Was furnishing and installing an above-ground swimming pool a retail sale or a construction contract?

Plain-English summary

The Board's legal staff treated contracts to furnish and install the described above-ground swimming pools as retail sales of tangible personal property. They were not construction contracts for improvements to real property because none of the installation went into the ground and the staff's application of the intent, affixation, and site-adaptability factors did not support real-property treatment.

Tax therefore applied to the retail selling price of the pool, while the installation charge was excluded under the memorandum's analysis. The seller's use of outside installation subcontractors did not turn the transaction into a construction contract.

Common questions

Did installation make the pool an improvement to real property?

No, not for the above-ground pools described in this memorandum.

Was the seller treated as a construction contractor?

No. The seller was making retail sales of tangible personal property.

Was installation included in the taxable selling price?

No; the memorandum states that tax was assessed on the retail selling price less installation.

Citations and references

• California Civil Code section 660 — cited for intent, manner of affixation, and adaptability to the site
• California Code of Regulations, title 18, section 1521 — construction-contract framework
• Chahine v. State Board of Equalization, 90 Daily Journal D.A.R. 8400 — cited as consistent analysis; the memorandum says the relevant portion was not certified for publication

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/190-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/190-0010.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. Robert Imig
Torrance – Auditing

From:

Gary J. Jugum
Assistant Chief Counsel

Subject:

R --- P--- B---, Inc.

190.0010

Date:

October 23, 1990

This is in response to your memorandum of July 19, 1990. As you are aware, we intentionally delayed responding to your inquiry. We understand that the referenced taxpayer started business in California in 1986. In the latter part of 1989, the entity reincorporated with the same principals under the name of A--E---. R--- was in the business of selling above-ground swimming pools with installation provided by outside subcontractors to R---. None of the installation is into the ground. The pools are obtained ex tax from the out-of-state manufacturer, P--- P---, ---, New York. During our previous discussion, the question arose as to whether taxpayer was a construction contractor or whether taxpayer was making sales of tangible personal property. Under our Regulation 1521, “Construction Contractors,” a “construction contract is basically a contract to erect or construct any building or other structure or other improvement on or to real property. Civil Code section 660 establishes the standards for determining whether property qualifies as an improvement to realty. There is a three-part test involving intent, manner of affixation, and adaptability of the construct to the site. Consistent with our prior interpretations, we are of the opinion that contracts to furnish and install above-ground swimming pools of the type in question are contracts to sell tangible personal property, not contracts to make improvements to real property. This is consistent with the decision of the Court of Appeal in Chahine v. State Board of Equalization, 90 Daily Journal D.A.R. 8400, decided on July 25, 1990. There the court noted that the taxpayer was selling above-ground swimming pools without a permit. The tax was assessed on the retail selling price less, of course, installation. The portion of the opinion referred to was not certified for publication, but the court’s analysis reflected favorably on the Board’s interpretation.

Mr. R--- I---

-2-

October 23, 1990
190.0010

Herewith please find the exhibit materials which accompanied your memorandum of July 19, 1990.

GJJ:sr
Enc.