How were industrial boiler air preheaters and their drives classified?

Plain-English summary

The air-preheater unit installed in a large industrial boiler's air-intake passage was material. The manufacturer-installer was taxed on its cost of materials for that portion.

The drive mechanism, including its motor and gears, was a fixture. The installer was the retailer of that mechanism.

If the customer was not separately charged for purchased motors, the taxable fixture amount was the installer's cost of the motors.

Common questions

Was the whole preheater one fixture?

No. The letter split the body and drive by component.

How was the preheater body classified?

As material.

How were the motor and gears classified?

As a fixture drive mechanism.

What measure applied when motors had no stated customer price?

The cost of the purchased motors.

Citations and references

• Former California Sales and Use Tax Ruling 11 — construction-contractor materials and fixtures classifications applied by component
• Taxpayer-submitted literature concerning the industrial preheaters' function, design, and construction — reviewed and used to understand the equipment; titles, dates, and copies are not supplied 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/190-2080.pdf

Original ruling text

190.2080

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-5550

July 8, 1965

--- --- ----- --- ----- --- --Gentlemen:
We have reviewed the literature which you submitted regarding function, design, and construction of the industrial preheaters manufactured and installed by “A”. It is our understanding from the information submitted that the preheater units are substantial pieces of equipment installed in air intake passages of large industrial boilers in steam plants. The units heat air which is utilized by the boiler, causing more efficient fuel combustion and greater heat production. In our opinion the air preheater itself constitutes “materials” and the drive mechanism constitutes “fixtures” under Ruling 11. Therefore, where “A” manufactures and installs a preheater, it is subject to tax on its cost of materials with respect to the preheater unit and is the retailer of the drive mechanism, including motor and gears; but if no specific charge is made to the customer for the motors, the taxable amount is the cost of the motors, which we presume are purchased from a manufacturer of motors. Very truly yours,

George A. Trigueros
Associate Tax Counsel

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