Was a rebabbitting shop the consumer or seller of material included in a lump-sum bearing-repair charge?

Plain-English summary

California treated rebabbitting a bearing as repair.

For a lump-sum labor-and-material charge, the repairer consumed the material when its value was insignificant relative to the total charge. If material value was substantial, the repairer sold the material and tax applied to its fair retail selling price.

Common questions

Was rebabbitting treated as fabrication?

No.

When did the shop consume the material?

When its value was insignificant relative to the total charge.

When was the shop a material seller?

When material value was substantial.

Citations and references

• Historical 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/315-0700.pdf

Original ruling text

315.0700

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

April 16, 1954

G--- I--- W---, Inc.
P. O. Box XXX
---, California
Attention: Mr. E. W. S--Your letter of March 19
Account No. --- XX XXXXXX

Gentlemen:
You inquire concerning the application of sales tax to your charges for re-babbitting a bearing. It is our opinion that this is a repair operation and governed by Ruling 26 (copy enclosed). Since, in the case in question, you have made a lump-sum charge for labor and materials, you are the consumer of the materials if the value of the materials furnished is insignificant in relation to the total charge. If the value of the materials furnished is substantial in relation to the total charge, you are regarded as selling such materials and the tax applies to the fair retail selling price thereof. Very truly yours,

Bill Holden
Assistant Counsel

BH:ja

cc:

--- - Auditing