Was cutting off damaged pipe threads and rethreading both ends taxable fabrication?

Plain-English summary

A customer brought in pipe with damaged threads and collars. The shop removed the collar, cut off the damaged threads at both ends, rethreaded the ends, and reset the collar.

Although the pipe became shorter by the length of the removed threads, it remained usable in the same manner as before. California treated the work as restoration to original condition rather than creation or alteration for a new use. Because the shop furnished no materials, the entire charge was nontaxable repair.

Common questions

Did shortening the pipe make the work fabrication?

No.

What supported repair treatment?

The pipe retained the same use after its damaged threads were restored.

Were any materials taxed?

No materials were furnished under the source's facts.

Citations and references

• Historical Sales and Use Tax Rulings 15 and 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/315-0800.pdf

Original ruling text

315.0800

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

June 26, 1953

B--- & S--- Co.
XXXX --- Avenue
--- --- X, California

Your letter of March 24
Account No. -- - XXXXX

Gentlemen:
You inquire concerning the application of sales tax to charges for rethreading damaged pipe. A customer will bring in pipe with threads and collars damaged. One end of this pipe has a thread with a collar set on, the other end has just a thread. You remove the collar, cut off the thread at each end, rethread each end, and set the collar back on. During this work the length of the pipe is reduced but only by the length of the thread at each end. After your work, the pipe is to be used in the same manner as before your work. We enclose copies of Sales and Use Tax Rulings 15 and 26. Fabrication labor is subject to the tax (Ruling 15) and repair labor is exempt (Ruling 26). In general, fabrication is the creation of something new or the altering of tangible personal property to fit it for a new and different use. Repair, on the other hand, is the restoration of property to its original condition. It is our opinion that this is a repair job. Since you provide no materials, your entire charge is exempt from the sales tax. Very truly yours,

Bill Holden
Junior Counsel

BH:ja
cc:

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