Were engineering drawings, installation labor, on-site fabrication, and separately billed trucking taxable for a custom pipe organ?

Plain-English summary

Engineering drawings required by a custom pipe-organ contract were services forming part of the organ sale. Their charges remained in taxable gross receipts even if the church was billed before the organ was produced.

Installation labor was excluded whether the organ was classified as machinery and equipment or as a fixture under the cited historical rule. The letter cautioned that labor performed at the site could still be taxable fabrication rather than installation.

Separately billed actual trucking by nonretailer facilities was excluded when delivery cost was not included in the installed-organ price.

Citations and references

• California Sales and Use Tax Ruling 11, cited for machinery-and-equipment or fixture treatment and described as enclosed — enclosure and ruling text not reproduced in the official PDF; the live annotation instead attributes the point to Regulation 1521 without supplying a conversion or amendment record
• California Sales and Use Tax Ruling 58, cited for separately billed delivery by nonretailer facilities and described as enclosed — enclosure and ruling text not reproduced in the official PDF; the live annotation omits the trucking issue and Ruling 58
• October 27 custom-organ-company letter asking about several aspects of its business — request, attachments, contracts, and correspondence history not reproduced in the official PDF
• Contract-required engineering drawings for a custom-built pipe organ installed for a church, preproduction billing, machinery-or-fixture characterization, installation, possible onsite fabrication labor, nonretailer delivery, installed-organ price, and separate trucking bill — contract, drawings, invoices, classification records, labor records, carrier agreement, freight bill, and church payment records not reproduced in the official PDF
• November 16, 1964 tax-counsel response issued in E. H. Stetson's name by Phillip R. Dougherty and copied to the Out-of-State District Administrator in New York — no company reply, completed organ project, tax return, audit, assessment, refund claim, agency adoption, appeal, or later outcome supplied
• Official Annotation 295.1506's manufacturing-and-installation contract characterization, drawing treatment, Regulation 1521 attribution, categorical onsite-fabrication statement, installation conclusion, and November 16, 1964 date — supporting letter cites enclosed Ruling 11, says onsite labor may be fabrication, and separately addresses nonretailer trucking under enclosed Ruling 58; annotation omits the request, trucking result, enclosures, missing records, later outcome, and reliance status and supplies no reconciliation or 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/295-1506.pdf

Original ruling text

295.1506

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

November 16, 1964

A--- - S--- O--- Company, Inc.
XXX East --- Street
--- ---, -- XXXXX
G. A. Legal -- - - - XXX

Gentlemen:
This is in reply to your letter of October 27 in which you inquire about the application of the Sales and Use Tax Law to several aspects of your custom-built organ business. Engineering drawings required by part of a contract for the installation of a custombuilt pipe organ are considered to be services which are a part of the sale of tangible personal property. Accordingly, the receipts from the drawings are includible in taxable gross receipts whether or not they are billed to the church before the organ is produced. Whether an organ is considered machinery and equipment or “fixtures” under ruling 11 (copy enclosed), installation costs are not included in gross receipts. We note, however, that there may be labor cost incurred at the site which is attributable to fabrication of the organ rather than to its installation. Where costs of delivery by nonretailer facilities are not included in the price of the installed organ and the church is billed separately for any trucking charges, those trucking charges are exempt and not included in taxable gross receipts. (See ruling 58, copy enclosed.) If you have any further questions, please do not hesitate to write to us again. Very truly yours,

E. H. Stetson
Tax Counsel
By______
Phillip R. Dougherty
PRD:spg
Enc.
cc:
Out-of-State – District Administrator – New York