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Payments Unit

A sale by (and purchase from) a person who is not engaged in a business requiring a seller's permit is exempt from sales and use taxes. These types of sales are "occasional" sales (some states have similar exemptions for "casual" sales). Generally, a person who makes three or more sales for substantial amounts in any period of 12 months is required to hold a seller's permit. A person who makes a substantial number of sales for relatively small amounts is also required to hold a seller's permit. (The 12 month test period can be the 12 months before the sale in question, the 12 months after the sale in question, or any other 12 month period in which the sale occurs.) A person holding two garage sales with no other sales in any 12 month period inwhich the garage sales are held are regarded as making exempt occasional sales. A business that is not required to hold a seller's permit would be making an occasional sale when making a single sale of its assets upon termination of its business. Such persons should be aware that making two or three sales in anticipation of final liquidation will generally result in all the sales being subject to sales tax.  [SECTIONS:  6006.5 and 6367]

Periodicals
(BOE publication no. 61 (July 1999), "Sales and Use Taxes:  Exemptions and Exclusions : California Revenue and Taxation Code, Part 1, Division 2", page 14.  http://www.boe.ca.gov/pdf/pub61.pdf )

Sales of periodicals that appear at stated intervals of at least 4 times per year but not more than 60 times per year, and their ingredient and component parts, are exempt from the sales and use tax when the periodical is sold by subscription and delivered by mail or common carrier.  [SECTION:  6362.7]
 

Purchases Shipped Out of State or Out of Country
Payments made for materials that will be shipped by the vendor to an out of state or out of country address are exempt from sales tax. [e.g., orders for materials shipped directly to out of state exchange partners] See Regulation 1620.

Shipping Fees
see Transportation Charges.

Transportation Charges
(BOE publication no. 61 (July 1999), "Sales and Use Taxes:  Exemptions and Exclusions : California Revenue and Taxation Code, Part 1, Division 2", page 17.  http://www.boe.ca.gov/pdf/pub61.pdf )

Separately stated charges for transportation from the retailer to its customer are not subject to tax if transported by common carrier and the amount charged is the cost of the transportation. In addition, reasonable charges for transportation by the retailer's facilities or for property sold for a delivered price are not taxable if separately stated and if title to the property passes to the purchaser prior to such transportation. Note, however, that title passes to the customer prior to transportation by the retailer's own facilities only if the seller and purchaser explicitly contract for such early passage of title.  [SECTIONS:  6011 and 6012]

Are Delivery and Handling Charges Taxable?
(From a BOE FAQ (03-01-2000) at http://www.boe.ca.gov/faqs/faqpurch.htm#ten)
see Miscellaneous Fees for SUL policy

Delivery charges
You have the property delivered directly to your customer using a common carrier, the U.S. Mail, or an independent contractor.
Tax does not apply to the delivery charges under these conditions if the charges are clearly stated as a separate entry on the invoice or other bill of sale. If the delivery charges are not stated separately, they are taxable.

Example: You sell a refrigerator and have it delivered by an independent contract carrier. On the invoice, you show a $750 charge for the refrigerator plus a separately stated $50 charge for delivery (the amount charged you by the carrier). Since the delivery charge is stated separately, tax applies only to the charge of the refrigerator ($750). If the invoice had shown a single charge of $800, tax would apply to the entire amount.

Note: If you charge more for delivery than your actual costs, the added amount is subject to tax. In the example above, if you had charged your customer $60 for delivery, but your actual delivery cost was $50 (the amount charged by the independent contract carrier), tax would apply to the additional $10 charge.

Example. You sell a refrigerator and deliver it to your customer using your own vehicle. On the invoice, you show a $750 charge for the refrigerator plus a separately stated $50 charge for delivery. Tax applies both to the delivery charge and the charge for the refrigerator.

Note: Tax does not apply to delivery charges using your own vehicle if there is a written contract of sale, signed before delivery, that transfers ownership of the property to the purchaser prior to delivery.

Handling charges
Handling charges are generally taxable.

Combined charges
If you charge a single amount for delivery and handling (for example, the invoice shows a single amount for "postage and handling" or "shipping and handling"), the portion of the charge that represents handling is generally taxable, while the portion that represents delivery may nor may not be taxable.

Note: It is important to use terms such as "delivery," "shipping," or "postage" on the invoice to represent delivery charges. A separately stated charge that says only "handling", for example, is not considered a delivery charge and the entire handling charge is taxable--even if postage or shipment charges are indicated on the package.

Transportation vs. Customs, Processing, and Service Fees
Date: Fri, 10 Mar 2000 09:24:45 -0800
From: +SUTD Web Requests <SUTD_web@boe.ca.gov>
Subject: F00-02-093 SUTD Query
Sender: +SUTD Web Requests <SUTD_web@boe.ca.gov>
To: "'cporter@sulmail.stanford.edu'"
<cporter@sulmail.stanford.edu>

Reply-To: +SUTD Web Requests <SUTD_web@boe.ca.gov>
Message-ID:
<EB2C746E47FED211A1850008C7569CCA0367B07A@cboemsg01.boe.ca.gov>

Section 6596 of the Sales and Use Tax Law grants taxpayers relief from future liabilities if the underreported tax is based on incorrect written advice provided by a Board representative.  However, without specific details regarding the transaction in question, I cannot provide you with a specific opinion.  The answer given is intended to provide general information regarding theJuly 7, 2006rovided and will not serve for relief of liability under Section 6596.

In your email you asked whether two categories of fees billed to you by UPS Customhouse are subject to tax.  You described both categories of fees as processing fees to clear shipments through customs.  One of the categories of fees was a government charge, and the other was a brokerage service.  For purposes of writing this opinion, it is assumed that you are asking the question in order to accurately determine the amount of use tax due for tangible personal property imported from another country.  If any one of my assumptions is incorrect, then you will need to contact our office again with more details concerning the questioned transactions, as the opinion provided may differ.

Generally, use tax is measured by the sales price of the property.  In the definition of "sales price" found in Sales and Use Tax Law Section 6011 (available on our website in our Business Taxes Law Guide), separately stated charges for transportation from the retailer's place of business or other point from which shipment is made directly to the purchaser generally are not included in the sales price.  Neither of the categories of charges that you described, however, appears to be a category of transportation charges.

Fees for "processing" are fees for services other than transportation. Section 6011 includes any services that are a part of the sale in the definition of "sales price."  Thus, it appears that the processing fees from UPS Customhouse should be included in the measure of use tax.

I hope that you find this information helpful.  Please feel free to contact our office again with questions regarding any other sales or use tax matters.  You may also call our Taxpayer Information Center at (800)400-7115.

Lisa Andrews
Senior Tax Auditor

Last modified: June 8, 2006