How did California tax repair parts when repaired property was shipped across state lines?

Plain-English summary

An absent August 25, 1988 letter presented two hypothetical repair flows, each involving a firm registered in both states, shipment by common carrier or U.S. mail, and separately stated or lump-sum parts and labor. The requester, property, service centers, customers, contracts, invoices, registrations, parts, values, carriers, destinations, and actual transactions are not reproduced.

Repair work performed outside California and then shipped to a California customer was not itself a California sale. California did not tax repair labor. But if the out-of-state repairer was the retailer of the repair parts, use tax applied to the customer's purchase of those parts, and a repairer registered to collect California use tax had to collect and remit it.

The repairer was the parts retailer when it separately charged for them or their retail value exceeded ten percent of the total charge. If parts were ten percent or less and not separately charged, the repairer consumed them, so the California customer did not owe use tax on a parts purchase.

For repairs performed in California and shipped to an out-of-state customer, a repairer that consumed the parts owed tax on its own purchase or use. A repairer that sold the parts could treat the sale as exempt interstate commerce when its contract required out-of-state shipment and it actually shipped the property out by common carrier or U.S. mail.

The PDF's formal year is printed as “19B8,” normalized here to 1988 from the request and live annotation. It also cites sections 6051 and 6052 while describing use tax without explaining the choice. The live Annotation 315.0215 publishes the substantive scenarios but omits those source issues, the request and registration provenance, missing enclosures and records, and any later outcome.

Common questions

Was out-of-state repair labor taxable in California?

No.

When did the California customer owe use tax on parts?

When the out-of-state repairer was the retailer of those parts.

Did every California repair shipped out of state qualify for exemption?

No. The contract had to require out-of-state shipment, and the repairer had to actually make that shipment.

Citations and references

• Source-cited California Revenue and Taxation Code sections 6051 and 6052 — used without explanation for customer use tax; complete text, incidence rules, amendments, later history, and current law not supplied
• Board Regulation 1684 — registered repairer's use-tax collection duty; complete text, registration, reporting, exceptions, amendments, later history, and current law not supplied
• Board Regulation 1546(b) — repairer retailer/consumer threshold and separate-charge rules; complete text, valuation, allocation, invoice, exceptions, amendments, later history, and current law not supplied
• California Revenue and Taxation Code section 6396 and Board Regulation 1620(a)(3)(B) — contract-required and actual out-of-state shipment; complete text, shipment, delivery, title, carrier, proof, exceptions, amendments, later history, and current law not supplied
• August 25, 1988 request — letter beyond quoted questions, requester, service centers, property, customers, contracts, invoices, parts, values, labor, registrations, carriers, mail records, destinations, and transactions not reproduced
• Source date — literal October 31, 19B8 normalized to 1988 from the request and live annotation; no other correction supplied
• October 31, 1988 Tax Counsel John Abbott letter — no reply, enclosures, contract, invoice, registration, shipment proof, return, audit, assessment, refund claim, appeal, or later outcome supplied
• Official Annotation 315.0215's repair flows, labor, threshold, customer and repairer results, shipment conditions, and date rules — annotation omits the provenance, registration, date defect, unexplained citations, enclosures, missing records, later outcome, and reliance status and supplies no additional 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/315-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/315-0215.pdf

Original ruling text

315.0215

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

October 31, 19B8

Repair parts - shipments into state and out of state
Dear,
In your August 25, 1988 letter to the State Board of Equalization, you asked for a ruling on whether California sales or use tax would be due in two situations involving the repair of tangible property both in state and out of state. Your questions are quoted below, followed by our responses. Question "1. Repairs are made on an item of tangible personal property at a service center outside of your state and then shipped to the customer's location inside your state by common carrier or U.S. Mail. The firm performing the repairs is registered in both states to collect sales & use taxes. "a.) Is this repair considered a sale in your state? “b.) If so, is tax due on the entire charge or only on parts?

1. If parts and labor are separately stated?
2. If parts and labor are not separately stated?”
   Answer. This repair work would not be considered a sale in California, since the repair work was performed outside of California. However, unless the repairman is the consumer of parts used to perform the repair work, the use tax would apply to the customer’s purchase of the repair parts, since the customer purchased the repair parts from the repairman out of state for use in California. (Revenue and Taxation Code Section 6051, 6052). Since the customer would be liable for the use tax on the repair parts, a repairman who is registered in California to collect the use tax would be responsible for collecting the amount due and paying it to the Board. (Sales and Use Tax Regulation 1684 ). California does not tax repair labor. The tax would be due on parts in accordance with the provisions of Regulation 1546 - Installing, Repairing, Reconditioning In General. Subdivision (b) of that regulation in summary provides that the repairman is the retailer of the parts if the retail value of the parts is more than 10 percent of the total charge, or if

a separate charge is made for the repair parts. If, however, the retail value is 10 percent or less of the total charge and no separate charge is made for the repair parts, the repairman is the consumer of the property. If this latter provision applies, the customer will not be liable tor use tax on the purchase of the repair parts since we would regard the out-ofstate repairman as the consumer of the items, not the customer. Question “Repairs are made on an item of tangible personal property at a service center located in your state and then shipped to the customer's location outside your state by common carrier or U.S. Mail. The firm performing the repairs is registered in both states to collect sales & use taxes. “a.) Is this repair considered a sale in your state? “b.) If so, is tax due on the entire charge or only on parts?

1. If parts and labor are separately stated?
2. If parts and labor are not separately stated?”
   Answer. Regulation 1546(b) applies in this instance also. If the repairman is the consumer of the parts as described above, then tax applies to the repairman’s purchase of the repair parts from his vendors, and not to the sale of those parts to the out-of-state customer. If, however, the repairman is the retailer of the parts, either because the value of the parts exceeds 10 percent of the total charge or because the repairman makes a separate charge for the repair parts, then under the facts you relate the repairman would not be liable for the sales tax because the sale would be a sale in interstate commerce, exempt from the sales tax under the provisions of Revenue and Taxation Code Section 6396 and Sales and Use Tax Regulation 1620 (a) (3) (B), if the repairman is required by the contract of sale to ship the parts out of state and does, in fact, ship the parts out of state. I enclose for your information copies of Regulations 1546, 1620, and 1684. Please feel free to contact me if you have any further questions or comments about this letter.

Sincerely,

John Abbott
Tax Counsel
JA:jb
Enclosure