We are a California company and have purchased Telephone cable
materials from a distributor in California. 100% materials have been
shipped to Nevada directly from distributor.
Supplier has charged us California sales tax. We have no presence in
Nevada . All materials are ordered from distributor office in
California and shipped to Nevada from all over the country.
Distributor claims we have to pay California sales tax since they have
an office in Nevada . We did not know about the office and have not
purchased anything from that office.
Should we pay sales tax for material shipped out of state ? Nevada ?
or California and why ?
Hi popol:
Thanks for the interesting question.
Please keep in mind that we Google Answers Researchers don't provide
legal advice - and we aren't lawyers. As well, tax regulations can be
very complicated unless you're a tax lawyer/accountant.
However, I can certainly give you the benefit of what my research has
shown. As well, I'm happy to provide clarifications for you if your
distributor provides any fact-based objections to what I've found.
Having said all that, I don't think you should be paying California
sales tax on this purchase, given the facts you've presented me with.
Here are the relevant sections of California tax regulations that back
up my claim.
Regulation 1667. Exemption Certificates
URL: http://www.boe.ca.gov/pdf/reg1667.pdf
Quote:
************page 2**************
"(2) ISSUANCE OF CERTIFICATES WHERE NOT APPROPRIATE. There are several
cases in which certification will not relieve the seller of liability
for the sales tax. In such cases, an exemption certificate should not
be obtained but rather the facts and documentation of the transaction
must support the exemption. For example, a certification to the effect
that sales tax does not apply because the property purchased will be
exported and shipped out of state, does not relieve the seller of
liability for the sales tax. A sale is exempt from sales tax as a sale
in interstate or foreign commerce only if the conditions set forth in
Regulation 1620 are met, and the seller should obtain the
documentation required by that regulation in order to support the
exemption."
*******************************
So, let's check whether the sale meets Regulation 1620 or not...
Regulation 1620. INTERSTATE AND FOREIGN COMMERCE
URL: http://www.boe.ca.gov/pdf/reg1620.pdf
Quote:
**********page 1*************
(3) SALES PRECEDING MOVEMENT OF GOODS FROM WITHIN STATE TO POINTS
OUTSIDE STATE. (A) To Other States ? When Sales Tax Applies. Except as
otherwise provided in (B) below, sales tax applies when the property
is delivered to the purchaser or the purchaser?s representative in
this state, whether or not the disclosed or undisclosed intention of
the purchaser is to transport the property to a point outside this
state, and whether or not the property is actually so transported. It
is immaterial that the contract of sale may have called for the
shipment by the retailer of the property to a point outside this
state, or that the property was made to specifications for
out-of-state jobs, that prices were quoted including transportation
charges to out-of-state points, or that the goods are delivered to the
purchaser in this state via a route a portion of which is outside this
state. Regardless of the documentary evidence held by the retailer
(see (3)(D) below) to show delivery of the property was made to a
carrier for shipment to a point outside the state, tax will apply if
the property is diverted in transit to the purchaser or his
representative in this state, or for any other reason it is not
delivered outside this state.
****************************
Now, you said that the shipment was NOT diverted to you within
California, but was shipped directly from the distributor to Nevada -
without your touching it. Right?
The regulation continues:
*************pages 1-2***************
(B) Shipments Outside the State ? When Sales Tax Does Not Apply. Sales
tax does not apply when the property pursuant to the contract of sale,
is required to be shipped and is shipped to a point outside this state
by the retailer, by means of:
1. Facilities operated by the retailer or
2. Delivery by the retailer to a carrier, customs broker or forwarding
agent, whether hired by the purchaser or not, for shipment to such
out-of-state point. As used herein the term ?carrier? means a person
or firm regularly engaged in the business of transporting for
compensation tangible personal property owned by other persons, and
includes both common and contract carriers. The term ?forwarding
agent? means a person or firm regularly engaged in the business of
preparing property for shipment or arranging for its shipment. An
individual or firm not otherwise so engaged does not become a
?carrier? or ?forwarding agent? within the meaning of this regulation
simply by being designated by a purchaser to receive and ship goods to
a point outside this state. (This subsection is effective on and after
September 19, 1970, with respect to deliveries in California to
carriers, etc., hired by the purchasers for shipment to points outside
this state that are not in another state or foreign country, e.g., to
points in the Pacific Ocean.)
*****************************
Again, the distributor shipped directly from their facilities within
California to the out of state destination. By this account, there is
no California state tax applied!
However, there does appear to be some paperwork that *you* the
purchaser need to do to ensure that the shipment is not taxed:
**************page 4****************
(3) PURCHASE FOR USE IN THIS STATE. Property delivered outside of
California to a purchaser known by the retailer to be a resident of
California is regarded as having been purchased for use in this state
unless a statement in writing, signed by the purchaser or the
purchaser?s authorized representative, that the property was purchased
for use at a designated point or points outside this state is retained
by the vendor.
Notwithstanding the filing of such a statement, property purchased
outside of California which is brought into California is regarded as
having been purchased for use in this state if the first functional
use of the property is in California. For purposes of this regulation,
?functional use? means use for the purposes for which the property was
designed. When the property is first functionally used outside of
California, the property will nevertheless be presumed to have been
purchased for use in this state if it is brought into California
within 90 days after its purchase, unless the property is used,
stored, or both used and stored outside of California one-half or more
of the time during the six-month period immediately following its
entry into this state. Prior out-of-state use not exceeding 90 days
from the date of purchase to the date of entry into California is of a
temporary nature and is not proof of an intent that the property was
purchased for use elsewhere. Prior out-of-state use in excess of 90
days from the date of purchase to the date of entry into California,
exclusive of any time of shipment to California, or time of storage
for shipment to California, will be accepted as proof of an intent
that the property was not purchased for use in California.
**************************
So, it looks like you need to provide your distributor with a signed
statement that the materials purchased are strictly for use outside of
California. IF you are planning on bringing them back into California
in the future, then you ARE liable for California slaes tax. (But,
from what you've told me, I don't think that's the case.)
That's my reading of the situation at this point. If all the
assumptions I've made are true, then I think that you should be exempt
from paying California sales tax on this shipment.
Please let me know how this works out and whether you need any clarifications.
Search Strategy (on Google):
* "sales tax" "shipped out of state" site:ca.gov
* "regulation 1620" site:ca.gov
* "sales tax" "shipped out of state" site:ca.gov
websearcher
Thank you.
we know california Sales tax and we know we should not pay sales tax
for what get shiped outside.
Problem is that our supplier has an office in Nevada and they are
telling us that is the reason we should pay california sales tax due
to:---
REQUIRED REPORTING OF TAXES DUE NEVADA
Taxpayers filing sales tax returns in Nevada are statutorily required
to report sales in the county where delivery to the purchaser, his agent
or designee takes place. Also, taxpayers filing use tax returns in this
state are required to report the price of property purchased for
storage, use or other consumption in Nevada, in the county where
storage, consumption or first use takes place. A distinction is required
with respect to a contractor holding a consumer use tax permit. Raw
materials purchased to fulfill a contract and used in the fabrication of
the finished product at the contractor's place of business are subject
to tax at the county rate in which the place of business is located,
regardless of where the finished product is installed. Any materials
purchased by a contractor which are shipped directly to a job site are
subject to tax at the county rate in which the job site is located. (NRS
360.489 and NRS 372.365)
-----
Graybar Electric passes on this cost to the reseller, as would any
other seller. Therefore, Innova Global is responsible to Graybar for
payment of the Nevada sales tax.
If you have any other questions about the Nevada sale tax, the phone
number to the Nevada Department of Taxation is (775) 684-2000.
--------------------------------------------------------------------------
I am not sure my reading is is right or not , we are the " tax payer "
and not filing tax in State of Nevda since we do not have any Nevada
Licences or Sales tax ID. But our supplier in California has sent
material to Clark County Nevada and they are filing in Nevada for
everything elese they sale using their Nevada office. We have never
worked with their Nevada office.
can you comment on this .
Thank you
Hi popol:
OK - it seems to me that your supplier has got things messed up. I
*still* cannot see any reason why you would have to pay *California*
sales tax. There may be a reason you have to pay *Nevada* sales tax on
you purchase, but not California sales tax....
"Raw materials purchased to fulfill a contract and used in the
fabrication of the finished product at the contractor's place of
business are subject to tax at the county rate in which the place of
business is located, regardless of where the finished product is
installed. Any materials purchased by a contractor which are shipped
directly to a job site are subject to tax at the county rate in which
the job site is located. (NRS 360.489 and NRS 372.365)"
Your distributor is quoting:
NEVADA TAX NOTES
URL: http://tax.state.nv.us/taxnew/documents/ntn011999.doc
With respect to this, I'm not sure it matters which office your
distributor is claiming to be working out of.
As you can see at:
Nevada Sales and Use Tax Rates
URL: http://tax.state.nv.us/taxnew/taxmap.htm#cities
Tax rates in Clark County are 7.5%.
Perhaps, as commenter vegasfyr-ga says, it would be easier for you to
pay the California tax than to go any processes you might need to in
Nevada.
Does this help?
websearcher
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