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Business Taxes Law Guide – Revision 2020
 

Transactions And Use Tax Regulations

Article 20. Transactions (Sales) and Use Taxes

Regulation 1827


Regulation 1827. Collection of Use Tax by Retailers.

Reference: Section 7051.3 and 7262, Revenue and Taxation Code.

(a) IN GENERAL. In General. Except as provided in subdivision (d) below, any retailer engaged in business in a district imposing transactions (sales) and use taxes and making sales of tangible personal property, the storage, use or other consumption of which is subject to the state-administered district use tax imposed by that district is required to register with the Department, collect the use tax from the purchaser, give receipts therefor, and pay the tax to the Department. Retailers to whom seller’s permits have been or are issued under section 6067 of the Revenue and Taxation Code and who are engaged in business in the district are registered to collect the district use tax.

Any retailer who is not engaged in business in the district imposing transactions (sales) and use taxes may voluntarily collect tax from purchasers, give receipts therefor, and pay tax to the Department in the same manner as retailers engaged in business in the district.

(b) WHEN COLLECTION OF USE TAX IS REQUIRED.

(1) DELIVERIES INTO THE DISTRICT. A retailer engaged in business in a district (except retailers of certain vehicles, aircraft and vessels as described in paragraph (c)(2) below) shall not be required to collect district use tax from a purchaser of tangible personal property unless the retailer ships or delivers the property into that district or participates within that district in making the sale of the property, including, but not limited to soliciting or receiving the order, either directly or indirectly, at a place of business of the retailer in the district or through any representative, agent, canvasser, solicitor, subsidiary or person in the district under authority of the retailer.

(2) PRESUMPTION OF USE – OUT-OF-DISTRICT DELIVERIES. It shall be presumed that tangible personal property (except for certain vehicles, aircraft and vessels described in paragraph (c)(2) below) delivered outside a district imposing transactions (sales) and use taxes to a purchaser known by the retailer to be a resident of a district imposing such taxes was purchased from a retailer for storage, use or other consumption in the district in which the purchaser resides and was stored, used or otherwise consumed in that district. If the retailer is engaged in business in that district and participates within the district in making the sale of the property, the retailer shall collect the district use tax and pay it to the Department.

The presumption may be rebutted and the retailer relieved of the duty of collecting the district use tax if the retailer, in good faith, accepts from the purchaser a statement in writing that the property was purchased for use at a designated point or points outside a district imposing a use tax. The presumption may also be rebutted by other evidence satisfactory to the Department that the property was not purchased for storage, use or other consumption in a district imposing a use tax.

(3) VEHICLES, AIRCRAFT AND UNDOCUMENTED VESSELS. Retailers of vehicles, aircraft or undocumented vessels described in paragraph (c)(2) below are engaged in business in a district imposing a state-administered district use tax and are required to collect the use tax from the purchaser and pay it to the Department when such vehicles, aircraft or undocumented vessels are registered or licensed in that district.

(4) Trailing Nexus. A retailer engaged in business in the district is required to collect district use tax during any calendar year that it has a physical presence in the district that would be sufficient to establish a substantial nexus with this state for purposes of the Commerce Clause of the United States Constitution, including, but not limited to, a physical presence described in Regulation 1684, subdivision (c)(1), or it meets the threshold for total combined sales of tangible personal property in the state or for delivery in the state set forth in subdivision (c)(3) of this regulation, and during the following calendar year.

(c) DEFINITION—"RETAILER ENGAGED IN BUSINESS IN DISTRICT."

(1) The definition of "retailer engaged in business in the district" includes the following provisions of Regulation 1684, except that the name of the district shall be substituted for that of the state:

(A) The definition set forth in Regulation 1684, subdivision (b)(1);

(B) The rebuttable presumption set forth in Regulation 1684, subdivision (b)(2);

(C) The nonexhaustive examples listed in Regulation 1684, subdivision (c);

(D) The exceptions set forth in Regulation 1684, subdivision (d).

(2) On and after January 1, 1988, the definition of "retailer engaged in business in the district" includes any retailer of vehicles subject to registration pursuant to chapter 1 (commencing with section 4000) of division 3 of the Vehicle Code, aircraft licensed in compliance with section 21411 of the Public Utilities Code, or undocumented vessels registered under division 3.5 (commencing with section 9840) of the Vehicle Code.

(3) On and after April 25, 2019, a retailer is engaged in business in a district if the total combined sales of tangible personal property in California or for delivery in California by the retailer and all persons related to the retailer exceeds five hundred thousand dollars ($500,000) in the preceding or current calendar year. For purposes of subdivision (c)(3), a person is related to another person if both persons are related to each other pursuant to Internal Revenue Code section 267(b) and the regulations thereunder.

(A) If the total combined sales of tangible personal property in California or for delivery in California by a retailer and all persons related to the retailer exceeded five hundred thousand dollars ($500,000) during calendar year 2018 or during the period from January 1, 2019, through April 24, 2019, then the retailer was required to begin collecting district use tax for all districts on April 25, 2019.

(B) If the total combined sales of tangible personal property in California or for delivery in California by a retailer and all persons related to the retailer exceeded five hundred thousand dollars ($500,000) during calendar year 2019, but after April 24, 2019, or during any subsequent calendar year, the retailer is required to begin collecting district use tax for all districts immediately after the sale was made that exceeded the five hundred thousand dollar ($500,000) threshold.

(d) Sales to Persons Holding Use Tax Direct Payment Permits. Retailers selling tangible personal property, the storage, use or other consumption of which is subject to the use tax, who take in good faith use tax direct payment exemption certificates from persons holding use tax direct payment permits shall be relieved from the duty of collecting district use tax. Use tax direct payment permits and exemption certificates must comply with the requirements of Regulation 1699.6. This subdivision applies only to transfers that are subject to state and local use tax.

(e) Tax as Debt. The district use tax required to be collected by the retailer and any amount unreturned to the customer which is not tax but was collected from the customer under the representation that it was a tax constitute debts owed by the retailer to the district.

(f) Refunds of Excess Collections. Whenever the Department ascertains that a retailer has collected district use tax from a customer in excess of the amount required to be collected or has collected from a customer an amount which was not tax but was represented by the retailer to the customer as being use tax, no refund of such amount shall be made to the retailer, even though the retailer has paid the amounts so collected to the state. Section 6901 of the Revenue and Taxation Code requires that any overpayment of use tax be credited or refunded only to the purchaser who made the overpayment.

History: Adopted January 6, 1970, effective February 25, 1970.

Amended March 9, 1970, effective March 10, 1970.

Amended March 30, 1988, effective June 16, 1988. Amended subdivisions (b) and (c) to require retailers to collect the transactions use tax from purchasers of certain vessels, aircraft and undocumented vessels when they are registered or licensed in a district which imposes a transactions (sales) and use tax pursuant to AB 2446 (Chapter 308, Statutes of 1987).

Amended April 5, 1989, effective June 21, 1989. Corrects a minor error in the California Code of Regulations by replacing the word "a" with the word "any" in subdivision (b)(3). Deletes references to repealed sections of the Harbors and Navigation Code with appropriate Vehicle Code references. Also in subdivision (b)(3), explains that when an undocumented vessel is registered in a district imposing a transactions use tax, the retailer of the vessel is considered engaged in business in that district and is required to collect the use tax.

Amended September 1, 1999, effective October 21, 1999. Added cross reference to new subdivision (d) in subdivision (a). New subdivision (d) added for provisions of Revenue and Taxation Code section 7051.3 (Statutes of 1997, Chapter 702 (SB 110)) concerning sales made to persons holding use tax direct payment permits.

Amendments filed and effective March 30, 2020. The amendments replaced "board" with "Department" throughout; replaced "apply for a Certificate of Registration – Use Tax. Holders of such certificates are required to" with "voluntarily" in the second paragraph in subdivision (a); replaced "business in the district" with "business in a district," replaced "the purchaser" with "a purchaser," and replaced "the district" with "that district" in subdivision (b)(1); added "district" before "use tax" in subdivision (b)(1) and the second paragraph in subdivision (b)(2); replaced the references to subdivision (c)(4) with references to subdivision (c)(2) throughout subdivision (b); replaced "he" with "the retailer" in the last sentence of the first paragraph in subdivision (b)(2); replaced "controverted" with "rebutted" in subdivision (b)(2); replaced "transactions" with "district" in subdivision (b)(3); added subdivision (b)(4); reformatted the first sentence in subdivision (c) as new subdivision (c)(1) and deleted old subdivision (c)(1) through (3); added "The definition of" to the beginning of new subdivision (c)(1); deleted "any of" from before "the following," added the text between "the following" and the colon, and added new subdivision (c)(1)(A) through (D) after the colon in new subdivision (c)(1); renumbered subdivision (c)(4) as new subdivision (c)(2); added "the definition of ‘retailer engaged in business in the district’ includes" to renumbered subdivision (c)(2); and added subdivisions (c)(3), (e), and (f).