Were tower-crane or construction-hoist erection charges taxable when the lessee could arrange the work independently?

Plain-English summary

An unidentified lessor rented nonmobile tower cranes and construction hoists for a monthly rate plus a lump-sum charge for hauling to the jobsite, erection and later dismantling when applicable. The lessee could choose whether to handle each service. If it asked the lessor, the lessor subcontracted to a third party and charged exact third-party cost.

The letter treated leases as continuing sales and applied sales-style delivery rules when rent was taxable. Under absent former Ruling 58, separately stated transportation from the retailer's business or shipping point directly to the purchaser's specified place was nontaxable when provided by an independent contractor, except for a delivered price.

Because the lessee could transport the equipment, counsel concluded it was not leased for a delivered price. A separately stated charge for independent-party transport therefore was nontaxable.

The lessor's own-facility transport followed a different branch. It was taxable unless the lease commenced when equipment left the “point of debarkation.” If commencement waited until delivery, the delivery charge was taxable. The source gives no lease language or shipping facts to establish either event.

Dismantling was nontaxable regardless of whether the lessor or an independent party performed it. Erection or reassembly was a service connected with the continuing-sale lease: taxable if performed before lease commencement, but nontaxable if the lease began when equipment left the point of debarkation and erection occurred later.

The PDF contains only this July 16, 1968 letter. Live Annotation 330.3310 also prints January 30, 1987 and expressly describes the later erection as optional, but supplies no separate 1987 opinion. The letter's lessee-choice premise supports optionality; no additional 1987 facts or authority are inferred.

Common questions

Did separately stating erection charges automatically make them exempt?

No. Timing still controlled, and the letter describes a lump-sum service charge before separately addressing stated transport charges.

What made the post-commencement erection charge nontaxable?

The lease had already begun, erection followed, and the stated arrangement let the lessee obtain the work independently.

What if the lease did not begin until reassembly was finished?

The erection occurred before the continuing-sale lease commenced, so the source treated the service charge as taxable.

Was dismantling taxable?

No under the opinion, whether the lessor or an independent party performed it.

How did independent transport differ from the lessor's own delivery?

Separately stated third-party transport was excluded when the property was not leased for a delivered price. Own-facility delivery turned on whether the lease began before or upon delivery.

What does “point of debarkation” mean here?

It is the source's own phrase for the point whose departure could start the lease. No contract or shipping record defines it, so this page does not substitute another location.

What supports the live entry's 1987 date?

The collection prints it, but the linked PDF contains no separately dated 1987 opinion or additional record.

Citations and references

• Former California Sales and Use Tax Ruling 58 — separately stated independent-transportation rule; full text absent
• Live Annotation 330.3310 — commencement and optionality formulation dated July 16, 1968 and January 30, 1987
• July 9 request and every lease, jobsite, shipment, election, subcontract, invoice, tax and outcome record — absent

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.3310
• Original supporting opinion: 330.3310 PDF

Original ruling text

STATE OF CALIFORNIA

330.3310

STATE BOARD OF EQUALIZATION
July 16, 1968
Gentlemen:
This is with reference to your letter of July 9, 1968 regarding the rental of tower cranes and construction hoists. You state the equipment is not mobile and is rented on a monthly rate plus a lump-sum charge for hauling to the jobsite, erection and subsequent dismantling, if applicable. You state that the lessee has the option of whether he wants to do the hauling, erection and dismantling, and if the lessee desires your firm to do it, you subcontract the work to a third party. Where this is the case, you charge the lessee your exact cost from the third party. Under the law today, leases are continuing sales and the tax on delivery charges, where the rental receipts are taxable, is applied in the same manner as in sales. Under Ruling 58, tax does not apply to separately stated charges for transportation of property from the retailer’s place of business or other point from which shipment is made directly to a place specified by the purchaser, provided the transportation is by other than facilities of the retailer, i.e., independent contract. The place where title passes (the lease commences) is immaterial, except where the property is sold (leased) for a delivered price. Inasmuch as the lessee has the option of transporting the equipment, it is our opinion that the equipment is not leased for a delivered price or rate. Thus, where you contract with some independent party to transport the equipment, the [separately stated] charge for the transportation would not be subject to tax. The charge for the dismantling would not be taxable regardless of whether your firm or an independent party did the work. If your firm with the use of your facilities, transported the equipment to the jobsite, the charge would be taxable unless the lease commenced when the equipment left the point of debarkation. In other words, if the lease commenced when the equipment was delivered, the charge for the delivery would be taxable. Under the concept that the charges for the reassembly (erection) of the equipment is a service connected with a sale (lease), the charge would be taxable if the erection occurred before the lease commenced. If the lease commenced when the equipment left the point of debarkation, the charge for the erection at the jobsite would not be taxable. Very truly yours,

Robert H. Anderson
Tax Counsel
RHA/vs
[lb]