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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 1. Sales and Use Taxes
Chapter 2. The Sales Tax
Article 3. Presumptions and Resale Certificates
Section 6094
6094. Liability of purchaser; accommodation loans. (a) If a purchaser who gives a resale certificate makes any use of the property other than retention, demonstration, or display while holding it for sale in the regular course of business, the use shall be taxable to the purchaser under Chapter 3 (commencing with Section 6201) of this part as of the time the property is first used by him, and, except as provided in subdivisions (b), (c), and (d) of this section, the sales price of the property to him shall be the measure of the tax.
(b) If such use is limited to the loan of the property to customers as an accommodation while awaiting delivery of property purchased or leased from the lender or while property is being repaired for customers by the lender, the measure of the tax is the fair rental value of the property for the duration of each loan so made.
(c) If the property is used frequently for purposes of demonstration or display while holding it for sale in the regular course of business and is used partly for other purposes, the measure of the tax is the fair rental value of the property for the period of such other use or uses.
(d) If the property is mobile transportation equipment as defined in Section 6023, and the use is limited to leasing the equipment, the purchaser may elect to pay his use tax measured by the fair rental value, if the election is made on or before the due date of a return for the period in which the equipment is first leased. The election must be made by reporting tax measured by the fair rental value on the return for that period, or in such other manner as the board may prescribe. Tax must thereafter be paid with the return for each reporting period, measured by the fair rental value, whether the equipment is within or without the state. The election may not be revoked with respect to the equipment as to which it is made.
(e) As used in subdivision (d), the term "fair rental value" means the rentals required by the purchaser under the lease except where the board determines that such rentals are nominal. The term shall not include any reimbursement payments made by the lessee to the purchaser for such use tax.
History—Stats. 1953, p. 2460, in effect September 9, 1953, substituted "taxable to the purchaser under Chapter 3 of this part" for "deemed a retail sale by the purchaser" and "sales price of the property to him shall be the measure of the tax" for "cost of the property to him shall be deemed the gross receipts from such retail sale" in the first sentence, added the second sentence, and substituted "sales price" for "cost" in the last sentence. Stats. 1965, p. 5447 (First Extra Session) operative August 1, 1965, deleted last sentence providing, "if the sole use of the property other than retention, demonstration, or display in the regular course of business is the rental of the property while holding it for sale, the purchaser may elect to include in his gross receipts the amount of the rental charge rather than the sales price of the property to him." Stats. 1966, p. 176, in effect July 1, 1967, added reference to section 6201, and deleted the last sentence providing, "Only when there is an unsatisfied use tax liability on this basis shall the seller be liable for sales tax with respect to the sale of the property to the purchaser." Stats. 1967, p. 2061, in effect November 8, 1967, added most of the language of (b). Stats. 1968, p. 1999, in effect November 13, 1968, divided the former section into subdivisions, added the reference in (a) to subdivisions (b) and (c), added "or while property is being repaired for customers by the lender" to (b), and added (c). Stats. 1971, p. 3835, in effect December 16, 1971, operative January 1, 1972, substituted "subdivisions (b), (c), and (d)" for "subdivisions (b) and (c)" in first paragraph, and added subdivision (d). Stats. 1978, Ch. 1211, effective January 1, 1979, deleted the last sentence in subdivision (d): "The purchaser's use tax liability may not be charged to the lessee as separately stated tax or tax reimbursement." Stats. 1980, Ch. 1352, effective September 30, 1980, added (e).
Commingling property purchased with property produced by purchaser.—An oil company which purchases crude oil for resale and commingles it with crude oil of its own production, refines the mixture and uses a portion thereof in its own business, is liable for the tax upon that proportion of the refined product so used by it which is equal to the proportion that the purchased crude oil bears to the total crude oil refined. Union Oil Co. v. Johnson (1943) 58 Cal.App.2d 636. See, however, Sections 6095 and 6245, as to the application of the tax on and after July 1, 1943.
Out-of-state contractors.—Where tangible personal property purchased under a resale certificate in this state undergoes fabrication in this state for use in performing a construction contract, the puchaser is subject to tax under this section, as it existed prior to 1953, even though the job site is located out of state. Levine v. State Board of Equalization (1956) 142 Cal.App.2d 760. But see Section 6386 for present law.
Property Treated as Depreciable Assets.—Horses held for resale were subject to use tax when capitalized and treated as depreciable assets for income tax purposes. McConville v. State Board of Equalization (1978) 85 Cal.App.3d 156 (as modified, 85 Cal.App.3d 1032a).