Did attaching a separately purchased tax-paid motor to a tax-paid boat substantially change the leased property?

Plain-English summary

The only PDF is a short Tax Counsel memorandum answering an absent August 23, 1966 San Jose district request. It identifies no lessor, boat, motor, purchase, tax payment, actual work, cost, lease or transaction.

Live Annotation 330.3940—not the PDF—says a lessor bought a boat and motor from different vendors, paid tax on both purchase prices, attached the “boat to the motor” and leased the combined property. It asks whether the leased item was in substantially different form so rent became taxable.

The memorandum made significant fabrication labor the test. Merely bolting or clamping the motor in place was insufficient. Significant boat alteration to accommodate shafts, wiring, controls or similar integration could produce a substantial change.

The source offered no exact answer. It floated labor exceeding 10 percent of combined boat-and-motor cost as one possible indicator, not a definitive rule.

The live annotation converts the PDF's “could result” wording to a definite substantial-change result when significant boat alterations are needed. But it omits both the explicit no-exact-answer limitation and the tentative labor-cost indicator. Neither source cites numbered law or shows a later factual determination, tax return, audit or outcome.

Common questions

Did any motor attachment change form?

No. Simple bolting or clamping did not.

Where do the different-vendor and tax-paid facts come from?

Only the live annotation. The supporting memo begins with the fabrication question and does not restate them.

What work could create a substantial change?

Drilling, wiring, controls, shafts, or other significant alterations.

Did the PDF definitely decide that those alterations changed form?

No. It says a substantial change “could result” and then says no exact answer could be given. The live annotation states the result more definitely.

Was 10 percent a binding threshold?

No. The memorandum called it only a possible test and expressly declined an exact answer.

Was there a final tax determination?

No. The district request, evidence, lease, reporting and later outcome are absent.

Citations and references

• No numbered statute, regulation, or case citation appears in the supporting memorandum.
• August 23, 1966 district memorandum — referenced request, absent
• Live Annotation 330.3940 — different-vendor/tax-paid/lease facts and definite significant-alteration result
• Lessor, property, purchases/tax, fabrication, costs, lease, returns, audit and outcome — absent

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.3940
• Original supporting opinion: 330.3940 PDF

Original ruling text

State of California

Board of Equalization

Memorandum
330.3940

To:

San Jose – District Principal Auditor

From:

Tax Counsel (EHS) - Headquarters

Subject:

Re:

Date:

August 31, 1966

Your memo of August23, 1966

We believe the test to be applied is whether or not a significant amount of fabrication labor is required to attach the motor to the boat. If it is only necessary to bolt or clamp the motor in place, this would not be sufficient to amount to a “substantial” change in form before leasing. If, however, there must be a significant alteration made on the boat to accommodate the motor, e.g., drilling holes for shafts, wiring, controls, etc., a substantial change in form could result. We can give you no exact answer. Perhaps one test could be whether the labor cost exceeds 10 per cent of the cost of the boat and motor.

EHS:fb