How was tax measured when stadium scoreboards were exchanged for advertising rights?

Plain-English summary

The large stadium scoreboard, two auxiliary scoreboards, and two timers were fixtures. They remained identifiable building accessories after permanent attachment to concrete footings or the stadium's upper-deck fascia.

Transferring title to the city and county in exchange for the manufacturer's right to lease advertising space for 15 years was a sale for consideration under section 6006(a), even though no ordinary lump-sum fixture price was stated.

The tax measure was the prevailing price at which similar fixtures ready for installation would be sold to contractors. If no prevailing price existed, the source directed use of the prescribed manufactured-cost computation.

Common questions

Did advertising rights count as consideration?

Yes. They supported a taxable transfer of title.

Were the scoreboards materials?

No. They were fixtures that retained their identity as stadium accessories.

How was the selling price determined without a stated fixture price?

By comparable ready-for-installation pricing or, if unavailable, manufactured cost.

Citations and references

• California Revenue and Taxation Code section 6006(a) — sale-for-consideration rule applied in the letter
• Former California Sales and Use Tax Ruling 11 — fixture classification and unstated-price measure applied
• Business Taxes General Bulletin 67-8, including paragraph IV — prevailing ready-for-installation price and manufactured-cost measure applied
• California Sales and Use Tax Regulation 1521(b)(2)B, as printed in a bracketed source update — later location of the historical fixture measure
• November 10, 1967 representative letter — described the contemplated scoreboard contract and requested a sales-or-use-tax ruling; facts summarized and answered, but the request is not reproduced in the official PDF
• Enclosed copies of former Sales and Use Tax Ruling 11 and Business Taxes General Bulletin 67-8 — identified as enclosures; 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/190-2115.pdf

Original ruling text

STATE OF CALIFORNIA

190.2115

STATE BOARD OF EQUALIZATION

November 21, 1967
--- --- ----- --- ----- --- --Gentlemen:
In your letter of November 10, 1967 you have asked for a ruling regarding the application of sales or use tax under the circumstances hereafter described. You state that your client, “G”, is considering entering into a contract to install a large scoreboard, two auxiliary scoreboards, and two times in “S”. These items would be manufactured by “G” in Wisconsin, shipped to California and installed by “G” in the stadium. The large scoreboard would be 150 feet long, 32 feet wide and 3 to 4 feet thick. It would weigh approximately 25 tons. It would be attached to the stadium as follows: concrete footings in which anchor bolts would be affixed would form the base for the scoreboard, and the board would be bolted and welded in place and would become a permanent part of the stadium structure. The two auxiliary scoreboards would be 70 feet long by 4 feet wide and weigh 2 tons each. The two timers would be somewhat smaller and weigh 1 ton each. These auxiliary scoreboards and timers would be welded to the facia of the upper deck of the stadium and would also become a permanent part thereof. Title to the scoreboards and timers would be vested in the City and County of “S”. “G” would pay a yearly rental for the space occupied by the scoreboards and timers and would be entitled to lease advertising space on them for a 15-year period and collect revenues therefrom. On these facts, it appears that the transaction would be a “sale” within the meaning of Section 6006(a) of the Revenue and Taxation Code since “G” would be transferring title to the scoreboards and timers for a consideration, i.e., the right to lease advertising space. Sales and use tax Ruling 11, and Business Taxes General Bulletin 67-8, copies of which are enclosed, provide a means of determining the measure of tax on a retail sale of “fixtures” under a lump-sum construction contract. The scoreboards and timers would be “fixtures” within the meaning of Ruling 11 since they would be accessory to the stadium and would not lose their identity when installed. Although the contract in question would not be a “lump-sum” contract in the usual sense of the term, the same considerations would apply to it for the purposes at hand, i.e.,

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-2-

November 20, 1967
190.2115

it would be a construction contract under which the price of the fixtures would not be specifically stated, thus requiring resort to a reasonable means of determining the selling price. In accordance with Ruling 11 and Bulletin 67-8, the sale of the fixtures would be subject to sales tax measured by the prevailing price at which similar fixtures ready for installation would be sold to contractors or, if there is no such prevailing price, then the measure of tax would be the manufactured cost computed as provided in Business Taxes General Bulletin 67-8, paragraph IV.
[Now covered by Reg. 1521(b)(2)B].
Very truly yours,

T. P. Putnam
Tax Counsel

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