Was a separately stated $40 installation charge for a garbage disposal unit included in the California sales tax measure?

Plain-English summary

California's 1953 counsel memorandum treated an electrically operated garbage disposal unit as a fixture whose retail selling price was taxable. The seller sometimes sold the unit alone. For other customers, a plumbing concern installed it under an arrangement with the seller; the seller added a $40 installation charge to the customer's contract and paid the plumber.

The Board's counsel regarded the seller as the retailer because the plumbing concern did not both furnish and install the unit. When the $40 charge was separately stated, counsel said the tax applicable would apparently be the same as for a unit sold without installation: the parties had set out an agreed retail selling price for the fixture. If the $40 was not separately stated, counsel said the arrangement appeared to be a lump-sum construction contract governed by special provisions of former Ruling 11. The memorandum does not set out the resulting tax measure for that lump-sum case.

What this means for you

Sellers arranging installation

The separately stated installation charge mattered because it identified the agreed retail price of the fixture. The memorandum's result rests on the seller furnishing the unit and the plumber only installing it.

Tax professionals

Check the contract and invoice as well as who supplies the fixture. Former Ruling 11 is identified in the memo as now Regulation 1521, but its text is not reproduced in this source.

Common questions

Q: Did the Board treat the garbage disposal unit as a fixture? A: Yes. The memorandum expressly applied former Ruling 11's fixture classification.

Q: Did the plumber become the retailer by installing the unit? A: No. Counsel said the seller remained the retailer because the plumbing concern did not furnish the unit.

Q: What if the $40 installation charge was included in one lump sum? A: Counsel said former Ruling 11's special construction-contract provisions would apply; this memo does not give their tax calculation.

Citations and references

• Former California Sales and Use Tax Ruling 11 — the fixture and construction-contract rule applied by the memorandum; identified in its footnote as “Now Regulation 1521.” The rule itself is not reproduced in the PDF.
• Marysville memoranda of December 3, 1952 and January 8, 1953 — identified as the requests answered; they are not reproduced in the PDF.

Source

• Annotated Legal Opinions collection
• Official annotation page
• Original supporting memorandum
• The memorandum says that if the $40 installation charge “is separately stated, the amount of tax applicable would apparently be the same as where the unit is not installed.”

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Marysville – Tax Administrator

From:

Headquarters – Sales Tax Counsel

Subject:

190.1620
Sacramento, California
January 12, 1953

Account No. XX-XXXXXX

This is in reply to your memoranda of December 3, 1952, and January 8, 1953. It appears that, while the customer sometimes installs the electrically operated garbage disposal units sold to him by this account, in other cases the customer also asks for installation. In these latter cases the installation is perfromed by a plumbing concern with whom the retailer has made installation arrangements. The seller then adds a $40.00 installation charge to the customer’s contract and remits his own check to the plumbing concern. As you correctly indicate, we regard electrically operated garbage disposal units as “fixtures” under Ruling 11. We would also regard Mr. Murphy as the retailer for sales tax purposes inasmuch as the plumbing concern does not furnish as well as install the disposal units. The sales price of the fixture is, of course, governed by Ruling 11. If the $40.00 added is separately stated, the amount of tax applicable would apparently be the same as where the unit is not installed, inasmuch as the parties would have actually set out an agreed retail selling price. If the additional $40.00 charge is not separately stated, it would appear that we would have a lumpsum construction contract and the special provisions outlined in Ruling 11 would apply.
Now Regulation 1521.
DJH.

W. W. Mangels
WWM:ja