Yamaha Corp. of America v. State Board of Equalization

Opinion

On December 24, 1996, this court filed an opinion reversing the judgment of the trial court in this case, and finding in favor of appellant State Board of Equalization (the Board) and against Yamaha Corporation of America (Yamaha). Thereafter, Yamaha petitioned for a rehearing, which we granted. Following a rehearing, we again held in favor of the Board in our decision, filed February 21, 1997.

Yamaha then petitioned the Supreme Court for review, and its petition was granted. On August 27, 1998, the Supreme Court issued its decision in Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1 [ 78 Cal.Rptr.2d 1 , 960 P.2d 1031 ] (Yamaha), holding that we had erred by concluding that the Board’s interpretation of sales and use tax statutes, as set out in the Board’s Business Taxes Law Guide opinion summaries (the annotations), were entitled to the same high degree of judicial deference as is given to quasi-legislative rules. However, the Supreme Court specifically did not reach the merits of the particular legal question raised by this case (i.e., whether Yamaha had use tax liability for musical instruments and promotional brochures stored in California and shipped as gifts to out-of-state donees) and remanded the cause to us for further proceedings consistent with its views as to the proper standard of review. (Id. at p. 15.)

We conclude that while the particular annotations, relied upon by the Board in this matter, are entitled to less weight than quasi-legislative rules,

The Board interpreted section 6009.1 differently from Yamaha, and, after a sales and use tax audit for the period 1984 through 1989, the Board determined that use tax was owing based on the out-of-state gifts. Yamaha paid approximately $700,000 in use tax on the contested transactions and thereafter filed a claim for a refund, which was denied by the Board. Thus, on April 21, 1993, Yamaha filed the instant action, in which it alleged that the Board’s taxation of the interstate gifts violated section 6009.1 and California’s statutes governing administrative regulations and rulemaking (Gov. Code, § 11340 et seq.), as well as the commerce clause (U.S. Const., art. I, § 8) and the due process clause (Amend. XIV) of the United States Constitution.

The trial court concluded that the gifts at issue were excluded from use tax under section 6009.1. Specifically, the court made the following findings: “The gifts of musical instruments were made out-of-state. The merchandise at issue was delivered by common carriers, with freight charges paid by plaintiff. The gift was not effectuated until it was delivered to the donee, at their out-of-state business or residence. The only use of the property was for the storage and transportation outside the state for use solely outside the state, therefore [it] is excepted from taxation, Revenue and Taxation Code Section 6009.1 [¶] The merchandise was not used as a Marketing Aid within California. There is no evidence presented to indicate that Yamaha used the merchandise within California, except in storage and transportation solely for out-of-state use. Any promotional use of donating the instruments did not occur until its delivery outside the state’s borders. As a gift, Yamaha could have revoked the gift prior to its delivery. Any marketing aid use did not occur until it was delivered at its out-of-state destination. [I] The storage of the merchandise at issue within California was for subsequent use solely outside the State of California. This falls squarely within the exception to taxable storage as prescribed by Revenue and Taxation Code Sections 6008,

Contentions

The Board contends that its interpretation of section 6009.1, as expressed in its annotations, is proper and correct, and that therefore, giving its interpretation at least some weight, in the specific circumstances here involved, should cause us to conclude that: (1) Yamaha owed tax respecting the property purchased in California under resale certificates; (2) by delivering property in California to common carriers for transportation to out-of-state donees, Yamaha made a completed gift, and hence a taxable use, of the property in California; (3) section 6009.1 does not exclude the gifts at issue in this case from use tax; and (4) the Board’s construction of section 6009.1 does not violate the commerce clause.

Yamaha disputes these contentions. It contends that the Board’s interpretation of section 6009.1 is in direct contradiction of that section’s plain language, and that when the facts are analyzed by us independently, without reference to the annotations, we would conclude, as did trial court, that its gifts of musical instruments and promotional materials to donees outside California are excluded from taxation.

Discussion

1. Overview of the Applicable Statutes, Regulations and the Annotations in Question

“The California Sales and Use Tax Law (Rev. & Tax. Code, § 6001 et seq.) [fn. omitted] embodies a comprehensive tax system created to impose an excise tax for the support of state and local government, on the sale, use, storage or consumption of tangible personal property within the state. [Citation.] [Fn. omitted.] The two taxes, sales and use, are mutually exclusive but complementary, and are designed to exact an equal tax based on a percentage of the purchase price of the property. . . . ‘ “[A] sales tax is a tax on the freedom of purchase .... [a] use tax is a tax on the enjoyment of that which was purchased.” ’ [Citation.] ftQ The use tax supplements the sales tax by imposing on those subject to it the same tax burden as would otherwise be assessed under the sales tax. [Citation.] For example, the use tax generally applies where a particular transaction is exempt from sales tax, such as one involving goods purchased in another state and stored or used in California. [Citation.] Ordinarily, the use tax does not apply where a resale

Focusing on the specific statutes and regulations that control our decision in this case, sales tax is due on any retail sale of tangible personal property in California unless the sale is specifically exempt by statute. (§ 6051.) A retail sale is a sale for any purpose except resale in the regular course of business. (§ 6007.) All of a retailer’s sales are presumed to be taxable retail sales until the contrary is established. (§ 6091.) The retailer has the burden of proving that a sale is not at retail unless the retailer takes in good faith a timely and valid resale certificate. (§ 6091; Cal. Code Regs., tit. 18, § 1668.) A purchaser may validly issue a resale certificate when purchasing property that the purchaser intends to resell, provided that the purchaser will not store or use the property other than for retention, demonstration or display while holding it for resale. (Cal. Code Regs., tit. 18, § 1668.) A purchaser may not issue a resale certificate when purchasing property which the purchaser knows it will not resell. (§ 6094.5; Cal. Code Regs, tit. 18, § 1668, subd. (g).) If a purchaser does so, the purchaser is liable for the sales tax that the seller would have owed but for the seller’s acceptance of the purchaser’s resale certificate and for an additional penalty. (Ibid.)

Use tax is due if a purchaser purchases property under a proper and valid resale certificate but thereafter stores or uses the property other than for retention, demonstration or display while holding it for resale. (§ 6094, subd. (a); Cal. Code, Regs., tit. 18, § 1668, subd. (a)(2).) Similarly, if, for any other reason, sales tax was not paid when personal property was purchased, the purchaser is required to pay a use tax on the storage, use or other consumption of the property in California. (§§ 6201, 6202, 6401.) “Storage” is defined as any keeping or retention of tangible personal property in California for any purpose except sale in the regular course of business or subsequent use solely outside this state. (§ 6008.) “Use” is the exercise of any right or power over tangible personal property incident to the ownership of that property, except that it does not include the sale of the property in the regular course of business. (§ 6009.) “Use” includes the making of a gift of property to others, and, if that is the use which a purchaser of property intends at the time of the purchase, then sales tax applies to the purchase, just as the tax applies to a sale for any other intended use. (Cal. Code Regs.,

The Board publishes a Business Taxes Law Guide (2A State Bd. of Equalization, Bus. Taxes Law Guide, Sales & Use Tax Annots. (1998) (Annotations)), which includes annotations to the statutes and regulations. These annotations are opinions by the Board’s legal staff and are intended to be used for guidance by the Board itself and tax practitioners. Annotation No. 280.0040 states the view that advertising and promotional material which is brought into the state from elsewhere is subject to use tax when a gift of the material is made and title passes to the donee in the state. This annotation further states that the gift is regarded as being a taxable use of the property “[wjhen the donor divests itself of control over the property in this state.” (P. 3731, italics added.) Annotation No. 280.1140 expresses the view that stock in trade which is purchased for resale is subject to use tax if it is used instead for the purpose of making a gift. The annotation further states that such a gift is a taxable use, and imposition of the tax does not constitute an unconstitutional burden on interstate commerce, “[ajlthough the donor in this state ships the gift to the donee out of state.” (Pp. 3750-3751.)

The issue before us is whether the Board’s interpretation of the foregoing statutes and regulations, as reflected in its Annotations No. 280.0040 and No. 280.1140 and in its determination of tax in this case, is correct.

2. Principles Governing Judicial Review of the Board’s Interpretation of the Tax Statutes and Regulations

The interpretation of statutes and regulations is a question of law. Accordingly, the Board’s interpretation of the sales and use tax statutes and regulations is subject to independent judicial review. (Yamaha, supra, 19 Cal.4th at pp. 7-8; Wallace Berrie & Co. v. State Bd. of Equalization, supra, 40 Cal.3d at p. 65.) Agencies such as the Board may promulgate their interpretation of statutes via two classes of rules — quasi-legislative and interpretive — that, because of their differing legal sources, command significantly different degrees of deference by the courts. (Yamaha, supra, 19 Cal.4th at p. 10.) Quasi-legislative rules, promulgated pursuant to a delegation of the Legislature’s lawmaking power, have the dignity of statutes, so when a court assesses the validity of such rules, the scope of its review is narrow; if the court is satisfied that the rule in question falls within the lawmaking authority delegated by the Legislature, that the rule is reasonably

In contrast, the other class of administrative rules, those which simply interpret an existing statute, e.g., which give the agency’s view of the statute’s legal meaning and effect, do not implicate the exercise of a delegated lawmaking power. (Yamaha, supra, 19 Cal.4th at p. 11.) “[B]e-cause the agency will often be interpreting a statute within its administrative jurisdiction, it may possess special familiarity with satellite legal and regulatory issues. It is this ‘expertise,’ expressed as an interpretation (whether in a regulation or less formally, as in the case of the Board’s tax annotations), that is the source of the presumptive value of .the agency’s views. An important corollary of agency interpretations, however, is their diminished power to bind.” (Ibid.) However, “[bjecause interpretation is an agency’s legal opinion, however ‘expert,’ rather than the exercise of a delegated legislative power to make law, it commands a commensurably lesser degree of judicial deference . . .” than quasi-legislative rules. (Ibid., italics and citation omitted.)

When an agency is merely construing a statute, as in the case of the annotations here, the question of whether judicial deference to the agency’s interpretation is appropriate and, if so, the extent of such deference, is fundamentally situational. (Yamaha, supra, 19 Cal.4th at p. 12.) Thus, a court must consider complex factors material to the substantive legal issue before it, the particular agency offering the interpretation, and the comparative weight the factors ought in reason to command. (Ibid.) These factors fall into two broad categories: (1) those “ ‘indicating that the agency has a comparative interpretive advantage over the courts,’ ” and (2) those “ ‘indicating that the interpretation in question is probably correct.’ ” (Ibid., quoting Cal. Law Revision Com., Tent. Recommendation, Judicial Review of Agency Action (Aug. 1995) p. 11 (Tentative Recommendation); see also Asimow, The Scope of Judicial Review of Decisions of California Administrative Agencies (1995) 42 UCLA L.Rev. 1157 , 1192-1209.)

In the first category are factors that “ ‘assume the agency has expertise and technical knowledge, especially where the legal text to be interpreted is technical, obscure, complex, open-ended, or entwined with issues of fact, policy, and discretion. A court is more likely to defer to an agency’s interpretation of its own regulation than to its interpretation of a statute, since the agency is likely to be intimately familiar with regulations it authored and sensitive to the practical implications of one interpretation over

This principle applies to policies embodied in staff legal opinions just as much as to policies set out in formal, quasi-legislative regulations (Yamaha, supra, 19 Cal.4th at p. 21 and cases cited there), a rule which is particularly appropriate where, as here, such legal opinions have been collected and made public so that taxpayers can order their transactions according to such policies. As Justice Mosk pointed out in his concurring opinion, the annotations have a special legal status, for when the Board obtained an exemption from the Administrative Procedures Act for the annotations (Gov. Code, § 11342, subd. (g)), it did so with the acknowledgment that the opinions, though addressed to specific tax questions by taxpayers, were intended to be generally applicable to all taxpayers similarly situated, and that the exemption would therefore “permit the department to continue to provide a valuable service to taxpayers. If the rulings were deemed to be regulations, the service would have to be discontinued because of the administrative burdens created by the OAL review process.” (Franchise Tax Bd. staff, Enrolled bill Rep., Assem. Bill No. 227 (1983-1984 Reg. Sess.) Sept. 16, 1983, p. 3; Yamaha, supra, 19 Cal.4th at pp. 22-23 (conc. opn. of Mosk, J.).) Thus, the passage of the 1983 amendment to Government Code section 11342 evidently was designed to benefit taxpayers by giving them information about

Another important factor is the agency’s particular expertise and whether its interpretation is of a statute it enforces, rather than some peripheral law. Professor Michael Asimow, an administrative law adviser to the California Law Revision Commission, whose 1995 article, The Scope of Judicial Review of Decisions of California Administrative Agencies was cited with approval by both the majority and the concurring justice in Yamaha, has stated that deference is especially appropriate not only when an administrative agency has particular expertise, but also by virtue of its specialization in administering a statute, which “ ‘gives [that agency] an intimate knowledge of the problems dealt with in the statute and the various administrative consequences arising from particular interpretations,’ ” and also when, as in the present case, the agency is interpreting “ ‘the statute [it] enforces’ ” rather than “ ‘some other statute, the common law, the [C]onstitution, or prior judicial precedent.’ ” (19 Cal.4th at p. 20.) (Asimow, The Scope of Judicial Review of Decisions of California Administrative Agencies, supra, 42 UCLA L.Rev. 1157 , 1196.)

Yet another factor we may consider is the fact that courts should apply a presumption that the Legislature is aware of a consistent and very long-standing administrative interpretation, and thus, the reenactment of the statute being interpreted with no modification designed to make it clear that the agency’s interpretation is wrong is a strong indication that the administrative practice was, and is, consistent with underlying legislative intent. (Yamaha, supra, 19 Cal.4th at pp. 21-22 (conc. opn. of Mosk, J.), citing Rizzo v. Board of Trustees (1994) 27 Cal.App.4th 853 , 862 [ 32 Cal.Rptr.2d 892 ], disapproved on another ground, Yamaha, supra, 19 Cal.4th at p. 15; Thornton v. Carlson (1992) 4 Cal.App.4th 1249 , 1257 [ 6 Cal.Rptr.2d 375 ]; Lute v. Governing Board (1988) 202 Cal.App.3d 1177 , 1183 [ 249 Cal.Rptr. 161 ]; Napa Valley Educators’ Assn. v. Napa Valley Unified School Dist. (1987) 194 Cal.App.3d 243 , 252 [ 239 Cal.Rptr. 395 ]; Horn v. Swoap (1974) 41 Cal.App.3d 375 , 382 [ 116 Cal.Rptr. 113 ].) In this case, as noted by Justice Mosk, the statute under consideration, section 6009.1, has been amended twice since the issuance of Annotation No. 280.0040. (Stats. 1965, ch. 1188, § 1, p. 3004; Stats. 1980, ch. 546, § 1, p. 1503.) The amendments did nothing to suggest that the Legislature had any problem with the Board’s interpretation of the section.

Yamaha contends the decision in each of the foregoing cases was based upon the fact that the taxpayer made a “functional use” of the property within California by, in effect, installing the subject railroad equipment on a locomotive (Atchison, etc. Ry. Co. v. State Bd. of Equal., supra, 131 Cal.App.2d at p. 680), filling the subject containers with tomatoes (H. J. Heinz Co. v. State Board of Equalization, supra, 209 Cal.App.2d at pp. 5-6), or assembling the subject display cases and packing them with cosmetics. (Parfums-Corday, Inc. v. State Bd. of Equalization, supra, 187 Cal.App.3d at pp. 637-638.) Yamaha contends that it made no “functional use” of the musical instruments and promotional literature that it sent out of state as gifts, because it simply sent the property to the out-of-state donees in its original packaging and made no physical change of any kind in it. We reject this argument. Yamaha concedes that a gift is a “use.” A gift is thus subject to use tax if the gift is made in California, whether or not a “functional use” of any other kind is made of the property. Thus, if the gifts at issue in this case can properly be considered to have been made in California, they were taxable.

In connection with its argument that the gifts were not made, in other words, were not completed in California, Yamaha relies on the case of Stockton Kenworth, Inc. v. State Bd. of Equalization (1984) 157 Cal.App.3d 334 [ 203 Cal.Rptr. 698 ]. However, Stockton Kenworth does not support Yamaha’s claim that its gifts to out-of-state donees were not completed within California. In Stockton Kenworth, the Court of Appeal agreed with the taxpayer’s claim that section 6009.1 excluded from use tax the taxpayer’s transportation of several trucks out of state, where the taxpayer leased the trucks to an out-of-state lessee. The court found invalid a regulation which required the trucks to be towed out of state, rather than being driven on their own power, in order for section 6009.1 to apply; the court found this to be an unreasonable interpretation of the statute. (157 Cal.App.3d at pp. 338-339.) Yamaha contends our decision should follow that of the court in Stockton

Here, we are not dealing with a dispute over whether a decedent made a gift, nor with an alleged donor who now claims that he or she was confused or tricked into parting with his or her property. Instead, we are dealing with a business enterprise which is, and was, perfectly capable of presenting evidence as to whether it intended to make a gift or not at the time it handed its property over to a common carrier for delivery to an out-of-state donee. Not surprisingly, there is no evidence in the record (which consists of stipulated facts) that at the time Yamaha gave the common carrier its property, addressed for delivery to out-of-state donees, it did not intend to make a gift of such property. The evidence, in fact, is to the contrary, given that the product loan/giveaway authorization forms, which were made part of the stipulated record, clearly indicate that the property in question was to be shipped by common carrier to various entities for “giveaway promotions.”

Although Yamaha contends that its unexercised right to recall delivery of its property until it was actually received by the donee prevented the gift from being complete upon delivery to the common carrier, it cites to no

As to the element of acceptance, under California law, it is presumed a gift beneficial to the donee is accepted, even without the donee’s knowledge or consent. (Estate of Kalt (1940) 16 Cal.2d 807 , 813 [ 108 P.2d 401 , 133 A.L.R. 1424 ] [“ ‘There is no intrinsic difficulty in regarding a conveyance as effective to vest property in the grantee even before the latter has consented to receive it’ ”]; Kropp v. Sterling Sav. & Loan Assn. (1970) 9 Cal.App.3d 1033 , 1046 [ 88 Cal.Rptr. 878 ].) Such presumed acceptance is deemed to have occurred at the time the donor first handed the property over to a third person for delivery to the donee. (Civ. Code, § 1059, subd. 2; Windiate v. Moore (1962) 201 Cal.App.2d 509 , 514-515 [ 19 Cal.Rptr. 860 ]; Neely v. Buster (1920) 50 Cal.App. 695 , 700 [ 195 P. 736 ], and cases cited there.)

“ ‘[W]hether a gift is complete and effectual is a question of fact to be determined from all the evidence.’ [Citation.]” (Jaffe v. Carroll, supra, 35 Cal.App.3d 53 , 61.) The evidence here supports only these findings on the issues of intent, delivery and acceptance: that when Yamaha handed over its property to a common carrier for delivery to out-of-state donees, it intended, at the time it handed each piece of property over to the carrier, to

Notably, we have found two published cases in which this same issue was presented for resolution, both of which reached the same conclusion as we that a gift which is mailed or sent out-of-state is made, for purposes of a taxable “use” of the donated property, in the state in which the donor turns it over to a common carrier or post office, regardless of any argument that there is not a completed gift made within the taxing state. In one case, McGraw-Hill, Inc. v. State of New Jersey, Department of the Treasury, Division of Taxation (1987) 9 N.J. Tax 372 , this conclusion was based on an analysis which focused not on when a gift is complete, but instead on an analysis of where the taxpayer had manifested a change of intention as to its intended use of the property. In the other case, Hoffman-LaRoche, Inc. v. Porterfield (1968) 16 Ohio St.2d 158 [ 243 N.E.2d 72 ], the analysis focused on when a gift is deemed completed.

In McGraw-Hill, Inc. v. State of New Jersey, Department of the Treasury, Division of Taxation, supra, 9 N.J. Tax 372 , the taxpayer, McGraw-Hill, purchased book components outside of New Jersey, which components were made into books and stored as inventory in McGraw-Hill’s New Jersey warehouse and held for resale. No sales or use tax was paid on this basis. McGraw-Hill thereafter donated the books to a charitable organization. After the director, division of taxation imposed a deficiency use tax assessment on McGraw-Hill on the cost of the books so donated, McGraw-Hill brought an action contesting the tax. One of its many arguments was that if the transactions were gifts, then any gifts to out-of-state charities did not take effect in New Jersey, and therefore they were not subject to use tax by New Jersey. (Id. at p. 379.)

New Jersey defined “use” as “[t]he exercise of any right or power over tangible personal property by the purchaser thereof and includes, but is not limited to, the receiving, storage or keeping or retention for any length of time, withdrawal from storage, any distribution, any installation, any affix-ation to real or personal property, or any consumption of such property.” (NJ. Stat. Ann. § 54:32B-2(h).) Use tax in New Jersey is imposed on property which has not already been or will be subject to sales tax, except that “the mere storage, keeping, retention or withdrawal from storage of

The court in McGraw-Hill made the following salient observations:

“It is important to recognize the difference between the sales tax and the use tax. Sales tax is imposed on a commercial transaction, a purchase for consideration. The use tax is a tax complementary to the sales tax as an aid to its enforcement. It is a tax on possession and enjoyment of that which was purchased and for which no sales tax was paid. [Citation.]

“The subject case turns neither on the nature of the gifts nor the fact that some gifts were made to out-of-state donees, but on the fact that a change of intention occurred in New Jersey, manifested by taxpayer’s withdrawal of tangible personal property from storage for gift, rather than resale, purposes. This change of intent was evidenced by instructions to the Hightstown distribution center to segregate the books and have them shipped to the charitable donee, and the carrying out of these instructions by taxpayer taking all steps necessary in New Jersey to complete the gifts. So long as the books were held in inventory with the intent to resell, they were not subject to use tax, but once taxpayer took steps to use the books for gift purposes, they were removed from the protection of § 2(e) and became subject to use tax under § 6.

“Section six provides that ‘mere storage, keeping, retention or withdrawal from storage of tangible personal property by the person who manufactured, processed or assembled such property shall not be deemed a taxable use by him.’ [Emphasis omitted.] This wording indicates that goods placed in storage or withdrawn from storage are not subject to use tax. But, these words must be read in the context of the entire act, and particularly § 2(h), which includes storage or withdrawal from storage in the definition of ‘use.’ Placing in or removing from storage within the resale chain (for instance removal for transfer to another warehouse, or to a distributor or retailer) is not a taxable event, but removal from storage for the purpose of using the property subjects the user to use tax. The word ‘mere’ limits the nontaxable status. In this case the withdrawal is not a ‘mere’ withdrawal but is coupled with instructions to remove from storage and the removal from storage and delivery of the books to a common carrier for shipment for a non-resale purpose.

“Although it may appear severe to impose a use tax on a gift, this treatment is consistent with statutory requirements. If I give tangible personal property, for instance, a television set, to a charity, I must pay a sales

tax. when I acquire the set. The fact that I could have restructured the hypothetical transaction and given cash to the charity, and the charity could then have purchased a television set without paying a sales or use tax, does not justify a finding in the subject case that no use tax is due. [Citation.] Further, if a manufacturer of television sets withdraws a set from its warehouse for its own use, whether it be for use in an employees’ lounge or to be given away for promotional purposes or to a charity, a use tax must be paid on this withdrawal if no sales tax was paid by the manufacturer on the purchase of the component materials. The product is no longer being held for resale and therefore is not exempt from tax on the purchase, either as a finished product or as component parts or raw materials. This is the scheme of the Sales and Use Tax Act.

“In the subject case, taxpayer is giving tangible personal property to a charity without having paid sales tax to acquire the property. I conclude that the withdrawal of the books from inventory for the purpose of making a gift and the delivery of the books to the common carrier for shipment to the donee are the events which subject the donated books to use tax. The fact that some books were shipped out of the state, where title passed, does not affect this taxability since the devotion to the non-resale use occurred in New Jersey.

“Taxpayer’s contention that no use tax can be imposed by New Jersey because the books are shipped by common carrier and insured by taxpayer during transit, with title passing on receipt in the donee’s state, is grounded in Commerce Clause concepts which apply to sales to out-of-state customers. The Commerce Clause is concerned primarily with the avoidance of multiple or burdensome taxation on interstate commerce. In the subject case, there is no allegation that a sales or use tax has been paid to any other state, either on the component materials or on the finished product. Normally, if there is no sale, no other state can impose a sales or use tax on the charitable donee. If, by reason of the passing of title in another state, a use tax is sought to be imposed on the taxpayer-donor, the principles of Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 , 97 S.Ct. 1076 , 51 L.Ed.2d 326 (1977), reh’g den. 430 U.S. 976 , 97 S.Ct. 1669 , 52 L.Ed.2d 371 (1977), would be applicable. Since a use tax has been imposed by New Jersey on the donor, presumably the tax credit provision of the sales and use tax act of the donee’s state would prevent multiple taxation of the donor. If the donee’s state has no tax credit provision, there would be a serious doubt as to the validity of that state’s sales and use tax act because it would not be ‘fairly apportioned’ as required by Complete Auto. See KSS Transp. Corp. v. Taxation Div. Dir., 9 N.J. 273 (Tax Ct. 1987) (Appellate Division appeal pending).” (McGraw-Hill, Inc. v. State of New Jersey Deprtment of Treasury, Division of Taxation, supra, 9 N.J. Tax at pp. 382-384, italics added.)

In Ohio, just as in California, “use” means the exercise of any right or power incidental to the ownership of the thing used. (Compare Ohio Rev. Code Ann. § 5741.01 (C), with Rev. & Tax Code, § 6009.) A consumer who stores, uses, or otherwise consumes in Ohio tangible personal property purchased for such purpose, is liable for the tax. ( Ohio Rev. Code Ann. § 5741.02 (B).) The board of tax appeals reduced the use-tax assessment levied by the tax commissioner, concluding that the material mailed from a state other than Ohio was not stored, used or otherwise consumed by the taxpayer in the state of Ohio. The tax commissioner appealed, arguing that because Hoffman-LaRoche sent the materials into Ohio by way of the postal service, it did not divest itself of possession and control of the materials outside Ohio, because postal regulations gave it the right to recall the mail at any time prior to delivery, and that the post office was thus the taxpayer’s agent. (16 Ohio St.2d at p. 161 [243 N.E.2d at p. 74].)

The Supreme Court of Ohio disagreed with this contention, noting that there was authority in many jurisdictions that delivery of a gift is completed at the time it is deposited in the mail for delivery to the intended recipient. (16 Ohio St.2d at pp.161-162 [243 N.E.2d at p. 74].) It also noted that there was no evidence that the taxpayer had ever attempted, or would ever attempt, to recall any of the promotional materials it had sent through the mail. (16 Ohio St.2d at p. 162 [243 N.E.2d at p. 74].) Thus, because it had done as much as it reasonably could do under existing postal regulations to divest itself of ownership, possession and control of the mailed materials while outside Ohio, it was “reasonable to conclude that the gift of these samples and advertising materials took place outside Ohio and such material was not stored, used or otherwise consumed by [the taxpayer] in the state of Ohio within the meaning of those words as used in Section 5741.02, Revised Code.” (16 Ohio St.2d at p. 162 [243 N.E.2d at p. 75].)

In this case, the uncontradicted evidence shows not only that Yamaha intended to make gifts of the property in question when it withdrew it from storage in California and delivered it to common carriers for delivery to out-of-state donees, but that, under the principles of gift law discussed above, such gifts were complete when Yamaha delivered the property to common carriers in California. Because giving away the property was not one of the exempted uses, Yamaha was properly liable for the applicable use tax.

Thus, our independent interpretation of sections 6008, 6009, 6009.1, 6094, 6201, 6202, and 6401 as meaning that delivery of property to a common carrier in California for delivery to an out-of-state donee shows an intent to make a gift, which is a nonexempted use of the property, is consistent with both (1) the Board’s interpretation of those statutes, as expressed in Annotation No. 280.0040 (which states that a gift is regarded as being a taxable use of the property “when the donor divests itself of control over the property in this state”; id. at p. 3731 ) and Annotation No. 280.1140 (which states that stock in trade which is purchased for resale is subject to use tax if it is used instead for the purpose of making a gift, even if the donor in this state ships the gift to the donee out of state), and (2) the intent behind the California Sales and Use Tax Law (§ 6001 et seq.), which, as noted above, is to apply the use tax so as to ensure that the basic excise tax will be levied on

Yamaha does not contend the tax at issue here applies to activities without a substantial nexus with the state, facially discriminates against interstate commerce or is not fairly related to services provided by the state. Rather, Yamaha asserts that taxation of gifts to out-of-state donees would violate the “fair apportionment” prong of the Complete Auto test, because such taxation by California would create a risk of multiple taxation. However, no such risk is created.

A state tax is considered properly apportioned under the Complete Auto test if each state taxes only its fair share of an interstate transaction. (Oklahoma Tax Comm’n v. Jefferson Lines, Inc., supra, 514 U.S. at pp. 183-184 [115 S.Ct. at pp. 1337-1338, 131 L.Ed.2d at p. 271]; Goldberg v. Sweet (1989) 488 U.S. 252 , 260-261 [ 109 S.Ct. 582 , 588- 589, 102 L.Ed.2d 607 ].) Claims of malapportionment are assessed by asking whether a challenged tax is “internally consistent” and, if so, whether it is also “externally consistent.” (Oklahoma Tax Comm’n v. Jefferson Lines, Inc., supra, 514 U.S. at p. 184 [115 S.Ct. at p. 1338, 131 L.Ed.2d at p. 271]; Goldberg v. Sweet, supra, 488 U.S. at p. 261 [109 S.Ct. at pp. 588-589].) A tax is “internally consistent” when imposition of an identical tax by every other state would add no burden to interstate commerce that intrastate commerce would not also bear. (Oklahoma Tax Comm’n v. Jefferson Lines, Inc., supra, 514 U.S. at pp. 183-185 [115 S.Ct. at pp. 1337-1339, 131 L.Ed.2d at pp. 271-272]; Goldberg v. Sweet, supra, 488 U.S. at p. 261 [109 S.Ct. at pp. 588-589]; General Motors Corp. v. City of Los Angeles (1995) 35 Cal.App.4th 1736 , 1750 [ 42 Cal.Rptr.2d 430 ].) “External consistency” does not look to the abstract and purely logical consequences of an imagined cloning of the

In sum, taxation of the gifts is not in itself unreasonable, and such taxation contravenes no statute or rule of law. Nor is the tax unjust. Tax was properly imposed upon the gifts, and no refund is due.

7. Yamaha Owes Sales Tax on Promotional Literature Purchased Under Resale Certificates

With respect to the promotional literature which Yamaha purchased under resale certificates, Yamaha plainly owed the tax claimed by the Board. Yamaha stipulated to the following facts concerning the promotional literature: “From time to time, [Yamaha] purchased merchandise ex-tax for the purpose of giving the merchandise away as promotional gifts.” (Italics added.) Some of this merchandise “was purchased in California by giving the seller a resale certificate.” Yamaha’s purchase of merchandise under resale certificates with the intent of giving the merchandise away was improper. Sales tax is owing on any sale of merchandise that is not purchased for resale. (§§ 6007, 6051; Cal. Code Regs., tit. 18, §§ 1668, 1670, subd. (a).) Since Yamaha purchased promotional literature in California with no intent of reselling it, the sale was taxable, and it was immaterial that Yamaha later gave some of the literature away out-of-state rather than in California. (§ 6094.5; Cal. Code Regs., tit. 18, § 1668, subd. (g).)

The judgment is reversed. Costs on appeal are awarded to the Board.

Klein, P. J., and Kitching, J., concurred.

A petition for a rehearing was denied July 15, 1999, and respondent’s petition for review by the Supreme Court was denied October 20, 1999.