Was a periodic fluorescent lamp-and-ballast replacement contract a construction contract?

Plain-English summary

A contract to periodically replace fluorescent tubes and ballasts was a construction contract. The legal staff expressly withdrew its contrary April 4, 1966 position and instructed the district to treat the taxpayer as a lump-sum contractor.

Because the taxpayer had already reported lamps at cost, the audit markup on that item was deleted. Ballasts had not been reported, so that item was reduced to the taxpayer's cost.

The official annotation describes the installed tubes and ballasts as fixtures and the contract as a uniform monthly service arrangement.

Common questions

Was periodic replacement treated as a retail sale of lamps?

No. The letter classified the arrangement as a construction contract.

What happened to the lamp audit item?

It was deleted because the taxpayer had reported the lamps at cost.

How was the ballast item adjusted?

It was reduced to the taxpayer's cost.

Citations and references

• April 4, 1966 prior letter — expressly identified as erroneous and replaced by this source

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/190-0260.pdf

Original ruling text

190.0260

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

April 14, 1966

Mr. E--- D. O--XXXX --- Boulevard
--- ---, California XXXXX
SR -- XX XXXXXX
F--- S--- Inc.
Dear Mr. Oliver:
This is in reply to your letter of April 12, 1966, concerning the taxability of fluorescent tubes and ballasts. After further consideration of the matter, we believe our earlier letter of April 4, 1966, was in error. A contract to periodically replace fluorescent tubes and ballasts in lighting fixtures constitutes a construction contract. This interpretation is in conformity with past treatment of similar lamps and ballasts on government owned property. We are asking our district office to make appropriate adjustments in the audit. Since the taxpayer reported the lamps at cost, this item will be deleted. The taxpayer did not report the ballasts and this item will be reduced to the taxpayer’s cost. Very truly yours,

John H. Knowles
Associate Tax Counsel

JHK:em
cc:

Pasadena – Subdistrict Administrator
After a conference with Mr. Oliver, Mr. Stetson and others of the legal staff, it is concluded that contracts to replace lamps and ballasts are construction contracts. Please make appropriate adjustments in the audit to treat the taxpayer as a contractor on a lump sum contract. JHK