Did subcontracting a repair make the retailer's full customer charge taxable?

Plain-English summary

California said a retailer did not owe tax on its full charge merely because another repairman performed the repair. If the retailer segregated parts and materials from repair labor as historical Ruling 26 required, tax applied only to the parts and materials.

The retailer could give the repairman a resale certificate for the repair parts the repairman sold to it. If the retailer did not segregate parts and materials from labor and other services, California presumed the entire charge represented the selling price of property and taxed the full repair charge.

Common questions

Did subcontracting make the whole repair charge taxable?

No.

What had to be separated?

Charges for parts and materials had to be segregated from repair labor and other services.

What happened without segregation?

The full charge was taxable.

Citations and references

• Historical Sales and Use Tax Ruling 26

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/315-0320.pdf

Original ruling text

315.0320

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

March 30, 1951

S--- U--S--California
Account SR -- XX XXXXXX
Gentlemen:
This is in answer to your letter of March 26 in which you supplement the information previously furnished to us with respect to a Waring Blender procured through the M. L. C--- Co., San Francisco, California. Your understanding that the State sales tax does not apply to the full charge for repair services even though the retailer subcontracts the repairs is correct. Thus, Ruling 26, copy enclosed, applies to charges for repairs whether the retailer performs the repair services himself or subcontracts the repairs to another repairman. Accordingly, if the M. L. C--- Co. segregates its charges, as required by the first paragraph of said Ruling 26, the tax will apply only to the charge for materials and parts furnished in connection with the repair. The M. L. C--- Co., in turn, can give the repairman who actually performs the repair service a resale certificate to cover the sale of the repair parts by the repairman to it. Although it is our opinion that the M. L. C--- Co. may segregate its charges and be subject to the tax only with respect to the charge for parts and materials furnished in connection with the repairs, where the charges for such parts and materials are not segregated from charges for labor of repair and other services, it will be presumed that the entire charge represents the sale price of the property, and the tax will, in this case, apply to the full charge for the repair. Very truly yours,

R. G. Hamlin
Tax Counsel

RGH:HB
cc:

J--- J. H---