Was travel time between a custom cabinet shop and the job site a nontaxable installation charge?

Plain-English summary

Travel time was not treated the same in every cabinet contract. A cabinet was a fixture under the stated Regulation 1521 test if at least 90% of the total direct fabrication-and-installation labor and material cost was incurred before affixation.

When cabinets were materials, the construction contractor generally consumed them. The sale to the contractor was taxable, while the contractor's charges to the customer for furnishing and installing them—including transportation and travel time—were not taxable.

When cabinets were fixtures and the contract separately stated the cabinet sale price and installation charge, tax applied to the sale price. Travel time could be included in nontaxable installation only when the sole purpose of the travel was installing the cabinets. Lump-sum or unstated-sale-price contracts instead used the regulation's cost-price measure.

Common questions

Was all cabinet-installation travel nontaxable?

No; fixture-contract travel qualified only when its sole purpose was installation.

What if the cabinets were materials?

The contractor's customer charge, including travel, was generally not taxable, while the material sale to the contractor was.

Did lump-sum contracts use the separately stated sale price?

No; the regulation's cost-price method applied.

Citations and references

• California Code of Regulations, title 18, section 1521(c)(2) — 90% cabinet fixture test applied
• California Code of Regulations, title 18, section 1521(b)(2)(A)(1) — contractor-consumer treatment for materials discussed
• California Code of Regulations, title 18, sections 1521(b)(2)(B), (b)(2)(B)2.a, and (b)(2)(B)2.b — fixture sale, installation, and cost-price rules applied
• Requester's undated letter asking whether shop-to-job-site travel solely for installation counted as installation time — quoted and answered; request letter not reproduced separately in the official PDF
• Copy of California Sales and Use Tax Regulation 1521(c)(2) enclosed with the opinion — enclosure copy 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/190-2550.pdf

Original ruling text

190.2550

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-8208

MEMBER
First District
BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego

January 21, 1993

MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

L. R. C--XXX W. --- Street
---, California XXXXX
Re:

BURTON W. OLIVER
Executive Director

SR -- XX-XXXXXX

Dear Ladies/Gentlemen:
This is in response to your letter to the State Board of Equalization in which you state: "We custom make cabinets for kitchens and bathrooms mainly, but we also custom make built-in desks, bookcases, bars, etc. We install everything that we make. Sometimes we subcontract the installation and sometimes we handle the installation ourselves. "Please send to us in writing the answer to the following question. "1) Can the travel time from our shop to the job site and from the job site to our shop be considered installation time when the sole purpose of traveling to and fro was to install?" The application of tax to charges for travel time to a job site and from a job site will depend on several factors. The first is whether the cabinets you install are regarded as materials or fixtures. The test for determining whether cabinets are fixtures or materials is set forth in Regulation 1521(c)(2), a copy of which is enclosed. Under that test, a cabinet is considered a fixture if 90 percent of the total direct cost of labor and material in fabricating and installing the cabinet is incurred prior to affixation to the realty. If the cabinets are materials, then generally the construction contractor is the consumer of materials which they furnish and install in the performance of construction contracts. (Sales and Use Tax Regulation 1521(b)(2)(A)(1). But see Regulation 1521(b)(2)(A)(1) for descriptions of contracts in which the contractor is regarded as the retailer of the materials.) This means that the sale of the materials to the contractor is subject to tax, but the contractor's charges to the customer for furnishing and installing the cabinets, including transportation charges and charges for travel time to and from the job site, are not taxable.

L. R. C---

-2-

January 21, 1993
190.2550

If the cabinets are regarded as fixtures, the contractor is the retailer of the fixtures. (Regulation 1521(b)(2)(B).) If the cabinets you furnish and install are fixtures and the contracts state the sale price at which the cabinets are sold and state the installation charges separately, tax applies to the sale price. (Regulation 1521(b)(2)(B)2.a.) Installation charges are not subject to tax. Such charges may include charges for travel time to and from the job site but only if the sole purpose of the travel is for installation of the cabinets. If your contracts are lump sum contracts or do not otherwise state the sales price, the measure of tax is the cost price which is determined in a different manner, as set forth in Regulation 1521(b)(2)(B)2.b. If you have further questions regarding Sales and Use Tax Law, please do not hesitate to write again. Sincerely,

Elizabeth Abreu
Tax Counsel
EA:cl
Enclosure