Could repair parts and modification materials remain exempt when attached to customer property in California before the repairer shipped the finished item outside the state?

Plain-English summary

A redacted recipient, another redacted participant and Board Tax Counsel E. H. Stetson attended a March 14, 1958 conference. During the week before his April 23 letter, Stetson discussed those matters with Assistant Attorney General James E. Sabine and Deputy Attorney General Ernest P. Goodman. Neither the conference record nor the Attorney General discussion is published.

Stetson reported the resulting Board position: repair parts or materials used to repair engines, modify aircraft and do similar work would fall within the exempt category of interstate sales when the contract required the repairer to ship the finished item outside California using its own facilities or a carrier.

Under that position, it did not matter that the repairer first installed or attached the parts or materials in California to an engine, aircraft or other property belonging to the customer. What mattered was the repairer's contractual responsibility for the later outside shipment.

The letter cites no statute, regulation, case or constitutional provision. It identifies no actual repairer, customer, property, contract or shipment and records no tax proceeding or later outcome. Stetson sent a copy to the Van Nuys auditing office to inform it of the conclusion and also copied C. P. Hamlin.

The live annotation publishes the same conditional outside-shipment rule and California-attachment treatment. It omits the conference and Attorney General consultation, the author's prospective wording that "we will regard" the sales as exempt, the internal distribution and all underlying-record gaps.

Common questions

Did attaching parts to customer property in California defeat the exemption?

No, under this letter, if the repair or modification contract required the repairer to ship the finished property outside California.

Who had to arrange the outside shipment?

The party doing the repair or modification work had to be required by contract to ship the item using its own facilities or a carrier.

Did the position cover only aircraft?

No. The letter names engine repairs and aircraft modifications as examples, then refers more broadly to repaired articles and other customer property.

Did the Attorney General issue a published opinion?

Not in this source. The letter reports an oral discussion with two Attorney General lawyers but supplies no opinion, memorandum or quotation from them.

What legal authority did the letter cite?

None by number or name. It labels qualifying sales as exempt interstate sales without citing a statute, regulation, case or constitutional provision.

Does the source document a completed exempt transaction?

No. It identifies no business, customer, contract, shipment, invoice, tax amount, assessment, claim, appeal or later outcome.

Citations and references

• March 14, 1958 Board-office conference — identified but not documented
• Discussion with Assistant Attorney General James E. Sabine and Deputy Attorney General Ernest P. Goodman — reported without a record or exact date
• April 23, 1958 Tax Counsel position — conditional interstate-sales exemption with no cited legal authority
• Official Annotation 325.0780 — publishes the contract and shipment rule while omitting its consultation provenance

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.0780
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0780.pdf

Original ruling text

325.0780

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

April 23, 1958

Last week I was able to discuss with Assistant Attorney General James E. Sabine and Deputy Attorney General Ernest P. Goodman the matters discussed in this office on March 14 at a conference attended by yourself, --- and the undersigned. The result of the discussion in the Attorney General’s office is that we will regard the sale of repair parts or materials used in repairing of engines, modification of aircraft, etc., as falling within the exempt category of interstate sales in cases where the contract between the party doing the repair or modification work requires that such party ship the repaired articles or modified aircraft to which the repair parts and materials are attached, to a point outside this State by its own facilities or the facilities of a carrier. It will be considered immaterial that the repair parts or materials used in modification may be installed upon or attached to engines, aircraft or other property in this State belonging to the customer prior to the time the repaired or modified items are actually shipped or delivered to a carrier for shipment. Our Van Nuys office is being informed of this conclusion by being sent a copy of this letter.

Very truly yours,

E. H. Stetson
Tax Counsel
EHS:tl
Cc: Mr. C. P. Hamlin
Cc: Van Nuys – Auditing (CWT)