What qualifies as an out-of-state sales tax exemption in California?

Products sold and delivered directly to a location outside California may qualify for a sales tax exemption if delivery conditions are met.

What are the delivery requirements for California’s out-of-state sales tax exemption?

The exemption applies if the seller ships products using their transportation, the U.S. Postal Service, a customs broker, or a forwarding agent directly to the consumer outside California.

Can California residents claim a sales tax exemption for products delivered out of state?

No, unless the California resident provides written confirmation that the product will be used exclusively outside California.

Do foreign residents qualify for sales tax exemptions in California?

Yes, sales of products intended for use in other countries or new noncommercial vehicles sold to foreign residents may qualify, provided delivery requirements are met.

Does temporary possession in California disqualify a sale from a sales tax exemption?

Yes, if the consumer or their representative takes possession of the product in California, even briefly, the sale does not qualify for the exemption.

Where can I find more information on California’s sales tax rules for out-of-state sales?

Refer to CDTFA Publication 34 and Regulation 1620 for detailed guidelines on interstate and foreign commerce sales tax exemptions.

California Sales Tax Exemptions for Out-of-State Deliveries

The California Department of Tax and Fee Administration (CDTFA) published a short guideline clarifying the taxability rules for products sold and delivered outside California. The guideline includes examples of when the sales tax exemption applies and in which situations sales may not qualify for it.

CDTFA publication 34, Motor Vehicle Dealers, and Regulation 1620 Interstate and Foreign Commerce provide further information and details on this matter.

Sales Tax Exemption Framework for Out-of-State Sales

Under the California Sales Tax rules and regulations, sales tax is generally not applicable to sales of products shipped directly to the consumer in a location outside California. For example, a sale is exempt from sales tax if the taxable persons deliver the product directly to the consumer using their transportation or ship it directly to consumers using a third party, such as the U.S. Postal Service, customs broker, or forwarding agent.

In addition, sales of products intended for use in other countries or new noncommercial vehicles to foreign residents are exempt from sales tax if they meet the delivery criteria outlined in accompanying regulations.

However, if the consumers or their representatives take possession of the bought products in California, even for a short period, the sale cannot qualify for a sales tax exemption. Even when products are delivered outside California to Californian residents, the sales tax exemption is not applicable unless the consumer states in writing that the products will be used outside California.

Conclusion

The guidelines provide information showing that the sales tax exemption applies when products sold are shipped directly to consumers outside California or are intended for use in foreign countries if the specified delivery conditions are met. Furthermore, under California sales tax rules, even temporarily, possession or use of products within California disqualifies sales from the exemption.

Therefore, sellers should carefully consider where their consumers come from, their residency, and how they deliver their products to consumers when applying for sales tax exemption.

Source: California Department of Tax and Fee Administration