When were nursery charges for growing seedlings or maintaining completed trees excluded from California sales tax?

Plain-English summary

The primary letter addressed a nursery whose customer supplied seed. The nursery planted it, raised the seedlings, and returned them for a growing fee. Tax counsel treated that arrangement as a nontaxable growing service, comparing it to boarding someone else's horse.

The PDF also contains a 1973 follow-up about completed nursery trees. When a purchaser had contracted to buy a tree of a specified age but could not take delivery because the field was not ready, optional maintenance after the tree reached that stage was not part of the sale. By contrast, charges for growing the seller's tree to the maturity the purchaser originally contracted to buy were services forming part of the sale.

Source-date note

The primary 295.0290 letter is dated May 4, 1971. An appended memorandum marked 295.0260 is dated October 19, 1973. Although the annotation index gives a later date, the complete PDF contains no 1978 document.

Citations and references

• The official source cites no statute or regulation by number.
• California Tax Service Annotation 1071.05 (Aug. 9, 1965) — cited for the horse-boarding comparison; underlying annotation not reproduced in the official PDF
• Requester's Mar. 29, 1970 letter about bare-root-seedling sales and growing customer-furnished seed — facts and question supplied; request, attachments, nursery and customer identities, and complete service terms not reproduced in the official PDF
• Customer-furnished seed, nursery planting and growing, seedling delivery, and growing fee — facts supplied; seed and seedling records, growing agreement, cultivation and delivery records, invoices, payments, returns, and tax computations not reproduced in the official PDF
• Appended Oct. 19, 1973 memorandum marked 295.0260 following a telephone conversation about an auditor's Sept. 13, 1973 letter — described; telephone notes, letter, attachments, parties beyond redaction, prior conclusion, and complete facts not reproduced in the official PDF
• Completed nursery trees, buyer's unready field or irrigation system, delayed delivery, optional maintenance, and growing to contracted maturity — facts supplied; tree-sale contract, tree age and completion evidence, field and irrigation records, delivery schedule, maintenance agreement, invoices, payments, returns, and tax computations not reproduced in the official PDF
• Official Annotation 295.0290's growing-fee, seller seed/seedling, contracted transplantable-tree, completed-tree, buyer-delay, optional-maintenance, and tax distinctions, dated May 4, 1971; Oct. 19, 1973; and Apr. 17, 1978, with cross-reference to Annotation 515.0720 — annotation adds seller-transfer/title/unit-price and true-object facts, the cross-reference, and a 1978 date/document absent from the PDF; it omits the request and internal-review provenance, 295.0260 identifier conflict, historical authority, source wording defects, and missing records and supplies no additional transaction record
• Possible later 1978 opinion, seedling or tree contract, cultivation, completion, delayed delivery, maintenance, payment, return filing, audit adjustment, assessment, refund claim, appeal, or other agency action — 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/295-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/295-0290.pdf

Original ruling text

295.0290

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

May 4, 1971

Re:

Dear Mr.
This is in reply to your letter of March 29, 1970.
We understand that in addition to selling bare root seedlings you offer a growing service whereby your customer furnishes the seed and you plant these seeds, grow the seedling, and deliver to the customer for a growing fee. A question has arisen as to whether the growing fee is subject to tax under the Sales and Use Tax Law. In our opinion tax does not apply to the growing fee charged by you. This case is similar to a case where a person maintains a horse boarding ranch, charging the owner of the horse a boarding fee. We have taken the position that such boarding fees are not subject to the tax. [California Tax Service Annotation 1071.05, August 9, 1965.]

Very truly yours,

Gary J. Jugum
Tax Counsel

GJJ:lt
Bc:
Santa Rosa – Dist. Admin.
Hdqrs. – Audit Eval. & Plan

State of California

Board of Equalization

Memorandum

To:

Van Nuys – Auditing (AJB)

From:

Headquarters – Tax Counsel (GLR)

295.0260

Date:

October 19, 1973

Subject:

This is a follow-up to my telephone conversation concerning your letter to --- of September 13, 1973. As I indicated there was a question in my mind concerning the conclusion set forth in the last paragraph of your letter regarding the taxability of the socalled maintenance charges. It is our opinion that under the unique facts of this case, i.e., the trees in question were complete from a nursery standpoint and the only reason for the maintenance was due to the predicament of the buyer, the maintenance charges are not subject to tax. It seems to us that the purchaser contracted to but a tree of a certain age and it was only through his failure to have the irrigation systems in that he could not take delivery at the time indicated. To our way of thinking we believe the question to be asked is what is the purchaser has contracted to buy a two-year-old tree and when he is to take delivery he finds it impossible to do so, i.e., because of the lack of field preparation, we should conclude that the so-called additional optional maintenance services are not part of the sale of the two-year-old tree. Of course any charges made by the nursery for growing the tree to its mature state, i.e., two years in the example, would be regarded as a service that is part of the sale. If in the future you get any other questions in this area, please let us know.

GLR:lb
cc:
Mr. Donald Hennessy