Was a mandatory fee for buying less than a full concrete load taxable?

Plain-English summary

An absent taxpayer letter said most mixers carried eight cubic yards and that the concrete seller imposed a short-load fee below a half-full cutoff because of fuel, payroll, maintenance, and other costs. Steve Guest of Return Analysis could find no authority exempting the revenue and asked Tax Counsel Janice L. Thurston for an opinion.

Counsel included the mandatory fee in taxable gross receipts because the customer had to pay it when buying less than a full load. She treated it like an expedite or handling charge and compared it to charging $100 for two widgets but $60 for one: the extra $10 on the single widget remained part of that sale's gross receipts.

The short-load fee did not appear to be transportation cost, and no facts supported exclusion under section 6012(c)(7) and Regulation 1628 even if it were. The taxpayer also asked about standby time and pump-wash fees. Counsel said standby time appeared analogous to the charge in Annotation 295.0710, while a pump-wash fee might be a taxable mandatory charge; she did not finally resolve either. The PDF supplies no implementation, revised return, audit, appeal, or later outcome.

Citations and references

• California Revenue and Taxation Code section 6012 and section 6012(c)(7) — described or cited for gross receipts without expense deductions and a possible transportation exclusion; complete text, subdivisions, version, and later history not supplied
• California Sales and Use Tax Regulation 1628 — cited with section 6012(c)(7) for the transportation-charge exclusion; complete text, version, factual requirements, and later history not supplied
• Sales and Use Tax Annotations 295.1506.150 (October 30, 1991) and 295.1507 (September 8, 1994) — cited as analogous expedite and handling charges; underlying opinions, facts, complete annotation text, and later history not reproduced
• Sales and Use Tax Annotation 295.0710 (November 26, 1974) — cited as apparently analogous to the taxpayer's “stand by time” question; underlying opinion, facts, complete annotation text, and later history not reproduced
• October 24, 1997 memorandum from Steve Guest requesting an opinion on the redacted taxpayer's deduction, together with an unidentified taxpayer letter describing most mixers as carrying eight cubic yards, a half-full cutoff, fuel, payroll and maintenance costs, and questions about standby time and pump-wash fees — request and taxpayer letter, fee schedules, invoices, delivery records, contracts, returns, deduction calculations, transportation facts, and tax records not reproduced in the official PDF
• November 26, 1997 Tax Counsel Janice L. Thurston memorandum concluding that the mandatory short-load fee was taxable gross receipts, finding no presented transportation-exclusion facts, analogizing standby time, and stating only that the pump-wash fee may be a taxable mandatory charge — no implementation, revised return, audit, assessment, refund claim, appeal, or later outcome supplied; copy sent to a redacted District Administrator
• Official Annotation 295.1710's less-than-full-load, mandatory, expedite-or-handling, gross-receipts, November 26, 1997, and M99-2 rules — annotation omits the internal request and taxpayer-letter provenance, eight-yard and half-full facts, identified costs, transportation issue, section 6012(c)(7), Regulation 1628, prior annotations, $100/$60 widget example, standby and pump-wash issues, missing records, copied administrator, later 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/295-1710.pdf

Original ruling text

State of California

Board of Equalization
Legal Division-MIC: 82

Memorandum
295.1710
November 26, 1997

To :

Mr. Steve Guest
Return Analysis Section

Date:

From :

Janice L. Thurston
Tax Counsel

Telephone: (916) 324-2588

Subject:

CalNet 454-2588

C--- S--- Company
Permit No. SY --- XX-XXXXXX ---

This is in response to your October 24, 1997 memorandum requesting our opinion regarding the deduction that this taxpayer has taken for what it calls a “short load fee” which it describes as follows: “Most mixers carry 8 cu yds of concrete. There is a cut off for loads that are half full. Due to the costs to the company for fuel, payroll, maintenance, etc. we charge a short load fee.” You had stated that you could not locate anything in the Sales and Use Tax Law or its accompanying annotations that would indicate that this source of revenue is exempt from sales tax. Tax applies to the short load fee. It is a mandatory charge the customer must pay for purchasing less than a full load of concrete and is includible in gross receipts of the taxpayer. Under Revenue and Taxation Code section 6012, “gross receipts” means the total amount of the sale price without deduction for the cost of materials, labor costs or other expenses. This type of charge is similar to an expedite charge or handling charge (see Sales and Use Tax Annotations 295.1506.150 (10/30/91) and 295.1507 (9/8/94).) This is similar to a retailer’s charging $100 for two widgets but $60 for one widget. The retailer’s charging $10 more per widget when sold singly rather than as one of two widgets does not provide a basis for excluding any part of the $10 charge from the gross receipts of the sale of the single widget. The short load fee does not seem to be a part of the cost of transporting the cement. Even if it were a transportation charge, no facts have been presented to show that it should be excluded form the definition from gross receipts under Revenue and Taxation Code section 6012(c)(7) and Sales and Use Tax Regulation 1628.

Mr. Steve Guest

-2-

November 26, 1997
295.1710

We also note that the letter from the taxpayer asked about “stand by time” and “pump wash fees.” “Stand by time” appears to be a standby charge as discussed in Annotation 295.0710 (11/26/74) but the “pump wash fee” may be a mandatory charge that would be required to be included in gross receipts and subject to sales tax. JLT/cmm cc:

--- --- District Administrator (--)