Could a construction contractor accept a resale certificate for installed materials or fixtures?

Plain-English summary

Under Regulation 1521, a construction contractor working for someone other than the United States was generally the consumer of installed materials and the retailer of installed fixtures.

The memorandum explained that a contractor could be the retailer of installed materials in the specific situation recognized by subsections (b)(2)(A)2 and (b)(6)(A). That contractor could buy those materials for resale, but could not accept a resale certificate for the materials it sold.

For installed fixtures, the contractor could accept a resale certificate only in the circumstances described in subsection (b)(2)(B)3. A certificate from a prime contractor, interior decorator, designer, department store, or another party did not itself create an exception.

Common questions

Was a contractor normally the consumer of installed materials?

Yes, except for the specific material-retailer situation recognized by the regulation. Even in that situation, the memorandum said the contractor could not accept a resale certificate for those materials.

Could a contractor normally take a resale certificate for installed fixtures?

No. The memorandum limited that treatment to the circumstances in subsection (b)(2)(B)3.

Did a resale certificate from a prime contractor change the result by itself?

No. The memorandum expressly rejected resale-certificate treatment merely because the certificate came from a prime contractor or another intermediary.

Citations and references

• California Code of Regulations, title 18, section 1521(b)(2)(A)2, (b)(2)(B)3, and (b)(6)(A) — contractor-consumer, contractor-retailer, and resale-certificate provisions interpreted in the memorandum
• Robert Nunes memorandum dated May 20, 1976 — identified as reviewed, returned, and attached; 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/190-0765.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. T. P. Putnam

From:

John H. Murray

Subject:

Regulation 1521 – Nunes Memorandum of May 20, 1976

190.0765

Date:

May 24, 1976

I have reviewed the above memorandum. The problem is occasioned by the inexact language of the second paragraph of subsection (b)(6)(A). Upon reflection I recall the purpose of that language. Under Regulation 1521 a construction contractor performing construction contracts for other than the United States is considered to be the consumer of materials and the retailer of fixtures. Under the first paragraph of subsection (b)(2)(A)2, a construction contractor in certain circumstances was considered to be the retailer of materials which he furnished and installed. The second paragraph of (b)(6)(A) was intended to recognize this exception and to treat the construction contractor as the retailer of those materials. Thus, a retailer under such contract could buy materials for resale and not report use tax on the sale price of those materials to him. Under subsection (b)(2)(B)3, the circumstances were set out where a construction contractor would be treated as making a sale for resale of fixtures which he furnished and installed. It was intended in this instance and in this instance only that a construction contractor would be allowed to take a resale certificate for such fixtures. From the foregoing it can be said that it was intended that a construction contractor furnishing and installing materials would be considered as consuming those materials except he would be the retailer of those materials in a [BW] situation. The contractor could not take a resale certificate for materials which he was selling under those circumstances. Similarly, a construction contractor could not take a resale certificate for fixtures which he furnished and installed except under the circumstances described in the first paragraph of subsection (b)(2)(B)3.

Mr. T. P. Putnam

-2-

May 24, 1976
190.0765

Accordingly, it was not intended that a construction contractor would be allowed to take a resale certificate from the prime contractor, interior decorator, designer, department store or others for materials or fixtures which the construction contractor furnished and installed. I am returning to you the copy of Mr. Nunes’ memorandum which you sent to me.

JHM/at
Attachment
cc:

Mr. Robert Nunes