State of California

BOARD OF EQUALIZATION

SALES AND USE TAX REGULATIONS

Regulation 1620. INTERSTATE AND FOREIGN COMMERCE.

Reference: Sections 6006, 6008, 6009.1, 6051, 6201, 6247, 6248, 6352, 6366.2, 6368.5, 6387, 6396, 6405, Revenue and Taxation Code.

(a) SALES TAX.

(1) IN GENERAL. When a sale occurs in this state, the sales tax, if otherwise applicable, is not rendered
inapplicable solely because the sale follows a movement of the property into this state from a point beyond its
borders, or precedes a movement of the property from within this state to a point outside its borders. Such
movements prevent application of the tax only when conditions exist under which the taxing of the sale, or the gross
receipts derived therefrom, is prohibited by the United States Constitution or there exists a statutory exemption. If title
to the property sold passes to the purchaser at a point outside this state, or if for any other reason the sale occurs
outside this state, the sales tax does not apply, regardless of the extent of the retailer’s participation in California in
relation to the transaction. The retailer has the burden of proving facts establishing his right to exemption.

(2) SALES FOLLOWING MOVEMENT OF PROPERTY INTO STATE FROM POINT OUTSIDE STATE.

(A) From Other States - When Sales Tax Applies. Sales tax applies when the order for the property is
sent by the purchaser to, or delivery of the property is made by, any local branch, office, outlet or other place of
business of the retailer in this state, or agent or representative operating out of or having any connection with, such
local branch, office, outlet or other place of business and the sale occurs in this state. The term “other place of
business” as used herein includes the homes of district managers, service representatives, and other resident
employees, who perform substantial services in relation to the retailer’s functions in this state. It is immaterial that the
contract of sale requires or contemplates that the goods will be shipped to the purchaser from a point outside the
state. Participation in the transaction in any way by the local office, branch, outlet or other place of business is
sufficient to sustain the tax.

(B) From Other States - When Sales Tax Does Not Apply. Sales tax does not apply when the order is
sent by the purchaser directly to the retailer at a point outside this state, or to an agent of the retailer in this state, and
the property is shipped to the purchaser, pursuant to the contract of sale, from a point outside this state directly to the
purchaser in this state, or to the retailer’s agent in this state for delivery to the purchaser in this state, provided there
is no participation whatever in the transaction by any local branch, office, outlet or other place of business of the
retailer or by any agent of the retailer having any connection with such branch, office, outlet, or place of business.

(C) Imports. Sales tax applies to sales of property imported into this state from another country when the
sale occurs after the process of importation has ceased, regardless of whether the property is in its original package,
if the transaction is otherwise subject to sales tax under subdivision (a)(2)(A) of this regulation.

(3) SALES PRECEDING MOVEMENT OF GOODS FROM WITHIN STATE TO POINTS OUTSIDE STATE.

(A) To Other States - When Sales Tax Applies. Except as otherwise provided in (B) below, sales tax
applies when the property is delivered to the purchaser or the purchaser’s representative in this state, whether or not
the disclosed or undisclosed intention of the purchaser is to transport the property to a point outside this state, and
whether or not the property is actually so transported. It is immaterial that the contract of sale may have called for the
shipment by the retailer of the property to a point outside this state, or that the property was made to specifications for
out-of-state jobs, that prices were quoted including transportation charges to out-of-state points, or that the goods are
delivered to the purchaser in this state via a route a portion of which is outside this state. Regardless of the
documentary evidence held by the retailer (see (3)(D) below) to show delivery of the property was made to a carrier
for shipment to a point outside the state, tax will apply if the property is diverted in transit to the purchaser or his
representative in this state, or for any other reason it is not delivered outside this state.
Regulation 1620. (Contd.)

(B) Shipments Outside The State - When Sales Tax Does Not Apply. Sales tax does not apply when the
property pursuant to the contract of sale, is required to be shipped and is shipped to a point outside this state by the
retailer, by means of:

1. Facilities operated by the retailer or

2. Delivery by the retailer to a carrier, customs broker or forwarding agent, whether hired by the
purchaser or not, for shipment to such out-of-state point. As used herein the term “carrier” means a person or firm
regularly engaged in the business of transporting for compensation tangible personal property owned by other
persons, and includes both common and contract carriers. The term “forwarding agent” means a person or firm
regularly engaged in the business of preparing property for shipment or arranging for its shipment. An individual or
firm not otherwise so engaged does not become a “carrier” or “forwarding agent” within the meaning of this regulation
simply by being designated by a purchaser to receive and ship goods to a point outside this state. (This subsection is
effective on and after September 19, 1970, with respect to deliveries in California to carriers, etc., hired by the
purchasers for shipment to points outside this state that are not in another state or foreign country, e.g., to points in
the Pacific Ocean.)

(C) Exports.
1. When Sales Tax Applies. Except for certain new motor vehicles delivered to a foreign country
pursuant to paragraph (b)(2)(D) of Regulation 1610 (18 CCR 1610), sales tax applies when the property is delivered
in this state to the purchaser or the purchaser’s representative prior to an irrevocable commitment of the property into
the process of exportation. It is immaterial that the disclosed or undisclosed intention of the purchaser is to ship or
deliver the property to a foreign country or that the property is actually transported to a foreign country.

Sales of property such as fuel oil and other items consumed during a voyage to a foreign country are not exempt
even though they are transported out of, and are not returned to this country. It is immaterial that the ship to which the
property is delivered is of foreign registry.

2. When Sales Tax Does Not Apply. Sales tax does not apply when the property is sold to a
purchaser for shipment abroad and is shipped or delivered by the retailer to a foreign country. To be exempt as an
export the property must be intended for a destination in a foreign country, it must be irrevocably committed to the
exportation process at the time of sale, and must actually be delivered to the foreign country prior to any use of the
property. Movement of the property into the process of exportation does not begin until the property has been
shipped, or entered with a common carrier for transportation to another country, or has been started upon a
continuous route or journey which constitutes the final and certain movement of the property to its foreign destination.

There has been an irrevocable commitment of the property to the exportation process when the property is sold to a
purchaser for shipment abroad and is shipped or delivered by the retailer in a continuous route or journey to the
foreign country by means of:

a. Facilities operated by the retailer,

b. A carrier, forwarding agent, export packer, customs broker or other person engaged in the
business of preparing property for export, or arranging for its export, or

c. A ship, airplane, or other conveyance furnished by the purchaser for the purpose of carrying
the property in a continuous journey to the foreign country, title to and control of the property passing to the purchaser
upon delivery. Delivery by the retailer of property into a facility furnished by the purchaser constitutes an irrevocable
commitment of the property into the exportation process only in those instances where the means of transportation
and character of the property shipped provide certainty that the property is headed for its foreign destination and will
not be diverted for domestic use. The following are examples of deliveries by the retailer into facilities furnished by
the purchaser which demonstrate an irrevocable commitment of the property into the exportation process:

Example 1. Sale of fuel oil delivered into the hold of a vessel provided by the purchaser. The fuel is to be unloaded
at the foreign destination.

Example 2. Sale of jewelry delivered aboard a scheduled airline with a scheduled departure to a foreign destination.

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Regulation 1620. (Contd.)

Example 3. Sale of equipment, designed specifically for use in the foreign destination, delivered to a foreign
purchaser’s aircraft. The foreign purchaser has filed a flight plan showing that the aircraft will be transporting the
property on a continuous journey to its foreign destination.

The following are examples of sales which do not demonstrate sufficient indicia of an irrevocable commitment to the
exportation process and do not qualify as exports:

Example 4. Sale of jewelry delivered to a foreign purchaser at the retailer’s place of business or to the purchaser or
his representative at the airport prior to boarding the plane. The tax applies even though the purchaser may hold
tickets for the foreign destination.

Example 5. Sale of a television set delivered into the trunk of a passenger vehicle or into the storage area of a
pickup truck.

Example 6. Sale of equipment delivered to a foreign purchaser’s aircraft even though a flight plan had been filed
showing that the aircraft was to be flown to a foreign destination. If the equipment sold had been altered or
specifically designed for use in the foreign destination, then the combined factors of the character of the property and
the means of transportation would provide certainty of export and the sale would qualify as an export as described in
(3) above.

Export has not begun where property is transported from a point within this state to a warehouse or other collecting
point in this state even though it is intended that the property then be transported, and in fact is transported, to
another country. Nevertheless, sales of property are exempt if transported under the circumstances described in 2.b.
above to a warehouse or other collecting point of a carrier, forwarding agent, export packer, customs broker, or other
person engaged in the business of preparing property for export, or arranging for its export. Property is regarded as
transported under the circumstances described in 2.b. above, when the property is sold to a purchaser for shipment
abroad and is shipped or delivered to a point in this state to a person who is not the purchaser, whether or not that
person is a legal entity related to the purchaser, who ships or delivers the property to a foreign destination as
provided in paragraph (a)(3)(C)2.b. of this regulation.

(D) Proof of Exemption. Bills of lading or other documentary evidence of the delivery of the property to a
carrier, customs broker, or forwarding agent for shipment outside this state must be retained by the retailer to support
deductions taken under (B) above. Bills of lading, import documents of a foreign country or other documentary
evidence of export must be obtained and retained by retailers to support deductions taken under (C) above.

(E) Particular Applications.

1. Property Mailed to Persons in the Armed Forces. Tax does not apply to sales of property which
is mailed by the retailer, pursuant to the contract of sale, to persons in the armed forces at points outside the United
States, notwithstanding the property is addressed in care of the postmaster at a point in this state and forwarded by
him to the addressee.

When mail is addressed to Army Post Offices (A.P.O.’s) or to Fleet Post Offices (F.P.O’s) in care of the postmaster, it
will be presumed that it is forwarded outside California. The retailer must keep records showing the names and
addresses as they appear on the mailed matter and should keep evidence that the mailing was done by him.

2. Property for Defense Purposes Delivered to Offices of the United States. Tax does not apply to
sales of property shipped to a point outside this state pursuant to the contract of sale when the property is marked for
export and delivered by retailer to the “contracting officer,” “officer in charge,” “port quartermaster,” or other officer of
the United States for transportation and delivery to the purchaser at such a point.

3. Airplanes Delivered to Agencies of the United States. Tax does not apply to sales of airplanes
and parts and equipment for airplanes transported to a point outside this state pursuant to the contract of sale when
such property is delivered to the United States Air Force or any other agency or instrumentality of the United States
for transportation and delivery to the purchaser or someone designated by him at that point.

4. Repairers. When repairers of property in California, in fulfillment of their repair contracts with
their customers, ship the repaired property to points outside this state by one of the methods set forth under (a)(3)(B)
and (C) above, tax does not apply to the sale by the repairer of the repair parts and materials affixed to and becoming
a component part of the repaired property so shipped.

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Regulation 1620. (Contd.)

(b) USE TAX.

(1) IN GENERAL. Use tax applies to the use of any property purchased for storage, use or other consumption
and stored, used, or consumed in this state, the sale of which is exempt from sales tax under this regulation.

(2) EXCEPTIONS.

(A) Use tax does not apply to the use of property held or stored in this state for sale in the regular course of
business nor to the use of property held for the purposes designated in subparagraph (b)(7), below.

(B) Interstate and Foreign Commerce.

1. In General. Use tax does not apply to the use of property purchased for use and used in
interstate or foreign commerce prior to its entry into this state, and thereafter used continuously in interstate or foreign
commerce both within and without California and not exclusively in California.

2. Intermodal Cargo Containers. Intermodal cargo containers are containers that are used to
transport freight during a continuous movement of that freight from the origin shipper to the destination receiver by
the use of two or more of the following modes of transportation: railroad, vehicle, or vessel. The use of an intermodal
cargo container in California is exempt from tax if the use meets the requirements of subdivision (b)(2)(B)1 of this
regulation.

An intermodal cargo container is regarded as first used in interstate or foreign commerce prior to its entry into
California if the container is loaded with freight outside California and then first enters California during a continuous
movement of that freight from the origin shipper to the destination receiver. For purposes of the requirements set forth
in subdivision (b)(2)(B)1 of this regulation, an intermodal cargo container is also regarded as first used in interstate or
foreign commerce prior to its entry into California if all of the following conditions are satisfied:

a. The contract for the sale or lease of the intermodal cargo container requires that the
container be used in interstate or foreign commerce and such sales contract or lease contract is entered into prior to
the entry of the intermodal cargo container into California;

b. The purchaser or lessee transports the intermodal cargo container into California with the
specific intent that such intermodal cargo container will then be loaded with freight for transport in a continuous
movement to a destination outside California, whether or not the purchaser knows which particular freight will be
loaded into the intermodal cargo container at the time the intermodal cargo container first enters California; and

c. The intermodal cargo container is, in fact, first loaded with freight for transport in a
continuous movement to a destination outside California, and the intermodal cargo container is thereafter used
continuously in interstate or foreign commerce both within and without California and not exclusively in California.

(C) Use tax does not apply to the use of certain new motor vehicles purchased for subsequent delivery to a
foreign country and so delivered pursuant to paragraph (b)(2)(D) of Regulation 1610 (18 CCR 1610).

(D) Hand-Carried from a Foreign Country.

1. Prior to January 1, 2008, use tax does not apply to the storage, use, or other consumption in this
state of the first four hundred dollars ($400) of tangible personal property purchased in a foreign country by an
individual from a retailer and personally hand-carried into this state from the foreign country within any 30-day period.
This subdivision shall not apply to property sent or shipped to this state.

2. On and after January 1, 2008, use tax does not apply to the storage, use, or other consumption in
this state of the first eight hundred dollars ($800) of tangible personal property purchased in a foreign country by an
individual from a retailer and personally hand-carried into this state from the foreign country within any 30-day period.
This subdivision shall not apply to property sent or shipped to this state.

(3) PURCHASE FOR USE IN THIS STATE. Property delivered outside of California to a purchaser known by
the retailer to be a resident of California is regarded as having been purchased for use in this state unless a
statement in writing, signed by the purchaser or the purchaser’s authorized representative, that the property was
purchased for use at a designated point or points outside this state is retained by the vendor.

Notwithstanding the filing of such a statement, property purchased outside of California which is brought into
California is regarded as having been purchased for use in this state if the first functional use of the property is in

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Regulation 1620. (Contd.)

California. For purposes of this regulation, “functional use” means use for the purposes for which the property was
designed. Except as provided in subdivision (b)(5) of this regulation, when property is first functionally used outside of
California, the property will nevertheless be presumed to have been purchased for use in this state if it is brought into
California within 90 days after its purchase, unless the property is used, stored, or both used and stored outside of
California one-half or more of the time during the six-month period immediately following its entry into this state.
Except as provided in subdivision (b)(5) of this regulation, prior out-of-state use not exceeding 90 days from the date
of purchase to the date of entry into California is of a temporary nature and is not proof of an intent that the property
was purchased for use elsewhere. Except as provided in subdivision (b)(5) of this regulation, prior out-of-state use in
excess of 90 days from the date of purchase to the date of entry into California, exclusive of any time of shipment to
California, or time of storage for shipment to California, will be accepted as proof of an intent that the property was
not purchased for use in California.

(4) PURCHASE FOR USE IN THIS STATE – VEHICLES, VESSELS, AND AIRCRAFT—90-DAY TEST (PRIOR
TO OCTOBER 2, 2004, AND FROM JULY 1, 2007, THROUGH SEPTEMBER 30, 2008). The provisions of
subdivision (b)(4) apply prior to October 2, 2004, and from July 1, 2007, through September 30, 2008. A vehicle,
vessel, or aircraft purchased outside of California which is brought into California is regarded as having been
purchased for use in this state if the first functional use of the vehicle, vessel or aircraft is in California. When the
vehicle, vessel or aircraft is first functionally used outside of California, the vehicle, vessel or aircraft will nevertheless
be presumed to have been purchased for use in this state if it is brought into California within 90 days after its
purchase, exclusive of any time of shipment to California or time of storage for shipment to California, unless:

(A) Physically Located Outside California. Use tax will not apply if the vehicle, vessel or aircraft is used,
stored, or both used and stored outside of California one-half or more of the time during the six-month period
immediately following its entry into this state.

(B) Used in Interstate or Foreign Commerce.

1. If the property is a vehicle, use tax will not apply if one-half or more of the miles traveled by the
vehicle during the six-month period immediately following its entry into this state are commercial miles traveled in
interstate or foreign commerce.

2. If the property is a vessel, use tax will not apply if one-half or more of the nautical miles traveled by
the vessel during the six-month period immediately following its entry into the state are commercial miles traveled in
interstate or foreign commerce.

3. If the property is an aircraft, use tax will not apply if one-half or more of the flight time traveled by
the aircraft during the six-month period immediately following its entry into the state is commercial flight time traveled
in interstate or foreign commerce.

Such use will be accepted as proof of an intent that the property was not purchased for use in California. For
purposes of subdivision (b)(4), the term “commercial” applies to business uses and excludes personal use. However,
the term “commercial” is not limited to for-profit businesses.

(5) PURCHASE FOR USE IN THIS STATE - VEHICLES, VESSELS, AND AIRCRAFT– 12-MONTH TEST
(FROM OCTOBER 2, 2004, THROUGH JUNE 30, 2007, AND AFTER SEPTEMBER 30, 2008).

(A) Purchased for Use in California. Except as provided in subdivision (b)(5)(D) below, the provisions of
subdivision (b)(5) apply from October 2, 2004, through June 30, 2007, and after September 30, 2008. A vehicle,
vessel, or aircraft purchased outside of California which is brought into California is regarded as having been
purchased for use in this state if the first functional use of the vehicle, vessel, or aircraft is in California. When a
vehicle, vessel, or aircraft is purchased outside of California, is first functionally used outside of California, and is
brought into California within 12 months from the date of its purchase, it is rebuttably presumed that the vehicle,
vessel, or aircraft was acquired for storage, use, or other consumption in this state and is subject to use tax if any of
the following occur:

1. The vehicle, vessel, or aircraft was purchased by a California resident as defined in section 516 of
the Vehicle Code, as that section now reads or is hereinafter amended.

2. In the case of a vehicle, the vehicle was subject to registration under Chapter 1 (commencing with
section 4000) of Division 3 of the Vehicle Code during the first 12 months of ownership.

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Regulation 1620. (Contd.)

3. In the case of a vessel or aircraft, that vessel or aircraft was subject to property tax in this state
during the first 12 months of ownership.

4. The vehicle, vessel, or aircraft is used or stored in this state more than one-half of the time during
the first 12 months of ownership.

(B) Evidence Rebutting Presumption. This presumption may be controverted by documentary evidence
that the vehicle, vessel, or aircraft was purchased for use outside of this state during the first 12 months of ownership.
This evidence may include, but is not limited to, evidence of registration of that vehicle, vessel, or aircraft, with the
proper authority, outside of this state.

Operative September 20, 2006, through June 30, 2007, and after September 30, 2008, in the case of a vehicle, this
presumption also may be controverted by documentary evidence that the vehicle was brought into this state for the
exclusive purpose of warranty or repair service and was used or stored in this state for that purpose for 30 days or
less. The 30-day period begins when the vehicle enters this state, includes any time of travel to and from the warranty
or repair facility, and ends when the vehicle is returned to a point outside the state. The documentary evidence shall
include a work order stating the dates that the vehicle is in the possession of the warranty or repair facility and a
statement by the owner of the vehicle specifying dates of travel to and from the warranty or repair facility.

(C) Used in Interstate or Foreign Commerce.

1. If the property is a vehicle, use tax will not apply if one-half or more of the miles traveled by the
vehicle during the six-month period immediately following its entry into this state are commercial miles traveled in
interstate or foreign commerce.

2. If the property is a vessel, use tax will not apply if one-half or more of the nautical miles traveled by
the vessel during the six-month period immediately following its entry into the state are commercial miles traveled in
interstate or foreign commerce.

3. If the property is an aircraft, use tax will not apply if one-half or more of the flight time traveled by
the aircraft during the six-month period immediately following its entry into the state is commercial flight time traveled
in interstate or foreign commerce.

Such use will be accepted as proof of an intent that the property was not purchased for use in California. For
purposes of subdivision (b)(5)(C), the term “commercial” applies to business uses and excludes personal use.
However, the term “commercial” is not limited to for-profit businesses.

(D) Repair, Retrofit, or Modification of Vessels or Aircraft.

1. Notwithstanding subdivision (b)(5)(A) above, aircraft or vessels, the purchase and use of which are
subject to the 12-month test described in subdivision (b)(5), that are brought into this state for the purpose of repair,
retrofit, or modification, shall not be deemed to be acquired for storage, use, or other consumption in this state.

2. Subdivision (b)(5)(D)1. does not apply if, during the period following the time the aircraft or vessel is
brought into this state and ending when the repair, retrofit, or modification of the aircraft or vessel is complete, more
than 25 hours of airtime in the case of an airplane or 25 hours of sailing time in the case of a vessel are logged on the
aircraft or vessel by the registered owner of that aircraft or vessel or by an authorized agent operating the aircraft or
vessel on behalf of the registered owner of the aircraft or vessel. The calculation of airtime or sailing time logged on
the aircraft or vessel does not include airtime or sailing time following the completion of the repair, retrofit, or
modification of the aircraft or vessel that is logged for the sole purpose of returning or delivering the aircraft or vessel
to a point outside of this state.

(E) Binding Purchase Contract. Subdivision (b)(5) does not apply to any vehicle, vessel, or aircraft that is
either purchased, or is the subject of a binding purchase contract that is entered into, on or before October 1, 2004,
or from July 1, 2007, through September 30, 2008.

(6) PURCHASE FOR USE IN THIS STATE – LOCOMOTIVES — 90-DAY TEST. A locomotive purchased
outside of California which is brought into California is regarded as having been purchased for use in this state if the
first functional use of the locomotive is in California. When the locomotive is first functionally used outside of
California, the locomotive will nevertheless be presumed to have been purchased for use in this state if it is brought

6
Regulation 1620. (Contd.)

into California within 90 days after its purchase, exclusive of any time of shipment to California or time of storage for
shipment to California, unless:

(A) Physically Located Outside California. Use tax will not apply if the locomotive is used, stored, or both
used and stored outside of California one-half or more of the time during the six-month period immediately following
its entry into this state.

(B) Used in Interstate or Foreign Commerce. Use tax will not apply to transactions involving locomotives
if one-half or more of the miles traveled by the locomotive during the six-month period immediately following its entry
into California are commercial miles traveled in interstate or foreign commerce.

Such use will be accepted as proof of an intent that the property was not purchased for use in California. For
purposes of subdivision (b)(6), the term “commercial” applies to business uses and excludes personal use. However,
the term “commercial” is not limited to for-profit businesses.

(7) EXAMPLES OF INTERSTATE AND FOREIGN COMMERCE. Examples of what constitutes interstate or
foreign commerce include, but are not limited to the following:

Example 1. A sightseeing tour bus group (charter) or regularly scheduled bus service (per capita) originates in
California and travels to another state or country for a single day or several days, then returns to California where the
charter or schedule terminates.

Example 2. A charter bus, vessel or aircraft deadheads under contract to another state, picks up the group and
operates the charter without entering the state of California, drops the group in the other state, and deadheads back
into the State of California. (The charter was quoted round trip.)

Example 3. A commercial vehicle deadheads to another state or country or transports property to another state or
country and delivers that property within the other state or country or to another state or country. The vehicle then
returns to California, either loaded or empty.

Example 4. A charter bus group tours under contract to another state or country for a day or several days, drops
the passengers in the other state or country, and then deadheads back under contract to its terminal or next
assignment.

Example 5. Property arriving in California via plane, train, or vessel from another state or country is picked up by a
commercial vehicle, vessel or aircraft and transported to another state or country for a day or several days. The
commercial vehicle, vessel or aircraft then returns to California, either loaded or empty.

Example 6. A sightseeing tour bus group (charter) arriving in California via plane, train, or ship from another state
or country is picked up by bus and tours California for a number of days, goes to another state or country for a
number of days, and then terminates service either in another state, country, or California.

Example 7. Property arriving in California via plane, train, or vessel from another state or country is picked up by a
commercial vehicle, vessel or aircraft, which may be operating wholly within California, and transported for further
distribution to one or more California locations or to locations in another state or country. The vehicle, vessel or
aircraft then returns empty to pick up another load arriving in California via plane, train, or vessel from another state
or country.

Example 8. A commercial vehicle, vessel, aircraft, or regularly scheduled bus service operating wholly within
California is picking up or feeding passengers or property arriving from, or destined to, a state or country other than
California to another form of transportation be it plane, train, ship, or bus. (Example: an airport bus service or a bridge
carrier for Amtrak.)

Example 9. Property is transported by a commercial vehicle, vessel, aircraft, or locomotive from another state or
country to California or from California to another state or country. While engaged in this transportation, the
commercial vehicle, vessel, aircraft, or locomotive also transports property from one point in California to another.

Example 10. A commercial vehicle, vessel, aircraft, or locomotive is dispatched from one location in California to
another location in California to pick up property and transport it to another state or country.

Example 11. A commercial vehicle, vessel or aircraft, sightseeing tour bus group (charter), or regularly scheduled
bus service operating in interstate or foreign commerce experiences a mechanical failure and is replaced by another

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Regulation 1620. (Contd.)

vehicle, vessel or aircraft. The replacement vehicle, vessel or aircraft is also deemed to be operating in interstate or
foreign commerce as a continuation of the original trip.

Example 12. A vehicle, vessel, aircraft, or locomotive transports persons or property for commercial purposes (a)
from California to another state or country; (b) from another state or country to California; (c) entirely within California,
but the vehicle, vessel, aircraft, or locomotive picks up persons or property arriving in California via train, bus, truck,
vessel, or aircraft from another state or country and then transports the persons or property in a continuous route or
journey to one or more California locations or to locations in another state or country.

Example 13. A vessel transports persons or property for commercial purposes (a) from a California port to a port in
another state or country; or (b) from a port in another state or country to a port in California.

(8) IMPORTS. Use tax applies with respect to purchases of property imported into this state from another
country when the use occurs after the process of importation has ceased and when sales tax is not applicable,
regardless of whether the property is in its original package.

(9) “STORAGE” AND “USE” - EXCLUSIONS. “Storage” and “use” do not include the keeping, retaining or
exercising any right or power over property for the purposes of subsequently transporting it outside the state for use
thereafter solely outside the state, or for the purpose of being processed, fabricated or manufactured, into, attached
to, or incorporated into, other property to be transported outside the state and thereafter used solely outside the state.

The following examples are illustrative of the meaning of the exclusion:

Example 1. An engine installed in an aircraft which is flown directly out of the state for use thereafter solely outside
the state qualifies for the exclusion. The use of the engine in the transporting process does not constitute a use for
purposes of the exclusion. However, if any other use is made of the aircraft during removal from this state, such as
carrying passengers or property, the exclusion does not apply.

Example 2. An engine installed in a truck which is transported by rail or air directly out of the state for use thereafter
solely outside the state qualifies for the exclusion.

Example 3. An engine transported outside the state and installed on an aircraft which returns to the state does not
qualify for the exclusion. It does not matter whether the use of the aircraft in California is exclusively interstate or
intrastate commerce or both.

Example 4. An engine transported outside the state and installed on an aircraft which does not return to the state,
qualifies for the exclusion.
(c) RAIL FREIGHT CARS. Sales tax does not apply to the sale of, and the use tax does not apply to the storage,
use or other consumption in this state of rail freight cars for use in interstate or foreign commerce.

History: Effective September 9, 1953.

Amended September 14, 1955.
Amended September 18, 1963.
Amended and renumbered December 9, 1970, effective January 15, 1971.
Amended July 27, 1976, effective August 28, 1976. Noted “original package” doctrine was overruled and that goods held for export are
not yet in export streams.
Amended December 7, 1977, effective January 19, 1978. In (a)(3)(D) changed “export declarations” to “bills of lading” and “import
documents.”
Amended September 28, 1978, effective November 18, 1978. Amends (b)(1); adds (b)(2) and (3); renumbers (b)(2) to (b)(4), and (b)(3)
to (b)(5).
Amended November 6, 1985, effective February 8, 1986. In subdivision (a)(3)(C), “Exports,” added language to more clearly define what
constitutes an export for sales and use tax purposes, and gives specific examples of what constitutes an exempt sale in foreign
commerce and examples of what does not qualify. In subdivision (a)(3)(C)(2), amended language expands the definition of the
requirements for a sale to qualify as a sale in foreign commerce when the property is delivered to the purchaser’s conveyance in this
state. Amended language includes examples of exempt and taxable sales. In subdivision (b)(5), “Storage” and “Use” — Exclusions,
language amended to reflect court decision in Stockton Kenworth, Inc. v. State Board of Equalization 157 Cal.App.3d 344.

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Regulation 1620. (Contd.)

Amendment explains certain uses that may be made of property which is to be subsequently transported outside this state that do not
constitute a taxable use of the property in this state.
Amended February 7, 1990, effective April 18, 1990. Paragraph (a)(3)(C) which explains that sales tax applies to property delivered to
the purchaser in California prior to export was amended and paragraph (b)(2)(C) was added to explain that deliveries of certain motor
vehicles to foreign tourists are exempt. Amended (a)(3)(C)2.(c) and (b)(2)(A) to correct erroneous references in the California
Administrative Code.
Amended May 3, 1994, effective July 14, 1994. Amended paragraph (a)(2)(A) to define when sales tax will apply to sales which follow
the movement of tangible personal property into California by adding “independent contractor” to the term “other place of business”
and “installation” and “assembly” to the functions performed.
Amended June 28, 1995, effective November 4, 1995. Amended paragraph (a)(2)(A) to delete the term “independent contractor” from
the term “other place of business” and deleting “installation” and “assembly” from the functions performed as amended in error.
Amended November 18, 1998, effective February 7, 1999. Subdivision (a)(2)(C) amended by adding phrase “, if . . . regulation.”
Sentence “Property . . . regulation” added to last unnumbered paragraph of subdivision (a)(3)(C).
Amended November 19, 1999, effective February 23, 2000. Subdivision (a)(3)(c)2.c. - The word “Example” added before examples 1
through 6. Subdivision (b)(3) - new language “All ... California.” added to first unnumbered paragraph; also new unnumbered
paragraph with examples 1 through 11 added. Subdivision (b)(5) - word “Example” added before examples 1 through 4.
Amended August 30, 2000, effective December 17, 2000. Revenue and Taxation Code sections 6051 and 6201 added to the Reference
section. Subdivision (b)(2)(A) - “(b)(5)” corrected to read “(b)(6).” Subdivision (b)(3) - definition for “functional use” moved from the
very end of this subdivision to be second sentence of first unnumbered paragraph and word “subparagraph” changed to “regulation.”
The language “All . . . California.” taken from first unnumbered paragraph and moved to new subdivision (b)(4). First sentence - word
“All” replaced with “A;” word “are” replaced with “is;” phrase “or aircraft” added. Second sentence - phrases “or aircraft,” “exclusive . . .
vehicle,” and “, or . . . commerce” added. Phrase “or aircraft” added to Examples 2, 5, 7, and 9-11, word “aircraft” added to Example
8, and Example 12 added. Subdivisions (b)(4) and (5) renumbered (5) and (6) accordingly.
Amended March 28, 2001, effective July 6, 2001. Subdivision (b)(1) – phrase “with respect” deleted and phrase “the use of” added.
Subdivision (b)(2)(A) – phrase “the use of” added twice. Both amendments were to clarify that the use tax attaches to the use of the
property, not the property itself. Subdivision (b)(2)(B) entitled “Interstate and Foreign Commerce” and its language transferred to new
subdivision (b)(2)(B)1., which was entitled “In General” with phrase “the use of” added to clarify that the use tax attaches to the use of
the property, not to the property itself. New paragraph (b)(2)(B)2. added to state rules for intermodal cargo containers. Subdivision
(b)(2)(C) – word “however” deleted and phrase “the use of” added to clarify that the use tax attaches to the use of the property, not
the property itself.
Amended October 24, 2001, effective February 7, 2002. Subdivision (b)(2)(B)2., first un-numbered paragraph, last line- word “satisfying”
deleted and words “are satisfied” added. Subdivision (b)(3) - second paragraph, phrase “unless the property is used or stored outside
of California” was replaced with “unless the property is used, stored, or both used and stored outside of California”. Subdivision
(b)(4)word “VESSELS” added to title, and word “vessel,” added to each of the first two sentences and colon added after “unless”;
substance of second sentence after “unless” and before “(B)” transferred to new subdivision (A) and words “Physically . . . if” and “,
vessel” and “,or both used and stored” added and semi-colon and word “or” replaced by period; new subdivision (B) added and
entitled “Used in Interstate or Foreign Commerce”; substance of second sentence from “(B)” through first “commerce” transferred to
new subdivision (B)1. with word “if” capitalized and words “the property is” and “use tax will not apply if and or foreign” added and “;
or” replaced with period; new subdivision (B)2. added; substance of second sentence from “or” through end transferred to new
subdivision (B)3. with word “if” capitalized and words “the property is” and “use tax will not apply if” and “or foreign” added; last
sentence made into new unnumbered paragraph and new sentence added; word “, vessel” added to introduction to Examples and to
Examples 2, 5, 7-12; new Example 13 added.
Amended December 14, 2004, effective March 3, 2005. Subdivision (a)(3)(C), Example 6 – Deleted the parentheses from around “b.”
after “2.” throughout the text of the example. Subdivision (b)(3) – Added the phrase “Except as provided in subdivision (b)(5) of this
regulation,” to the beginning of the second sentence, changed the original first word in the sentence to lower case, and deleted “the”
after that original first word. Added the phrase “Except as provided in subdivision (b)(5) of this regulation,” to the beginning of the third
and fourth sentences and changed the original first word in each sentence to lower case. The phrase was added as a cross-reference
to new subdivision (b)(5) of the regulation. Subdivision (b)(4) – Added the words “–90-DAY TEST (PRIOR TO OCTOBER 2, 2004,
AND AFTER JUNE 30, 2006).” to the title of the subdivision and added a new first sentence to the first paragraph of the subdivision.
These additions were added as a cross-reference to new subdivision (b)(5) of the regulation. With the addition of new subdivision
(b)(5), subdivision (b)(4) is applicable only to purchases made prior to October 2, 2004 and to purchases made after June 30, 2006.
Subdivision (b)(5) – A new subdivision was added to the regulation to implement the provisions of SB 1100 (Stats. 2004, Ch. 226, §2,
hereinafter “SB 1100”), which amended section 6248 of the Revenue and Taxation Code. Amended section 6248 is operative
October 2, 2004. Consequently, new subdivision (b)(5) of Regulation 1620 is applicable to purchases made from October 2, 2004,
through June 30, 2006. Subdivision (b)(6) – A new subdivision (b)(6) was created by setting off the examples of transactions in

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Regulation 1620. (Contd.)

interstate and foreign commerce from subdivision (b)(4) and adding the title “EXAMPLES OF INTERSTATE AND FOREIGN
COMMERCE.” Made a spacing correction to Example 2. Previous subdivisions (b)(5) and (b)(6) were re-numbered as subdivisions
(b)(7) and (b)(8), respectively.
Amended October 25, 2005, effective January 28, 2006. Subdivision (b)(6) is added to apply the 90-day test provisions in subdivision
1620(b)(4) specifically to locomotive purchases. Current subdivision (b)(6), “EXAMPLES OF INTERSTATE AND FOREIGN
COMMERCE,” is re-numbered (b)(7) accordingly, and references to locomotives are added to Examples 9, 10, and 12.
Amended July 18, 2006, effective September 15, 2006. Amended subdivisions (b)(4) and (b)(5) to show that the sunset date for the 12-
month test for out-of-state purchases of vehicles, vessels and aircraft was extended to June 30, 2007.
Amended November 20, 2006, effective April 25, 2007. Added paragraph to subdivision (b)(5)(B) to incorporate a statutory provision
regarding evidence rebutting the presumption that a vehicle was purchased for use in California.
Amended February 1, 2008, effective April 23, 2008. Added subdivision (b)(2)(D) to incorporate statutory provisions regarding the
exemption from use tax for the first $400 of tangible personal property purchased in a foreign country and hand-carried into this state,
and the subsequent increase in the exempted amount to $800 as of January 1, 2008.
Amended December 17, 2008, effective February 5, 2009. Amended subdivisions (b)(4) and (b)(5) to show that the 12-month test for
out-of state purchases of vehicles, vessels and aircraft was reinstated operative October 1, 2008.

Regulations are issued by the State Board of Equalization to implement, interpret or make specific
provisions of the California Sales and Use Tax Law and to aid in the administration and enforcement
of that law. If you are in doubt about how the Sales and Use Tax Law applies to your specific activity
or transaction, you should write the nearest State Board of Equalization office. Requests for advice
regarding a specific activity or transaction should be in writing and should fully describe the facts and
circumstances of the activity or transaction.

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