Help with California

[TaxBird]

I have a client (Mi based business) who wants to purchase a forklift in CA for use in his business. I know there is a sales tax exemption for manufacturing equipment (his company services manufacturing equipment) but I'm not sure how to proceed from there.

Would the purchase of a forklift in CA by an out-of-state company be exempt for sales/use tax purposes and if so, which form needs to be presented to the seller in order to get the exemption?

Any advice or direction would be greatly appreciated.

Thank you in advance!

[jainen]

the only one who cares.

>>which form needs to be presented to the seller<<

I think if you pick it up yourself you will pay sales tax, or if it is delivered to you out of state you SHOULD be exempt. But it makes no difference whatever you read on the Internet. The dealer is probably so afraid of the Board of Equalization (and California taxing authorities in general) that he isn't going to do you any favors unless there is something in it for himself. He knows this isn't going to lead to repeat sales, and he isn't interested in anything the least bit weird. Why is somebody from the industrial center of the world going 2000 miles just to buy a forklift which is probably made in Michigan to begin with?

Best thing is to make your peace with the sales rep. He's the only one who cares.

[CMTaxA]

I don't think forklifts qualify for the manufacturing exemption because the exemption typically covers manufacturing equipment primarily used for the production of a product. In my experience, forklifts have typically been considered separate from the manufacturing process and have thus been subject to sales/use tax in the state where the forklift is delivered.

[George Boutwell]

This Won't Help, But It's Interesting

128 T.C. No. 14
UNITED STATES TAX COURT

CALIFORNIANS HELPING TO ALLEVIATE MEDICAL PROBLEMS, INC.,Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 20795-05. Filed May 15, 2007.

P provided counseling and other caregiving services (collectively, caregiving services) to its members, who were individuals with debilitating diseases. P also provided its members with medical marijuana pursuant to the California Compassionate Use Act of 1996, codified at Cal. Health & Safety Code sec. 11362.5 (West Supp. 2007). P charged its members a membership fee that generally reimbursed P for its costs of the caregiving services and its costs of the medical marijuana. R determined that all of P’s expenses were nondeductible under sec. 280E, I.R.C., because, R determined, the expenses were incurred in connection with the trafficking of a controlled substance.

Held: Sec. 280E, I.R.C., precludes P from deducting its expenses attributable to its provision of medical marijuana.

Held, further, P’s provision of its caregiving services and its provision of medical marijuana were separate trades or businesses for purposes of sec. 280E, I.R.C.; thus, sec. 280E, I.R.C., does not preclude P from deducting the expenses attributable to the caregiving services.

[TaxBird]

>>which form needs to be presented to the seller<<

I think if you pick it up yourself you will pay sales tax, or if it is delivered to you out of state you SHOULD be exempt. But it makes no difference whatever you read on the Internet. The dealer is probably so afraid of the Board of Equalization (and California taxing authorities in general) that he isn't going to do you any favors unless there is something in it for himself. He knows this isn't going to lead to repeat sales, and he isn't interested in anything the least bit weird. Why is somebody from the industrial center of the world going 2000 miles just to buy a forklift which is probably made in Michigan to begin with?

Best thing is to make your peace with the sales rep. He's the only one who cares.

I see your point.

And I know what you mean about the purchase. I think it's a little weird, too. His $$ though, so I defer.

Thank you.

[jainen]

once a month

>>costs of the medical marijuana<<

Marijuana is definitely subject to sales tax. A recent ruling determined that since it is not dispensed from a licensed pharmacy, it is not exempt as medicine. Therefore all medical marijuana providers must register with the state and keep in touch once a month.

[TaxBird]

I don't think forklifts qualify for the manufacturing exemption because the exemption typically covers manufacturing equipment primarily used for the production of a product. In my experience, forklifts have typically been considered separate from the manufacturing process and have thus been subject to sales/use tax in the state where the forklift is delivered.

I didn't think so either. In Michigan they're only partial, if any. I wondered if CA interpreted it the same way. I found an exemption for manufacturing but I couldn't tell in which way that applied. As I mentioned, in MI you can sometime get a partial exemption on forklift use but could find no similar wording in the CA regs.

Now I'm off to call my client to break the news. Ah well, it's all for the best. As Jainen pointed out, what's he doing in CA buying a forklift (yes, one), anyway.

Thank you.

[TaxBird]

128 T.C. No. 14
UNITED STATES TAX COURT

CALIFORNIANS HELPING TO ALLEVIATE MEDICAL PROBLEMS, INC.,Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 20795-05. Filed May 15, 2007.

snip>.

So if I'm to interpret this correctly, marijuana is deductible for State but not for Fed? Huh.

What a headache!

In related news, Montana just passed it's Declaration of Independence from the 2005 Real ID Act. Said it would have no part of it and none of their State entities are to comply with any requests of that nature from Homeland Security.

Warms my heart.

[TaxBird]

Follow up

>>which form needs to be presented to the seller<<

I think if you pick it up yourself you will pay sales tax, or if it is delivered to you out of state you SHOULD be exempt. But it makes no difference whatever you read on the Internet. The dealer is probably so afraid of the Board of Equalization (and California taxing authorities in general) that he isn't going to do you any favors unless there is something in it for himself. He knows this isn't going to lead to repeat sales, and he isn't interested in anything the least bit weird. Why is somebody from the industrial center of the world going 2000 miles just to buy a forklift which is probably made in Michigan to begin with?

Best thing is to make your peace with the sales rep. He's the only one who cares.

Just got off the phone with my client. Dealer has agreed to exempt for out of state delivery. Hooray!

Thanks Jainen! You're my new hero ('cause you helped me look good)!

Now he's off to Tennessee. Lord, I have the traveling-est clients! Hopefully I can find what I need online without bothering the rest of you. *Sigh*

[OldJack]

>>Hopefully I can find what I need online without bothering the rest of you. *Sigh* <<

Go ahead and bother us.. this message board is getting boring without Snag.

[jainen]

all you nay-sayers

>>Thanks Jainen! You're my new hero<<

Take THAT, all you nay-sayers! No more jainen complainen. (Now, if you want to know my secret, what you do is refuse to answer the question at all--ridicule the post for even asking it! Pretty soon you can be a hero too!)

[TaxBird]

>>Thanks Jainen! You're my new hero<<

Take THAT, all you nay-sayers! No more jainen complainen. (Now, if you want to know my secret, what you do is refuse to answer the question at all--ridicule the post for even asking it! Pretty soon you can be a hero too!)

See, that's not true. You gave me 'insider' scoop that helped my client navigate the morass of sales tax in CA. Made me look like I had a mole on the inside.

I think that's why I like this board the best. Heck, we can all *read* the regs. It's the experience and practical application that is priceless.

Thanks again.