Could a lumber retailer exclude later bills for sorting at a tract compound and delivering selected lumber to individual home sites?

Plain-English summary

A lumber retailer contracted to furnish home-building lumber at housing tracts. Mills delivered the lumber to the retailer's central compound, where the retailer sorted it and then delivered required dimensions to individual construction sites.

The retailer initially billed wholesale cost plus freight to the compound and tax on that cost, then separately billed sorting and compound-to-site delivery.

Tax counsel treated the operation like a regular lumber yard. The retailer's taxable sales were the lumber furnished at the individual job sites, so gross receipts included the later sorting and delivery charges.

Citations and references

• The official letter cites no statute or regulation by number.
• Santa Ana office request that Board legal staff communicate concerning D's petition for redetermination — date, author, form, and copy not provided in the published text
• Petition for redetermination of sales tax filed by D — date, identifier, disputed amount, and copy not provided in the published text
• Agreements with building contractors to furnish lumber for home construction at housing tracts — dates, parties, complete terms, and copies not provided in the published text
• Initial and supplemental contractor billings separately stating lumber cost, freight, sales tax, sorting, and delivery — dates, contractors, amounts, and copies not provided in the published text
• Sales tax determination including the disputed sorting and delivery charges — determination date, period, amount, identifier, and copy not provided in the published text
• September 3, 1965 associate-tax-counsel response signed by George A. Trigueros, opining that the petitioner's client was the retailer and declining to recommend deletion of the charges from the determination — no staff recommendation record, agency decision, petitioner response, payment, refund claim, appeal, or later outcome supplied
• Official Annotation 295.1420's agreements, reception-site description, two-invoice characterization, retail-selling-price conclusion, and September 3, 1965 date — supporting letter calls the location a central compound, describes wholesale cost, freight and sales-tax billing followed by sorting and delivery billing, and ends with a recommendation concerning an existing determination; annotation omits the Santa Ana request, petition, determination, missing records, final outcome, and reliance status and supplies no additional proceeding record

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/295-1420.pdf

Original ruling text

295.1420

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 3, 1965

Gentlemen:
Our Santa Ana office has requested us to communicate with you regarding the petition for Redetermination of sales tax filed by “D”. It is our understanding that “D”’s business operations have been substantially as follows: He entered into agreements with building contractors pursuant to which he agreed to furnish lumber to them for home construction at housing tracts. He ordered the lumber from mills and had the lumber delivered to him at a compound at a central location in the tract area. After the lumber was delivered to the compound, he sorted it and delivered lumber of required dimensions to individual construction sites in the tract. “D”’s method of billing the contractors was first to bill them for his wholesale cost, plus freight to the compound. To this billing he added sales tax measured by his wholesale cost. Subsequently, he would bill the contractor an amount for sorting the lumber at the compound and delivering it to the individual construction sites. We can see no essential difference between “D”’s operations and the operations of a regular lumber yard which purchases lumber from a wholesaler, takes delivery at the lumber yard, sorts it at the lumber yard, and delivers lumber of required dimensions to individual jobsites. In view of the foregoing, it is our opinion that your client was the retailer of the lumber furnished at the individual jobsites and his taxable gross receipts included his charges for sorting the lumber at the compound and delivering the sorted lumber from the compound to individual construction sites. Accordingly, we cannot recommend deletion of the aforementioned charges from the determination of tax. Very truly yours,

George A. Trigueros
Associate Tax Counsel
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