When were underground tanks, pumps, and canopies taxable in a sale of an operating gasoline station?

Plain-English summary

An owner planned to sell operating gasoline stations in place, including underground storage tanks, pumps mounted on concrete islands, and canopies supported by pipes embedded in the ground. The purchaser would keep operating the stations at the same locations.

If the seller owned both the land and the station assets, the tanks and canopies were not taxable unless the contract required the seller to sever them. Pumps followed Regulation 1596(c): their sale was taxable if either seller or purchaser was expected to remove them, but not taxable when no removal was contemplated.

The pump result changed when the seller leased the land. Because the letter classified service-station pumps as trade fixtures removable under Civil Code section 1019, a lessee-seller's in-place pump sale was taxable.

The letter did not state a leased-land rule for the tanks or canopies. It also stressed that the answer was nonbinding general advice: the client was unidentified, so the written request did not qualify for relief under section 6596 if the advice proved wrong.

Common questions

Were owner-sold underground tanks and canopies taxable when left in place?

No, unless the sale contract required the seller to sever them.

When were pumps taxable on seller-owned land?

When the contract contemplated removal by either the seller or the purchaser.

Did the letter decide leased-land treatment for every station asset?

No. Its different leased-land rule addressed pumps as trade fixtures, not tanks or canopies.

Citations and references

• California Revenue and Taxation Code sections 6051 and 6596 (as cited)
• California Sales and Use Tax Regulation 1596(a) and (c) (as cited)
• California Civil Code section 1019 (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/150-0552.pdf

Original ruling text

150.0552

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

July 24, 1991

Mr. R--- P--XXXX -----, --- XXXXX
Re:

Application of Sales Tax to Sales of Gasoline
Service Stations

Dear Mr. P---:
Your letter dated June 11, 1991, in which you request a legal opinion concerning the application of the California sales tax to the sale of gasoline service stations has been forwarded to me for a response. According to your letter, the facts are as follows: “Taxpayer owns retail gasoline service stations located in California. These service stations are being sold to a purchaser who will continue to operate the stations at their current location. The assets being sold consist of underground storage tanks, pumps and canopies. The pumps are mounted to a concrete ‘island’ and the canopies are mounted to vertical pipe which are imbedded in the earth.” You inquire whether sales tax applies to the sale of the underground storage tanks, the pumps, and the canopies. Revenue and Taxation Code section 6051 imposes a sales tax on all retailers measured by their gross receipts from retail sales of tangible personal property. The issue raised by your letter is whether the sale of the storage tanks, the pumps, and the canopies is a sale of real or personal property. If the latter, the gross receipts from the sale of these items are subject to sales tax. Subsections (a) and (c) of Sales and Use Tax Regulation 1596, entitled “Buildings and Other Property Affixed to Realty,” provides as follows: “(a) BUILDINGS AND MINERALS. The transfer of buildings or minerals or the like affixed to land is taxable as a sale of personal property if, pursuant to the contract or agreement of sale, the buildings or minerals or the like are to be severed by the seller thereof. If, pursuant to the contract or agreement of sale, such buildings or minerals or the like are to be severed by the purchaser thereof, such a transfer is not taxable as a sale of personal property.

Mr. R--- P---

-2-

July 24, 1991
150.0552

“(c) FIXTURES, MACHINERY AND EQUIPMENT, AND DRAPERIES
AFFIXE TO REAL PROPERTY. The transfer ‘in place’ of affixed fixtures, machinery and equipment, or draperies is taxable as a sale of personal property when removal of the fixtures, machinery or equipment, or draperies by the seller or the purchaser is contemplated by the contract of sale. The transfer ‘in place’ of affixed fixtures, machinery and equipment, or draperies owned by a lessee of land or buildings to which those items are affixed, is also taxable as a sale of personal property when the lessee-seller has the present right to remove the items either as trade fixtures under Section 1019 of the Civil Code or under the express terms of the lease.” In the transaction you describe, if the seller owns both the land and the pumps, tank, and canopies, the sale of the tanks and canopies is not taxable unless the contract provides that the seller will sever these items. With respect to the pumps, if the contract provides that the pumps are to be removed by either the seller or the purchaser, the gross receipts from the sale of the pumps are taxable. Otherwise, the sale of the pumps is not taxable. A different rule applies to the pumps if the seller is leasing the land. Since pumps are trade fixtures under Section 1019 of the Civil Code, which gives the seller-lessee the right to remove the pumps, the sale of the pumps is taxable. Please note that this opinion is not binding upon the board. Revenue and Taxation Code section 6596 provides the only basis for relief from tax if a taxpayer relies on incorrect written advice from the board. The primary conditions to qualify are that the request for opinion must be in writing and must disclose all relevant facts, including the identity of the taxpayer. Since you have not identified your client, this opinion does not come within the provisions of section 6596 but rather is simply general advice regarding a set of hypothetical facts. For your information, we are enclosing a copy of Regulation 1596. If you have further questions regarding California sales and use taxes, please do not hesitate to write again. Very truly yours,

Elizabeth Abreu
Tax Counsel

EA:cl
Enclosure
bc:

--- District Office