How was a contractor taxed on furnishing and installing a water heater?

Plain-English summary

A water heater was a fixture, and the contractor's sale of it was taxable. The selling-price measure excluded the installation charge.

For a lump-sum contract where the contractor did not manufacture the water heater, former Board Ruling 11 treated the contractor's cost as the heater's retail selling price.

If a nonmanufacturing contractor bought the water heater tax-paid and installed it under a lump-sum contract, no further tax was due on that transaction.

Common questions

Was a water heater material?

No. The letter classified it as a fixture.

Was installation included in taxable selling price?

No.

What measure applied to a lump-sum nonmanufacturer?

The contractor's cost of the heater.

Was more tax due after a tax-paid purchase?

No, under the described historical rule.

Citations and references

• Former California Sales and Use Tax Ruling 11 — materials and fixtures, installation exclusion, lump-sum nonmanufacturer cost measure, and tax-paid purchase treatment applied
• November 23 and December 9 accounting-firm letters — asked about sales tax on furnishing and installing a water heater; years and separate requests 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/190-2360.pdf

Original ruling text

190.2360

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

December 21, 1953

Mr. F--- F---, Jr.
Certified Public Accountant
XXX --- --- ----- ---, California

Your letters of November 23
And December 9

Dear Mr. F---:
You inquire concerning the application of sales tax to the furnishing and installation of a water heater. Ruling 11 states that contractors are the consumers of “materials” and the retailers of “fixtures”. Accordingly, the sale of “materials” to a contractor is the taxable retail sale while the sale of “fixtures” by the contractor is the taxable retail sale. A water heater is a “fixture” and the tax applies to the contractor’s retail selling price of the heater, which price does not include the charge for installation. If the contract is a lump-sum contract, it would be difficult to apportion the contract between selling price of fixture and charge for installation. Ruling 11 therefore provides that in the case of a lump-sum contract by a contractor who is not the manufacturer of the fixture, the retail selling price is the contractor’s cost. If a contractor who is not a manufacturer of water heaters purchases water heaters tax paid and installs them under lump-sum contracts, no further tax is due with respect to such transactions. Very truly yours,

Bill Holden,
Junior Counsel
BH:ja
cc:

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