Evidence needed to establish exemption from State or local taxes depends on the grounds for the exemption claimed, the parties to the transaction, and the re- quirements of the taxing jurisdiction. Such evidence may include the fol- lowing: (1) A copy of the contract or relevant portion. (2) Copies of purchase orders, ship- ping documents, credit-card-imprinted sales slips, paid or acknowledged in- voices, or similar documents that iden- tify an agency or instrumentality of the United States as the buyer. (3) A U.S. Tax Exemption Form (SF 1094). (4) A State or local form indicating that the supplies or services are for the exclusive use of the United States. (5) Any other State or locally re- quired document for establishing gen- eral or specific exemption. (6) Shipping documents indicating that shipments are in interstate or for- eign commerce. VerDate Sep<11>2014 10:58 Jan 24, 2020 Jkt 247219 PO 00000 Frm 00705 Fmt 8010 Sfmt 8010 Y:\SGML\247219.XXX 247219 696 48 CFR Ch. 1 (10–1–19 Edition) 29.401 (b) Furnishing proof of exemption. If a reasonable basis to sustain a claimed exemption exists, the seller will be fur- nished evidence of exemption, as fol- lows: (1) Under a contract containing the clause at 52.229–3, Federal, State, and Local Taxes, or at 52.229–4, Federal, State, and Local Taxes (State and Local Adjustments), in accordance with the terms of those clauses. (2) Under a cost-reimbursement con- tract, if requested by the contractor and approved by the contracting officer or at the discretion of the contracting officer. (3) Under a contract or purchase order that contains no tax provision, if— (i) Requested by the contractor and approved by the contracting officer or at the discretion of the contracting of- ficer; and (ii) Either the contract price does not include the tax or, if the transaction or property is tax exempt, the contractor consents to a reduction in the contract price. [48 FR 42293, Sept. 19, 1983, as amended at 62 FR 237, Jan. 2, 1997; 68 FR 13205, Mar. 18, 2003] Subpart 29.4—Contract Clauses 29.401 Domestic contracts. 29.401–1 Indefinite-delivery contracts for leased equipment. Insert the clause at 52.229–1, State and Local Taxes, in solicitations and contracts for leased equipment when— (a) A fixed-price indefinite-delivery contract is contemplated; (b) The contract will be performed wholly or partly in the United States or its outlying areas; and (c) The place or places of delivery are not known at the time of contracting. [68 FR 28083, May 22, 2003] 29.401–2 Construction contracts per- formed in North Carolina. The contracting officer shall insert the clause at 52.229–2, North Carolina State and Local Sales and Use Tax, in solicitations and contracts for con- struction to be performed in North Carolina. If the requirement is for ves- sel repair to be performed in North Carolina, the clause shall be used with its Alternate I. 29.401–3 Federal, State, and local taxes. (a) Except as provided in paragraph (b) of this section, insert the clause at 52.229–3, Federal, State, and Local Taxes, in solicitations and contracts if— (1) The contract is to be performed wholly or partly in the United States or its outlying areas; (2) A fixed-price contract is con- templated; and (3) The contract is expected to exceed the simplified acquisition threshold. (b) In a noncompetitive contract that meets all the conditions in paragraph (a) of this section, the contracting offi- cer may insert the clause at 52.229–4, Federal, State, and Local Taxes (State and Local Adjustments), instead of the clause at 52.229–3, if the price would otherwise include an inappropriate contingency for potential postaward change(s) in State or local taxes. [68 FR 13205, Mar. 18, 2003, as amended at 68 FR 28083, May 22, 2003] 29.401–4 New Mexico gross receipts and compensating tax. (a) Definition. Services, as used in this subsection, is as defined in the Gross Receipts and Compensating Tax Act of the State of New Mexico, Sec. 7–9–3(k) NM SA 1978, and means all activities engaged in for other persons for a con- sideration, which activities involve predominately the performance of a service as distinguished from selling or leasing property. Services includes ac- tivities performed by a person for its members of shareholders. In deter- mining what is a service, the intended use, principal objective or ultimate ob- jective of the contracting parties shall not be controlling. Services also in- cludes construction activities and all tangible personal property that will be- come an ingredient or component part of a construction project. Such tan- gible personal property retains its character as tangible personal property until it is installed as an ingredient or component part of a construction project in New Mexico. However, sales of tangible personal property that will become an ingredient or component VerDate Sep<11>2014 10:58 Jan 24, 2020 Jkt 247219 PO 00000 Frm 00706 Fmt 8010 Sfmt 8010 Y:\SGML\247219.XXX 247219 Actual CA Receipt Examples: Waiver Deduct (Non-Reimbursement) Handwritten Exclusion Not Stated 0.00 Exempt