2017 California Code
Revenue and Taxation Code - RTC
DIVISION 2 - OTHER TAXES
PART 1 - SALES AND USE TAXES
CHAPTER 3 - The Use Tax
ARTICLE 3 - Presumptions and Resale Certificates
(a) Notwithstanding any other provision of law, a lessor of tangible personal property described in Section 17053.49 or 23649, who is the manufacturer of that property and who leases that property to a qualified taxpayer, as defined in Sections 17053.49 and 23649, in a form that is not substantially the same form as acquired, may, in lieu of reporting use tax measured by the rentals payable, elect to pay tax measured by his or her cost price of that property if the election is made on or before the due date of the return for the period in which the property is first leased. The election shall be made by reporting use tax measured by the cost price on the return for that period. The election shall not be revoked with respect to the property as to which it is made. The lease of that property for which an election is made pursuant to this section shall thereafter be excluded from the terms “sale” and “purchase.”
(b) “Cost price,” as used in subdivision (a), means the price at which similar property has been previously sold or offered for sale. If that property has not been previously sold or offered for sale, then the cost price shall be deemed to be the aggregate of the following:
(1) Cost of materials.
(2) Direct labor.
(3) The pro rata share of all overhead costs attributable to the manufacture of the property.
(4) Reasonable profit from the manufacturing operations which, in the absence of evidence to the contrary, shall be deemed to be 5 percent of the sum of the factors listed in paragraphs (1) to (3), inclusive.
(Added by Stats. 1996, Ch. 954, Sec. 3. Effective September 26, 1996. Operative January 1, 1997, by Sec. 62 of Ch. 954.)