Did a building kit with factory-made walls and roof, but no factory-made floor, qualify as factory-built housing?

Plain-English summary

The seller's kit contained factory-made wall and roof elements but no factory-made floor. California concluded that it did not qualify as factory-built housing under Regulation 1521.2.

The regulation's partial-manufacturing language did not eliminate the need to provide all three required elements: walls, floor, and roof. A concrete slab or mud sill built at the jobsite did not cure the problem because the required floor also had to be factory built.

For an over-the-counter kit sale, tax applied to the full selling price. Under a furnish-and-install contract, the seller was a construction contractor and consumed the kit and the materials used onsite for foundations and related work.

Common questions

Were factory-built walls and a roof enough?

No. A factory-built floor element was also required.

Did an onsite concrete slab or mud sill count as the floor?

No.

How were retail kit sales treated?

Tax applied to the full sales price.

How were furnish-and-install contracts treated?

The seller was a construction contractor, and the kit and foundation inputs were materials consumed in the work.

Citations and references

• Cal. Code Regs., tit. 18, reg. 1521.2(b)(1)(A) and (2)(c) — offsite manufacture and the required wall, floor, and roof elements
• Cal. Code Regs., tit. 18, reg. 1521(c)(2) — material treatment for furnish-and-install construction work
• Company board chairman's May 15, 1975 letter — kit and questions described; full letter not reproduced in the official PDF
• E--- I---, Inc.'s kit first sold May 18, 1975, factory-built wall and roof elements, missing factory-built floor, possible onsite concrete slab or mud sill, over-the-counter sales, and furnish-and-install contracts — product, sales, and contract alternatives described; underlying plans, specifications, kit components, prices, sales, contracts, invoices, and jobsite records not reproduced in the official PDF
• Possible later kit sales, installations, returns, audits, assessments, appeals, product changes, or other outcomes after the advice — no follow-up records or final outcomes 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/228-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/228-0250.pdf

Original ruling text

228.0250

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

May 30, 1975

Mr. F--- H--Chairman-Board of Directors
E--- I---, Inc.
XXXX --- ---, Suite XXX
--- ---, CA XXXXX
Dear Sir:
In response to your letter of May 15, 1975, it is our opinion that the “kit” your company began selling May 18, 1975, is not “factory-built housing” within Regulation 1521.2 of this Board. The kit contains only walls and roof elements; the regulation requires a floor element as well. Although the language in subsection (b)(1)(A) of the regulation, “Wholly manufactured or is in substantial part manufactured at an off-site location”, admits of the possibility that only a portion of the three elements may qualify, the regulation read as a whole requires that all three elements be provided. Specifically, subsection (2)(c) qualifying a panelized constructed kit describes it as consisting of all three elements. It is our further opinion that your company’s providing a concrete slab or mud sill constructed on the site would not bring the kit within the regulation. The floor required by the regulation must also be factory built. Because the kit is not within Regulation 1521.2, the tax would apply to the full sales price of over-the-counter sales of the kit. In furnish and install contracts your company would be a construction contractor under Regulation 1521, the kit would be considered materials as would materials used at the jobsite to construct foundations, etc., pursuant to subsection (c)(2) of the regulation. Very truly yours,

T. L. Hartigan
Legal Counsel
TLH:gj