Sales Tax Exemptions

Article 2 of Chapter 4 of Part 1 of Division 2 of the Revenue and Taxation Code deals with exemptions under the California Sales Tax Law.

Section 6381 exempts from the computation of the amount of the sales tax the gross receipts from the sale of any tangible personal property to the United States, its unincorporated agencies and instrumentalities, any incorporated agency or instrumentality of the United States, or the American National Red Cross, its chapters and branches.

Section 6384 states that the tax imposed under this part applies to the gross receipts from the sale of any tangible personal property to contractors purchasing such property either as the agents of the United States or for their own account and subsequent resale to the United States for use in the performance of contracts with the United States for the construction of improvements on or to real property in this State.

Section 6385 exempts from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property, other than fuel and petroleum products, to a common carrier, shipped by the seller via the purchasing carrier’s facilities under a bill of lading whether the freight is paid in advance, or the shipment is made freight charges collect, to a point outside this state and the property is actually transported to the out-of-state destination for use by the carrier in the conduct of its business as a common carrier.

In addition, there are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property, other than aircraft fuel and petroleum products, purchased by a foreign air carrier and transported by the foreign air carrier’s facilities to a foreign destination for use by the air carrier in the conduct of its business as a common carrier by air of persons or property. 

Section 6385 exempts from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property, other than fuel and petroleum products, to a common carrier, shipped by the seller via the purchasing carrier’s facilities under a bill of lading whether the freight is paid in advance, or the shipment is made freight charges collect, to a point outside this state and the property is actually transported to the out-of-state destination for use by the carrier in the conduct of its business as a common carrier.

There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property, other than aircraft fuel and petroleum products, purchased by a foreign air carrier and transported by the foreign air carrier’s facilities to a foreign destination for use by the air carrier in the conduct of its business as a common carrier by air of persons or property. The terms “common carrier” and “foreign air carrier” are defined.

Section 6386 exempts from the computation of the amount of the sales tax the gross receipts from the sale in this state of tangible personal property to a holder of a valid seller’s permit when the property is used by the purchaser outside of this state in his performance of a contract to improve real property and, as a result of such use, is incorporated into and becomes a part of real property located outside of this state. This exemption applies only if the purchaser certifies in writing to the seller, in such form as the board may prescribe, that the property will be used in a manner and for a purpose herein specified.

Section 6387 exempts from the computation of the amount of the sales tax the gross receipts from sales of tangible personal property purchased for use solely outside this State and delivered to a forwarding agent, export packer, or other person engaged in the business of preparing goods for export or arranging for their exportation, and actually delivered to a port outside the continental limits of the United States prior to making any use thereof.

Section 6388 states that, where a new or remanufactured truck, truck tractor, semitrailer, or trailer, any of which has an unladen weight of 6,000 pounds or more, or a new or remanufactured trailer coach or a new or remanufactured auxiliary dolly, is purchased from a dealer located outside this state for use without this state and is delivered by the manufacturer or remanufacturer to the purchaser within this state, and the purchaser drives or moves the vehicle from the manufacturer’s or remanufacturer’s place of business in this state to any point outside this state within 30 days from and after the date of the delivery, there are exempted from the taxes imposed by this part the gross receipts from the sale of and the storage, use or other consumption of the vehicle within the state, if the purchaser furnishes the three specified items to the manufacturer or remanufacturer.

Section 6390 exempts from the computation of the amount of the sales tax the rentals payable under a lease of tangible personal property when the rentals are required to be included in the measure of the use tax or when the property is situated outside this state.

Section 6391 exempts from the computation of the amount of the sales tax the rentals payable under a lease of tangible personal property for any period of time for which the lessor is obligated to lease the property for an amount fixed by the lease, and the lessor did not elect to pay use tax measured by the amount of the rental charge. The lessor is deemed not to be obligated for any period of time for which he has the unconditional right to terminate the lease upon notice, whether or not the right is exercised.

Section 6396 exempts from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property which, pursuant to the contract of sale, is required to be shipped and is shipped to a point outside this state by the retailer by either of two specified means. The term “carrier” is defined.