When were rock, sand, and gravel taxable personal property, and when did in-place severance or contractor use avoid a retail sale?

Plain-English summary

The memorandum distinguished material already removed from the ground from an in-place right to sever it.

Rock, sand, or gravel removed and then sold at retail was taxable. By contrast, a landowner's grant to another person of the right to enter and remove material in place was not a sale of tangible personal property.

A contractor that personally removed the material and used it in fulfilling a construction contract made no purchase of tangible personal property, so tax did not apply to a sale. But if the landowner or another removal-right holder first severed the material and then sold it to the contractor, the retail sale was taxable.

This same complete memorandum also supports Annotation 150.0540, which focuses on the removal right itself.

Common questions

Was removed rock, sand, or gravel taxable when sold at retail?

Yes.

Was granting an in-place removal right a taxable personal-property sale?

No. The material remained part of the realty until the grantee severed it.

What if a contractor severed and used the material itself?

The memorandum found no sale of tangible personal property in that sequence.

Citations and references

• California Attorney General Opinion NS-3526 (May 19, 1941) (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/150-0550.pdf

Original ruling text

State of California

Memorandum

To:

Mr. L. H. Wilson

From:

R. G. Hamlin

Subject:

Excavation and Removal of Gravel

Board of Equalization

150.0550
Sacramento
April 11, 1950

You have requested a copy of Attorney General’s Opinion NS-3526, dated May 19, 1941, and have inquired with respect to the application of the tax to sales of rock, sand and gravel. It is our opinion that the sale of rock, sand and gravel at retail is subject to the tax. Thus, if rock, sand or gravel is removed from the ground and sold at retail, the tax applies. As indicated by the above opinion of the Attorney General, however, the sale of rock, sand or gravel in place does not constitute the sale of tangible personal property. Therefore, where the owner of the land grants a right to another to remove rock, sand or gravel from the ground, the transaction does not constitute a sale of tangible personal property and is not subject to the sales tax. As rock, sand and gravel are “materials,” the tax does not apply if a contractor removes such “materials” from the land and used them in fulfilling a construction contract. This is for the reason that in such case there is no sale of tangilbe personal property involved. On the other hand, the tax will apply if the “materials” are removed by the owner of the property, or other person having the right of removal, and are sold to the contractor. We are enclosing a copy of Attorney General’s Opinion NS-3526.

RGH:HB