It shall be presumed that the property, the gross receipts from the sale of which is subject to the sales tax, is sold at a price which includes tax reimbursement if the retailer posts in his or her premises, or includes on a price tag or in an advertisement (whichever is applicable) one of the following notices:
An offset of a taxpayer's own tax liability against tax reimbursement collected from a customer can be made only with respect to transactions in which possession of the property upon which the taxpayer's tax liability is based is transferred, either permanently or temporarily, to the customer, as in the case of construction contracts or leases. A taxpayer such as a repairman or printer who uses shop supplies or printing aids in performing a job for a customer cannot offset the tax liability arising from the use of the supplies or aids against tax reimbursement collected from the customer.
A person who claims that a tax liability on a transaction should be offset against tax reimbursement paid to the state by another person has the burden of proving that tax reimbursement was in fact paid to the state on the same transaction by the other person. In the absence of such proof no offset will be allowed.
The offset allowances explained above are procedural changes mandated by statute and apply to all proceedings pending before the board on and after September 7, 1982.
For example, a sale is made for $100 plus $8.25 as tax reimbursement. Upon payment for the item the purchaser is allowed a discount of 20 percent of the sales price of $100 but the $8.25 tax reimbursement is excluded from the computation. Since the retailer is deducting the amount of the discount, $20, from taxable gross receipts, the retailer is actually paying a tax of only $6.60, i.e., 8.25 percent of $80, and has retained excessive tax reimbursement of $1.65.
The retailer must follow one of the three following procedures:
Under a lump sum contract to improve real property, a subcontractor furnishes and installs materials which were acquired without the payment of sales or use tax. The prime contractor collects tax reimbursement from the prime contractor's customer on the total contract price and pays all of the tax reimbursement collected to the state. The subcontractor's use tax liability on the materials consumed in performing the contract will be offset against the tax reimbursement paid to the state by the prime contractor, and the subcontractor has no further tax liability on the transaction. The tax reimbursement paid to the state by the prime contractor in excess of the use tax liability of the subcontractor will be refunded to the prime contractor only if it is returned to the customer.
Cal. Code Regs. Tit. 18, § 1700
Note: Authority cited: Section, Revenue and Taxation Code. Reference: Section , Revenue and Taxation Code; and Section , Civil Code. Leases, see also regulation 1660; Meals, tips and other charges as tax-included amounts, see regulation 1603; "Free meals," charging reimbursement on, see regulation 1670; Trading stamps generally, see regulation 1671; Trade-ins generally, see regulation 1654.
2. Certificate of Compliance filed 8-28-73 (Register 73, No. 35).
3. New subsection (c)(8) filed 5-30-75; effective thirtieth day thereafter (Register 75, No. 22).
4. Amendment filed 12-29-78; effective thirtieth day thereafter. Pursuant to Section , Revenue and Taxation Code, order establishes an operative date of 1-1-79 for certain provisions (see subsection (a)) (Register 78, No. 52).
5. Editorial correction of subsections (b)(3)(B) and (b)(4)(B)2. (Register 79, No. 6).
6. Editorial correction filed 8-7-84 (Register 84, No. 32).
7. Editorial correction filed 6-26-85; effective thirtieth day thereafter (Register 85, No. 26).
8. Change without regulatory effect amending subsections (a)(3) and (b)(5)(B)-(D) and repealing appendices filed 11-17-94 pursuant to section 100, title 1, California Code of Regulations (Register 94, No. 46).
9. Change without regulatory effect amending subsections (b)(5) and (b)(5)(A)1.-2. filed 5-13-2010 pursuant to section 100, title 1, California Code of Regulations (Register 2010, No. 20).