Were sales of optical equipment exempt when Chapa De Indian Health Program carried out an Indian Health Service contract under Public Law 93-638?

Plain-English summary

Senior Tax Auditor Karri Rozario contacted Chapa De about an unidentified taxpayer's optical-equipment sales and sent counsel a November 29, 1995 memorandum with other unidentified documents. Those included an absent October 20 Public Health Service letter and a pertinent Public Law 93-638 provision stating that Chapa De had an Indian Health Service contract and was deemed an executive agency when carrying it out.

Based on those federal documents, counsel agreed that Chapa De “appears” to be an executive agency of the United States while carrying out the contract.

Counsel therefore concluded that the taxpayer's sales of optical equipment to Chapa De were exempt under section 6381(a).

The live annotation says “medical equipment,” while the supporting memorandum says “optical equipment.” The PDF supplies no federal attachments, contract, invoices, equipment records, contract-purpose linkage, audit disposition, appeal, or later outcome.

What this means for you

Health programs, federal contractors, and equipment vendors

The exemption depended on documented federal agency status tied to performance of the specific contract.

Accountants and tax professionals

Retain the federal contract, agency-status letter, purchaser identity, equipment invoices, and evidence connecting purchases to contract performance.

Common questions

Q: Were the optical-equipment sales taxable?

A: No.

Q: Why was Chapa De treated as a federal agency?

A: Public Law 93-638 deemed it an executive agency while carrying out the Indian Health Service contract.

Citations and references

• California Revenue and Taxation Code section 6381(a) — cited for exempting the taxpayer's sales to a United States executive agency; complete text, version, purchaser and property requirements, and later history not supplied
• Public Law 93-638 and an attached pertinent provision — described as deeming Chapa De an executive agency when carrying out its Indian Health Service contract; complete act, provision and codification, contract requirements, version, amendments, and later history not reproduced
• October 20, 1995 Public Health Service, Department of Health and Human Services letter to Chapa De stating its contract and deemed status — letter and underlying federal determination, contract, amendments, scope, performance records, and later status not reproduced
• November 29, 1995 Senior Tax Auditor Karri Rozario memorandum after contacting Chapa De about the taxpayer's optical-equipment sales — memorandum, contact record, attachments, taxpayer identity, purchase orders, invoices, equipment records, delivery and payment records, and contract-purpose linkage not reproduced
• February 5, 1996 Senior Staff Counsel John L. Waid memorandum agreeing Chapa De “appears” to be a federal executive agency while carrying out the contract and exempting the optical-equipment sales — no implementation, response, transaction review, return, audit determination, assessment, refund claim, appeal, or later outcome supplied
• Official Annotation 305.0006.500's Chapa De, Public Law 93-638, Indian Health Service contract, federal executive-agency, section 6381(a), medical-equipment, and February 5, 1996 rules — the live annotation says “medical equipment” while the supporting memorandum says “optical equipment”; it omits the October 20 letter, November 29 audit request, tentative “appears” wording, absent federal and transaction records, later outcome, and reliance status and supplies no record resolving the equipment-description difference

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 305.0006.500
• Original supporting opinion: 305.0006.500 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Ms. Karri Rozario
Senior Tax Auditor
KH District

From:

John L. Waid
Senior Staff Counsel

Subject:

United States Government Contract

305.0006.500

Date:

February 5, 1996

I am answering your memorandum to me dated November 29, 1995. You indicated that you contacted the Chapa De Indian Health Program ("Chapa De") to determine if the taxpayer's sales of optical equipment to it were exempt from tax under Section 6381 (a). You attached to your memorandum, among other documents, a copy of a letter dated October 20, 1995, from ---, Public Health Service, Department of Health & Human Services, to Chapa De stating that the latter has entered into a contract with the Indian Health Service in accordance with Public Law 93-638, and in accordance with that law is deemed an executive agency when carrying out such contract; and of the pertinent provision of that law. After examining those documents, we agree with your conclusion that, under the terms of P.L. 93-638 Chapa De appears to be an executive agency of the United States when carrying out the purposes of the contract. As a result, the taxpayer's sales of optical equipment to Chapa De are exempt from tax under Section 6381 (a).