Were sales of fully fabricated steel fallout shelters taxable when the buyer or a construction contractor installed them?

Plain-English summary

A general contractor built fallout shelters and also acted as a dealer for a fully fabricated steel shelter that it sold at retail and sometimes installed.

Tax counsel said the dealer's sale of the fabricated shelter was a retail sale whether the installer was a construction contractor or the homeowner. Under historical Ruling 11, an installing contractor consumed materials forming the shelter's walls, floors, and ceiling but retailed attached items that kept their identity, such as bunk beds, ladders, and cabinets.

The dealer also retailed tangible personal property supplied with the finished shelter, including tables, chairs, cooking utensils, and food-package items. The letter treated food products as exempt under historical Ruling 52 but specifically said water and candy bars were not food products. For a lump-sum package of taxable and nontaxable items, tax applied to the taxable items' fair market value.

Common questions

Was the fabricated steel shell sold to an installer a wholesale sale?

No. The letter classified it as a retail sale.

How did the letter distinguish materials from fixtures?

Structural components entering walls, floors, and ceilings were materials; attached items retaining their identity were fixtures.

How were mixed shelter-supply packages handled?

The taxable items were measured at fair market value even when the package had one lump-sum price.

Citations and references

• California Sales and Use Tax Ruling 11 (historical, as cited)
• California Sales and Use Tax Ruling 52 (historical, as cited)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/150-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/150-0200.pdf

Original ruling text

150.0200
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 445-3723

November 22, 1961
REDACTED TEXT
Gentlemen:
This is in reply to your letter of November 17, 1961, concerning the sale of fallout shelters. You state that you are general contractors building fallout shelters and pay sales tax on the materials at your source. However, you are a dealer for a completely fabricated steel shelter which you retail and which you also install. Enclosed is a copy of Ruling 11, which explains the application of sales tax to construction contractors. You will note that a contractor is the consumer of materials, but the retailer of fixtures. Materials which go into the walls, floors, and ceiling of the fallout shelter are materials under Ruling 11. Other items which are attached to the structure which retain their identities when installed, such as bunk beds, ladders, cabinets, etc., are fixtures. If you install these latter items, you are required to obtain a seller's permit from your local State Board of Equalization office at 288 E. 19th Avenue, P.O. Box 1054, San Mateo, California, telephone Fireside 1-5625. Sales of fabricated steel shelters to persons who install them are retail sales, since the installer in this case would be either a construction contractor or the home owner. In both cases your sale of the steel shelter constitutes a retail sale. You are also the retailer of any items of tangible personal property which you furnish for inclusion in the finished shelter. These might include tables, chairs, cooking utensils, and food items. Food products are exempt from the sales tax, see Ruling 52 (copy enclosed). Food products do not include water and candy bars which might be included in a shelter food packet. Where you make retail sales of taxable and nontaxable items for a lump-sum charge, tax applies to the taxable items at their fair market value. Our San Mateo office will be happy to advise you as to the correct application of the tax and answer any other questions you may have. Very truly yours,

E. H. Stetson
Tax Counsel
JHK:lc