Were plug-in intercom handsets fixtures like hard-wired units?

Plain-English summary

Optional plug-in desk handsets were tangible personal property, not fixtures. Although each unit had a unique address and communicated through the central exchange, Tax Counsel concluded that a plug-in unit was not an accessory to the building and could not be treated as part of the in-place network.

The manner of attachment controlled. A comparable unit hard-wired into the system would be a fixture.

Tax on the plug-in units was measured by their fair retail selling price. The letter also corrected the requester's premise that fixture treatment would mean tax only on material cost: Regulation 1521 instead used the fixture selling-price or cost-price rules described in the letter.

Common questions

Were plug-in handsets fixtures?

No. They remained tangible personal property.

Were hard-wired handsets treated differently?

Yes. The letter classified units hard-wired into the system as fixtures.

Did electronic integration make a plug-in unit part of the installed network?

No. Its unique address and signaling frequency did not overcome the plug-in connection.

What was the measure of tax for the plug-in units?

Their fair retail selling price.

Citations and references

• California Code of Regulations, title 18, section 1521(a)(4) and (c) — fixture definition and contractor tax-measure provisions applied in the letter
• February 10, 1975 taxpayer letter — requested Sales and Use Tax Law treatment of the plug-in intercom handset and proposed fixture treatment at material cost; the request is summarized and answered but 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/190-2050.pdf

Original ruling text

190.2050

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)

February 26, 1975

Mr. W--- C. K---, Jr.
President
E--- of N--- C---, Inc.
XXX --- Road
---, CA XXXXX

Dear Mr. K---:
SR -- XX XXXXXX
This is in response to your letter of February 10, 1975.
We understand that E--- is a communications company that sells, installs, and services a wide range of products to the commercial and institutional market. The most modern addition to the E--- line is the E--- XXX series intercom. One of the versatile characteristics is the available option to purchasers to either plug in to terminate a desk unit, or to hard wire the unit through to the central exchange. The advanced technology of the system allows the operator of a desk unit to digital dial over two conductor wire by a series of electronic impulses to a main central exchange. In this exchange is maintained the various addresses of each of the other instruments of the system. The signals received go through a combination of electro mechanical relays and solid state boards to interpret the incoming impulses to generate an appropriate response. You have sought our advice as to how the Sales and Use Tax Law will apply to the plug-in handset unit. You wish us to confirm it “as a fixture” with tax applying “on cost of material only.” Under our Regulation 1521 “Construction Contractors,” one who furnishes and installs an intercom system of the type in question is a contractor engaged in the performance of a construction contract. As paragraph (c) of the regulation provides, contractors are retailers of ‘fixtures’ which they furnish and install and tax applies to the retail selling price thereof; which, in the case of lumpsum construction contracts is regarded as the cost price of the fixtures to the contractors. If the contractor is the manufacturer of the fixtures, the retail selling price thereof is the prevailing price at which similar fixtures in similar quantities ready for installation would be sold to contractors.”

Mr. W--- C. K---, Jr.
SR -- XX XXXXXX

-2-

February 26, 1975
190.2050

As is evident, even if we were to regard the plug-in unit as a “fixture” under our Regulation 1521, the measure of tax would not be “cost of material” but the measure stated in the reference paragraph (c). We are of the opinion, however, that the plug-in units do not qualify as “fixtures” under our regulation since the are not “accessory to a building” within the meaning of that concept as it is used in paragraph (a)(4) of Regulation 1521. Where the units are hard wired into a system, we would regard them as “fixtures.” We have consistently taken the position that the manner of affixation is almost always determinative as to whether a particular item may qualify as a “fixture.” Although we understand that the units in question have a unique address and frequency of signal generation, we are of the opinion that they may not be viewed as part of the in-place network. The measure of tax with respect to the plug-in units is thus the fair retail selling price of the units. Very truly yours,

Gary J. Jugum
Tax Counsel