Did adding a side-shifter that let forklift tines move laterally substantially change the truck for lease-tax purposes?

Plain-English summary

Absent August 5 and September 1, 1966 letters were forwarded for further reply to an absent August 12 Board letter. As restated, a redacted lessor added a “side shifter” after leasing a forklift. It let the forks move laterally for loading/unloading instead of only straight and backward.

The lessor estimated the addition at 5%–10% of original truck cost. After examining an absent original purchase order and supplement for the subject addition, Counsel found that single case closer to 15%–20%. The source does not identify cost dollars or establish a universal percentage test.

The attachment significantly expanded function, and Counsel also said the lessee paid substantially more to rent the modified truck without giving an amount. Considering those two features together, the lessor's own attachment substantially changed the leased property.

Historical section 6006.3 grandfathering did not apply, so section 6006(g) treated the lease as a taxable sale. Rent entered the tax measure for periods the side-shifter trucks were situated in California.

No requests/reply, orders, truck/attachment, installation, costs, lease/rent, location records, returns, audit or later outcome appears. Live Annotation 330.4120 publishes only the function/substantial-change conclusion, omitting all percentage, order, increased-rent, grandfather and California-measure facts.

Common questions

Was the conclusion based only on attachment cost?

No. The source considered both the new lateral function and the higher lease price.

Was 15%–20% a general cutoff?

No. It was Counsel's reading of one absent order and supplement.

What cost range appeared in the examined orders?

Approximately 15–20 percent of the original truck cost, despite an initial 5–10 percent estimate.

Was the higher lease price quantified?

No. The source says only that rent was substantially higher with side shifters.

Did the side-shifter materially change capability?

Yes. It added lateral movement of the forks.

Were California rentals taxable?

Yes under the opinion.

During which periods?

Only periods when the trucks were situated in California, according to the letter.

Was any return or final assessment shown?

No. The source gives advice without tax computations or later outcome.

Citations and references

• Cal. Rev. & Tax. Code § 6006(g) — taxable leasing-sale rule applied by the opinion
• Cal. Rev. & Tax. Code § 6006.3 — historical grandfather clause found inapplicable
• Live Annotation 330.4120 — capability/substantial-change conclusion dated September 22, 1966
• Requests/reply, orders, property/work/cost, lease/rent/location, returns/audit and outcome — absent

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.4120
• Original supporting opinion: 330.4120 PDF

Original ruling text

330.4120

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 22, 1966

P--- Co., Inc.
XXX --- Street
--- --- ---, CA XXXXX
Attention:

Mr. -. -. P---

SR – XX XXXXXX

Gentlemen:
This is in reply to your letters of August 5, 1966, and September 1, 1966, which have been forwarded to the undersigned for further reply to our initial letter to you dated August 12, 1966. It is our understanding from your letters that after you lease a fork lift truck to your customer, a “side shifter” attachment is added to the truck. It is also our understanding that this addition will enable the truck to use the forks for lateral motion in loading and unloading merchandise. You indicate that the charge for the addition of the “side shifter” is between 5 per cent and 10 per cent of the original truck cost. However, after examining your original purchase order and supplemental order thereto, which relate to the subject “side shifter” addition, it would appear that the charge in that case is between 15 per cent and 20 per cent of the original cost. Since the addition of the “side shifter” attachment to the fork lift truck adds to the truck’s functional capabilities (i.e., the trucks forks can be used in an lateral motion as well as straight and backwards), it would appear that such an increase in the truck’s capabilities constitutes a significant change. Moreover, the fact that it will cost the lessee substantially more to lease the truck with the “side shifters” than without them, makes it even clearer that there has been a material change in the equipment. Thus, after viewing these two features together, we are of the opinion that when your company leases a truck with a “side shifter” which it has attached, there has been a substantial change in the form of the property under lease. Since we have concluded that the addition of the “side shifter” makes a substantial change in the form of the equipment rented and that the rental is not subject to the provisions of the grandfather clause (§ 6006.3), it is our opinion that the lease of a fork lift truck, to which your company has added a “side shifter,” would be regarded as a taxable “sale” under § 6006(g) of the Sales and Use Tax Law.

P--- Co, Inc.
SR – XX XXXXXX

-2-

September 22, 1966
330.4120

On the basis of the above conclusion, the rental payments for “side shifter” trucks leased by your company to others would be required to be included in the measure of the tax due for periods in which these trucks were situated in California. If we can be of any further assistance in this matter, please do not hesitate to call upon this office again. Very truly yours,

E. H. Stetson
Tax Counsel

By __________
Elliott D. McCarty
EDM:em
cc:

--- --- – Subdistrict Administrator