What installation duties did California tax counsel say a window supplier ordinarily needed to be treated as a contractor-consumer?

Plain-English summary

Tax counsel cited Overly Manufacturing Co. for the rule that a supplier that did not install the frames was their retailer, even though it installed other items on the same project.

Counsel said a window supplier seeking contractor-consumer treatment must be contractually obligated to install the windows and responsible for proper performance. Ordinarily, the supplier would install them itself or hire a subcontractor other than the prime building contractor that was also its customer.

The requester proposed pricing windows as installed and paying the prime builder separately to do the work. Counsel hesitated to approve that arrangement because actual operations and responsibility might remain the same. Counsel requested the contract terms, information about whose tools and equipment were used, and other relevant facts before giving a further view.

Common questions

Did counsel approve the proposed installed-price arrangement?

No decision was given. Counsel hesitated to approve it and asked for more facts.

What contractual duty did counsel identify?

The supplier had to be obligated to install and responsible for proper performance.

Who would ordinarily perform the work?

The supplier itself or a subcontractor other than the prime builder-customer.

What additional facts did Tax Counsel request?

The actual contract terms, whose tools and equipment were used, and other facts showing who truly performed and controlled installation.

Citations and references

• Overly Manufacturing Co. v. State Board of Equalization, 191 Cal. App. 2d 20 — supplier-versus-installer rule cited and applied
• October 14, 1964 request letter — Board position and proposed installed-price arrangement outlined; not reproduced in the official PDF
• Supplier-builder contract, tools-and-equipment information, and other installation facts — requested for a further opinion but not supplied or 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/190-1180.pdf

Original ruling text

190.1180

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

November 4, 1964
Mr. M--- S--P. O. Box XXXXX
--- --- XX, California
Dear Mr. S---:
This is in reply to your letter of October 14, 1964, addressed to Mr. C. W. Twitchell, Assistant District Tax Administrator in our --- --- subdistrict office. This letter was referred to the undersigned by John T. Quick, District Principal Auditor, --- --- district. The board’s position as you outlined it in the first paragraph of your letter was sustained by the District Court of Appeal in Overly Manufacturing Co. v. State Board of Equalization, 191 Cal. App. 2d 20. This case held that since the supplier of the frames was not the installer, he was the retailer of the frames even though he did install other items in connection with the fulfillment of his contract. You inquire whether the seller of the entire window could “price the window installed and pay the builder separately for installation.” You then state that “This would mean that the builder would be acting as a subcontractor and the seller would be the consumer.” We hesitate to approve this arrangement as a valid means of minimizing the tax since it appears that the actual operations and responsibility may be the same. We believe that for the supplier to be entitled to the tax benefits of being a subcontractor, he must actually be obligated by his contract to perform the installation and to be responsible for its proper performance. Ordinarily, this would require him to make the installation himself, or by someone engaged by him as a subcontractor other than the prime building contractor and customer. We believe that we should have further information as to the actual provisions of the contract between the supplier and the builder, as well as information as to whose tools and equipment are used in performing the actual work and any other pertinent information, upon receipt of which we shall be glad to give you our further views. Very truly yours,

E. H. Stetson
Tax Counsel
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cc:
--- --- District – District Principal Auditor (JTQ)