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Sales and Use Tax Memorandum Opinions

Lawrence Roberts

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The form of trees or shrubs will, of course, change to some extent through growth after they are acquired. Nevertheless, in cases where trees or shrubs are in containers when acquired and remain in the same containers when they are subsequently leased or rented, they are leased in substantially the same form within the meaning of section 6006(g)(5) of the Revenue and Taxation Code.

BEFORE THE STATE BOARD OF EQUALIZATION OF THE STATE OF CALIFORNIA

In the Matter of the Petition of LAWRENCE ROBERTS for Redetermination of Sales Tax

Appearances:

MEMORANDUM OPINION

This petition is made pursuant to section 6561 of the Sales and Use Tax Law by Lawrence Roberts against a determination of sales and use tax in the amount of $483.84 plus a negligence penalty in the amount of $48.38 for the period January 1, 1964, to December 31, 1966. The amount of tax in dispute is $349.80.

Petitioner is engaged in landscape gardening and selling and renting trees and shrubs. The determination against petitioner was based primarily on the ground that petitioner failed to pay tax on the rentals of the trees and shrubs. Petitioner contends that the rentals are not subject to tax because he paid sales tax reimbursement at the time he acquired the trees and shrubs and that he rented them in substantially the same form as they were in when he acquired them. He contends that the trees and shrubs were in pots or cans when he acquired them and that he kept them in the same containers when he rented them to customers.

With certain exceptions, leases or rentals of tangible personal property were defined as sales and became subject to tax on August 1, 1965. The exception pertinent here is in section 6006(g)(5) which provides in part that "sale" does not include a lease of tangible personal property in substantially the same form as acquired by the lessor if he has paid sales tax reimbursement measured by the purchase price of the property.

Because petitioner's records for the period in question have been destroyed by fire, it is difficult to establish whether or not he paid sales tax reimbursement when he acquired the trees and shrubs here involved. It is also difficult to establish whether or not the trees and shrubs remained in substantially the same form when he rented them to customers. Based on petitioner's testimony, however, and on records showing his practices for periods after the fire occurred, we have found that he did pay sales tax reimbursement when he acquired the trees and shrubs and that he kept them in the same containers that they were in when he acquired them.

The form of trees or shrubs will, of course, change to some extent through growth after they are acquired. It is our opinion, nevertheless, that in cases where trees or shrubs are in containers when acquired and remain in the same containers when they are subsequently leased or rented, they are leased in substantially the same form within the meaning of section 6006(g)(5).

Although there remains a small deficiency in tax, we find that the deficiency was not due to negligence.

For the reasons expressed in this opinion, the tax is hereby redetermined in the amount of $134.04 and the negligence penalty is deleted.

Done at Sacramento, California, this 7th day of January 1969.

John W. Lynch, Chairman

Richard Nevins, Member

George R. Reilly, Member

Paul R. Leake, Member

Attested by: D. D. Bell, Acting Executive Secretary