Were job-site-built redwood water tanks tangible property, fixtures, or construction materials under California's historical rules?

Plain-English summary

Staff used a 500-barrel capacity line and the installation facts to classify redwood water tanks under former Ruling 11.

A tank under 500 barrels that rested by its own weight on mudsills, concrete walls, piers, slabs, or a tower was tangible personal property. Because all job-site labor fabricated that tank, the entire charge was taxable.

If the contractor both assembled and connected an under-500-barrel tank to the water supply, staff treated it as a fixture. A tank over 500 barrels was materials, with tax applied under the historical construction rules.

Because the taxpayer previously had been told it consumed materials, the memorandum recommended applying the new advice prospectively and giving written notice.

Common questions

Was every job-site-built tank materials?

No.

How was a smaller tank resting only by its weight classified?

As tangible personal property.

What if the contractor also connected the smaller tank?

It was treated as a fixture.

How were tanks over 500 barrels classified?

As materials.

Citations and references

• Former California Sales and Use Tax Ruling 11 — fixture and materials classifications applied to tanks based on capacity and hookup
• February 10 Santa Rosa Auditing letter — described non-prefabricated, job-site-assembled redwood water tanks without taxpayer plumbing hookup; year and separate letter not supplied in the official PDF
• Discussion with unidentified legal staff — addressed classification of the redwood water tanks; date, participants, and separate record not supplied in the official PDF
• Prior District Principal Auditor advice — treated the taxpayer as the consumer of materials and led to the recommendation for prospective treatment; date, form, and separate advice not supplied in the official PDF
• Proposed written notice to the taxpayer — recommended to explain the proper application of tax; no resulting notice is 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/190-2102.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Santa Rosa - Auditing

From:

Principal Tax Auditor

Subject:

Redwood Water Tanks

190.2102

February 22, 1972

This is in response to your letter of February 10 concerning the application of tax to redwood water tanks. You indicate in your letter that none of the tanks are prefabricated; all erection and assembly is done at the job site; and no plumbing hookup is done by the taxpayer. You also indicate that practically all tanks are over 2,500 gallon capacity. I have discussed this problem with the legal staff and we are of the opinion that any tank under 500 bbl. Capacity which is not attached to the realty other than by its own weight upon midsills, concrete walls, piers, slabs or a tower is tangible personal property. Since the total job site labor is fabrication labor, the total charge for the tank is subject to tax. If the taxpayer contracted to both assemble and hookup the tank to a water supply, we believe that any tank under 500 bbls. would be classified as a fixture under Ruling 11 and tax would apply accordingly. If the tank is over 500 bbls., it would be classified as materials under Ruling 11 and tax would apply accordingly. In view of the fact that the taxpayer has previously been advised by the District Principal Auditor that he was the consumer of materials, I suggest that this memorandum be given prospective effect and that the taxpayer be advised in writing of the proper application of tax.

R. Nunes
RN:iw
cc:

Mr. John H. Murray