Was a charge for filling a customer-furnished aqua lung taxable when the business merely provided its compressor, and what about prefilled cylinders?

Plain-English summary

Board counsel revisited the tax treatment of compressed air for aqua lungs and announced a change in position. When the customer furnished the aqua lung and the business merely supplied the use of its compressor to fill that tank, staff treated the charge as a nontaxable service.

The result differed when the business had previously compressed air into cylinders or tanks and delivered those filled containers to the purchaser. Receipts from those sales remained subject to sales tax.

The memorandum refers to and encloses a June 12, 1958 letter, but that enclosure is not included in the official supporting-opinion PDF. The published source therefore supports the 1978 distinction and change in position, not any additional facts from the missing earlier letter.

Citations and references

• No statute or regulation was cited in the published supporting memorandum.
• Jack D. Paulson's June 12, 1958 letter to the taxpayer concerning compressed air for aqua lungs — copy listed as enclosed but not reproduced in the official PDF
• Discussion with Tax Counsel Mr. Stetson and Assistant Administrator Mr. Denny concerning the recurring aqua-lung problem and change in position — date, other participants, analysis, notes, and record not provided in the official PDF
• Taxpayer's customer-furnished aqua-lung, compressor-only service, previously compressed air, cylinder or tank ownership, delivery, charges, and sales receipts — facts and distinction supplied; complete service records, equipment diagrams, compression and storage process, orders, invoices, tank records, and receipts not reproduced in the official PDF
• Instruction to the San Diego administrator to advise the taxpayer of the changed position — instruction supplied; notice, taxpayer response, implementation, returns, and transaction treatment not reproduced in the official PDF
• Official Annotation 275.0020's July 17, 1959 date and compressor-service distinction — annotation does not explain that date versus the official PDF's August 1, 1978 memorandum and June 12, 1958 enclosure reference or supply the missing earlier record
• Possible later taxpayer notice, service or equipment change, sale, audit, assessment, refund claim, appeal, or other agency action — no follow-up or final outcome 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/275-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/275-0020.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

275.0020
Sacramento
August 1, 1978

To:

San Diego – Administrator

From:

Headquarters – Sales Tax Counsel (JDP)

Subject:

F--- B--XXXX South --- Street
---

Account - - XXXXX

Please refer to my letter of June 12, 1958 to this taxpayer, copy enclosed. This problem has arisen again and, after discussing the matter with Mr. Stetson, Tax Counsel, and Mr. Denny, Assistant Administrator, it has been determined that charges for servicing aqua lungs with compressed air where the customer furnished the aqua lung and the taxpayer merely furnished the service of his compressor, the transaction is a nontaxable service. However, sales tax still applies to the receipts from sales of air which has been previously compressed into cylinders or tanks with the tanks being delivered to the purchaser. Please advise the taxpayer of this change in our position.

Jack D. Paulson

JDP:o’b
Enc.