Were turbines, pump-turbines, Kaplan turbines, and governors fixtures?

Plain-English summary

Turbines, pump-turbines, Kaplan turbines, and governors were fixtures. They became part of the real property, and the installer was treated as their retailer.

Attaching components directly to realty before further personal-property assembly was installation labor. Assembly or processing of components while they remained tangible personal property was taxable.

The memorandum originally stated a fabricated-cost measure. A July 2, 1987 signed correction makes Regulation 1521(b)(2)(B)2 controlling wherever it conflicts with that historical paragraph.

Common questions

Were the turbine units machinery and equipment?

No. The memorandum classified them as fixtures.

Was direct attachment to realty taxable fabrication?

No. It was installation under the stated sequence.

Was pre-attachment component assembly taxable?

Yes.

Which measure rule controls a conflict?

Regulation 1521(b)(2)(B)2, under the incorporated 1987 correction.

Citations and references

• California Code of Regulations, title 18, section 1521(b)(2)(B)2 — controlling rule identified by the 1987 correction
• Former California Sales and Use Tax Ruling 11 — turbines, pump-turbines, Kaplan turbines, and governors classified as fixtures
• February 18, 1966 Out-of-State Auditing memorandum and March 31, 1966 follow-up — request answered; memoranda not reproduced in the official PDF
• Chicago request for an early response — identified as limiting the time for analysis; date, author, recipient, and separate request not supplied in the official PDF
• Large volume of submitted project data, printed as “date” in two passages of the source — review acknowledged as abbreviated and the material identified as returned with the memorandum; contents and attachment not reproduced in the official PDF
• Annotation 190.2420 — separately published copy of the same corrected memorandum

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/190-2300.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Out-of-State – Auditing (DMA)

From:

Tax Counsel (EHS) - Headquarters
Legal

Re:

190.2300
April 7, 1966

Your memo of 2-18-66, and follow-up of 3-31-66

Turbines, Pump-turbines and Kaplan turbines and Governors, herinafter collectively called “turbines,” are “fixtures” under ruling 11. They become a part of the real property. As the installer is the retailer, his gross receipts must be ascertained. The fixtures are partially manufactured at the factory, and shipped unassembled or as subassemblies to the jobsite. If the final assembly at the jobsite involves only the attaching of components to real property prior to any further assembly of personal property components, tax does not apply to such installation labor. If, however, there is any jobsite assembly or processing of tangible personal property prior to its being affixed to real property, charges for such assembling or processing would be subject to tax. The measure of tax is the selling price of these components and subassemblies, which, if not stated in the contract (unit prices quoted include installation), is the “fabricated cost” thereof. This is the sum of the following: Cost of materials, cost of fabrication labor, overhead and indirect costs prorated to the fabrication of the fixtures sold, i.e. the components or subassemblies in the state of completion at the time they become affixed to real property. In addition, tax would be measured by the value of any jobsite labor of assembly or processing of personal property prior to its being affixed to real property. * The foregoing may be considered rather brief in view of the size of the project and the amount of date submitted. The request of Chicago for an early response, and your follow-up of March 31, prevents us, however, in view of other work that cannot be put off, from spending the time reasonable required to make a detailed analysis and study of the large volume of date submitted, which is returned herewith.. We shall, of course, be glad to confer with Mr. --- --- or any other interested party regarding the matter.

EHS;fb
Attach.

*To the extent this paragraph conflicts with Reg. 1521(b)(2)(B)2, the Regulation rules and this paragraph is superceded. D.J. Hennessy 7/2/87