How did California distinguish refrigeration fixtures, embedded feeder lines, fabrication, and installation labor?

Plain-English summary

Refrigeration units were fixtures, and the refrigeration subcontractor was their retailer. Separately billed installation was excluded, while the historical lump-sum measure depended on contractor cost or, for a manufacturer, the prevailing ready-for-installation selling price.

Assembly or partial assembly at the jobsite was fabrication or processing labor included in the taxable sale price. Labor actually installing the completed article was not taxable.

Feeder-line tubing, pipes, valves, and fittings encased in or securely attached through floors, ceilings, and walls could be materials consumed by the installer. A labor-only installer was generally not taxable unless it fabricated property before installation.

Common questions

Were refrigeration units fixtures?

Yes.

Were embedded feeder lines also fixtures?

No. The letter allowed material treatment for the described tubing, pipes, valves, and fittings.

Was onsite assembly automatically installation labor?

No. Assembly could be taxable fabrication even when performed at the jobsite.

Citations and references

• Former Board Ruling 11, including the heading “Fixtures Furnished and Installed by Contractors” and its definition of materials — fixture, material, and contractor measures applied in the letter
• February 25, 1950 request letter — identified as the inquiry answered; not reproduced in the official PDF

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/190-0660.pdf

Original ruling text

190.0660

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

April 17, 1950

R--- C--- A--of Northern California
XX --- Street
--- --- X, California
Attention:

Mr. Z. E. J--Executive Vice President

Gentlemen:
This is in reply to your letter of February 25 regarding the application of the State sales tax in connection with charges for labor or services rendered and installing or applying refrigeration facilities. The refrigeration subcontractor is, under Ruling 11, the retailer of “refrigeration units”, and the tax applies to the retail selling price thereof. This price does not include, however, additional charges separately billed for the installation of the units. Even where a lump-sum charge is made, you will observe from Ruling 11, under the heading “Fixtures Furnished and Installed by Contractors”, that the retail selling price is regarded as the cost price of the fixtures to the contractors, or if the contractor is the manufacturer, the retail selling price is regarded as the prevailing price at which similar fixtures in similar quantities ready for installation would be sold to contractors. It is sometimes difficult to determine whether certain labor involved in installation contracts is production or fabrication labor or is true installation labor. Generally, labor “on the job” is installation labor, although not necessarily so in all cases. Where the completed unit is assembled or partially so at the job site, any labor for such assembly is properly regarded as processing or fabrication labor and as such the charges therefor are included within the measure of the tax, as a part of the sale price of the assembled or completely fabricated article. The labor of installing that article is, of course, not subject to the tax. A somewhat more difficult question may be the proper status of the tubing, pipes, valves, and fitting constituting the feeder lines through which the refrigerant gas is conveyed from the units to the points of operation of the facilities. We believe, however, that where these lines run through floors, ceilings, and walls of the structure, being encased therein or securely attached thereto, these lines and the valves and fittings constituting a part thereof may be treated as “materials”, as defined in Ruling 11. Thus, the installing contractor is regarded as the consumer thereof, the tax being

R--- C--- A--of Northern California

-2-

April 17, 1950
190.0660

properly measured by the sales price of such materials to him. Even if we were to regard this property as in the category of “fixtures”, the measure of the tax would be no different in view of that paragraph of Ruling 11 under the heading “Fixtures Furnished and Installed by Contractors”, unless a retail selling price for the materials was actually billed. Where the refrigeration contractor furnishes no fixtures or materials but merely performs the labor and services of installation, the amounts charged by him are not taxable, unless prior to installation he actually performs processing of fabricating work, resulting in the production of the complete fixture or other article of tangible personal property from materials furnished to him. Where he also installs such property, he would be regarded as the consumer of that which might be classified as “materials”, in which case his charges would not be taxable. If he both processed a fixture and installed it, he would be subject to tax on that portion of this charge attributable to processing. Very truly yours,

E. H. Stetson
Tax Counsel

EHS:ph
cc:

Mr. B--- S---