Was tax refundable when a prefabricated aircraft hangar later became a permitted improvement to real property?

Plain-English summary

Once installed, the described prefabricated modular hangars were improvements to real property. They were substantial T-shaped buildings attached to asphalt, sealed to the ground with tar, and wired to metered electricity. Calling them "portable" did not make their installed use temporary or make them easy to move after installation.

That real-property result did not create a refund for the buyer. A seller's contract to furnish and install this type of hangar would be a construction contract. But where the seller only sold the unit and the purchaser or the purchaser's contractor installed it, the transaction was a retail sale of tangible personal property taxable in full, even though later installation converted the hangar into a real-property improvement.

Common questions

Did a building permit make the original sale exempt?

No.

Was the installed hangar real property?

Yes, under the described attachment and use.

Why was the sale still fully taxable?

Because the seller did not undertake final installation; the buyer or another contractor did.

Would seller installation change the classification?

Yes. A furnish-and-install contract for this hangar type would be construction work.

Citations and references

• California Code of Regulations, title 18, section 1521 — construction-contract distinction between seller installation and a property-only sale

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/190-0025.pdf

Original ruling text

190.0025

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 445-3723

November 28, 1988

Mr. R--- W. P--XXX --- Way
---, CA XXXXX
SS -- XX-XXXXXX
Dear Mr. Price:
This is in response to your letter of September 6, 1988, which was addressed to Mr. Steve Biggers of our --- --- office. Your letter was recently referred to the Board’s legal office for reply. We understand that you own a portable aircraft hangar which was licensed at the time of acquisition as “special mobile equipment” by the Department of Motor Vehicles. Sales tax was paid when you purchased the portable aircraft hangar from P--- - --- - P---, Inc. Recently, the County of --- has required that a building permit be obtained for hangars to be installed at --- --- Airport. You are in the process of obtaining a building permit from --- County. You suggest that since installation of these hangars now requires a building permit, and since the Department of Motor Vehicles no longer requires licensing of these units, you may be entitled to a refund of the sales tax paid. We recently examined four of these hangars installed at the Natomas Airport in Sacramento. These aircraft hangars are in reality prefabricated modular buildings movable on the highway as a unit from the point of sale to the point of installation. Upon installation, the hangars are in the shape of a “T” as looked at from above. They are approximately 40 feet across the front end and are approximately 33 feet deep. The ones we viewed were attached in a substantial manner to the asphalt on which they rested, possibly by lag screws. The hangars were sealed to the ground by tar. The hangars were wired to a metered electrical hookup. There is no question that when installed these hangars constitute improvements to real property for sales tax purposes.

Mr. R--- W. P---

-2-

November 28, 1988
190.0025

The term “portable” is misleading. These items are built to be transported to their installation site. The towing yoke remains in place upon installation. However, these buildings are not portable in the sense that they are installed on a temporary basis, or in the sense that they are easily moved from place to place after installation. We would consider a contract to furnish -----and install a “portable” aircraft hangar of the type in question to be a construction contract. However, where the unit is sold for installation by the purchaser (or by a contractor hired by the purchaser), the contract is not a construction contract but is a contract for the sale of tangible personal property. The contract is taxable in its entirety, notwithstanding the fact that the hangar may then be installed as an improvement to realty. For this reason, it is our opinion that the tax was properly computed in this case, and that there is no basis for a refund. Very truly yours,

Gary J. Jugum
Assistant Chief Counsel

GJJ:sr
cc:

Mr. A. H. T----- --- District Administrator