SALT Report 1666 – The California Board of Equalization recently amended regulation 1618 to make the regulation consistent with the Federal Acquisition Regulation (FAR) and to provide guidance regarding sales to the United States Government. The amendments to regulation 1618 are as follows:
Special Tooling – The definition of tools includes “special tooling” as defined by FAR. Title to special tooling will pass prior to use by the contractor only if the agreement between the contractor and the U.S. government contains a custom clause providing for title passage prior to use by the contractor. Therefore, sales of special tooling will generally be subject to tax.
Retail Sale – Is defined as a sale for any purpose other than resale in the regular course of business.
Direct Consumable Supplies – For sales of that are charged direct to the U.S. government, title passes to the government pursuant to the title passage clause associated with that specific contract.
Indirect Consumable Supplies Including Overhead Materials – For sales that are charged to an expense account which is then allocated to other locations, cost centers or contracts it will be considered that title passed to the U.S. government prior to use of the property, and tax will not apply if the item is allocated to a specific government supply contract.
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