Was a feed-mixing wagon MTE even though it usually moved only short distances on one farm and its lease use occurred in Texas?

Plain-English summary

A cattle-feeding-equipment manufacturer protested tax on a feed wagon it had leased for evaluation at a Texas operation. The wagon mixed feed while moving it from storage bins to feeding troughs, usually over short distances on the same feed lot or dairy, and normally traveled on highways only for service.

The hearing officer nevertheless treated the wagon as mobile transportation equipment. It was mounted on a standard truck chassis, could carry feed substantial distances if needed, and had actually been driven from California to Texas and back.

Because an MTE lease was excluded from the definition of a sale, the lessor was treated as the consumer. The source said the act of leasing was a taxable use even though the lessee's functional use occurred outside California. It also found an independent California use when the manufacturer drove the wagon in California on the way to Texas.

The recommendation was to redetermine the assessment without adjustment.

Transaction and procedural record

H. L. Cohen heard the petition in Fresno on June 14, 1978 and dated the recommendation July 5. The audit covered April 1, 1974 through December 31, 1976; the determination was issued April 22, 1977. The protested tax was based on $16,417, not stated as a $16,417 tax bill. No rate or resulting tax dollars are supplied.

The corporation had built and sold cattle-feeding equipment since August 1955, and its prior audit ended March 31, 1971. It normally sold rather than leased its output. In December 1975 it leased a feed wagon on a 1974 Ford truck chassis to a redacted Texas feed-lot customer that wanted to evaluate it. The manufacturer drove the wagon to Texas, and the customer drove it back to California after the lease. The lease term, rentals and actual contract are not supplied.

The chassis had been bought for resale without tax or reimbursement. Its engine powered the mixing equipment; predetermined feed ingredients were mixed and transported from bins to troughs. Short typical trips did not negate the capacity to travel and carry feed substantial distances. The actual California operation during delivery independently supported the use-tax result, even apart from the hearing officer's analysis of leasing as use.

Authorities and source limits

The PDF cites Annotation 335.0048, June 26, 1975 as “airline lift catering trucks,” and 335.0005, September 26, 1974 as “mobile truck cranes.” The live section identifies 335.0048 as Mobile Cranes and 335.0005 as Catering Trucks. The numbered authorities and dates remain preserved; the PDF's reversed subject descriptions are not silently corrected.

The live 335.0019 entry describes the lessor as consumer of inputs, including purchased fabrication labor. The PDF does not supply a separate fabrication-labor charge or analysis. It instead documents the Texas evaluation lease, $16,417 measure and California delivery use omitted from the live summary.

No chassis invoice, manufacturing-cost schedule, lease, delivery records, audit or final Board disposition is attached. The published result is the hearing officer's recommendation, not evidence of a later collection or refund.

Common questions

Did the wagon's usual short-distance farm use prevent MTE status?

No. The decision focused on its truck-mounted design and capacity to transport feed substantial distances.

Did the Texas lease avoid California tax?

No. The source treated the lessor's lease of MTE as a taxable use and also relied on the manufacturer's California operation of the wagon during delivery.

Was the wagon actually capable of long-distance travel?

Yes. It was driven from California to Texas and returned after the lease.

Citations and references

• California Revenue and Taxation Code sections 6006(g)(4), 6023, and 6201
• California Sales and Use Tax Regulation 1661(b)
• Annotations 335.0048 and 335.0005 — cited dates retained; PDF subject labels conflict with live entries

Verbatim support

From the official recommendation:

The amount upon which the protested tax is based is $16,417.

Petitioner operated the equipment in this state in transporting it to Texas. That use would of itself make petitioner liable for tax.

Redetermine without adjustment.

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/335-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/335-0019.pdf

Original ruling text

STATE OF CALIFORNIA
BOARD OF EQUALIZATION

In the Matter of the Petition
for Redetermination of State
and Local Sales and Use Taxes
H. L. C---.,

Petitioner.

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335.0019

DECISION AND RECOMMENDATION
OF HEARING OFFICER
Account No. SR --- XX XXXXXX

The above-entitled matter came on regularly for hearing on June 14, 1978 in Fresno, California. H. L. Cohen, Hearing Officer. Appearing for Petitioners:

Mr. T--- W. H---, General Manager

Appearing for the Board

Mr. M. Anderson, Principal Auditor
Fresno District
Mr. E. Smith, Auditor
Fresno District

Protest
Petitioner protests the assertion of tax on a lease of mobile transportation equipment. Tax was asserted pursuant to an audit covering the period from April 1, 1974, through December 31, 1976, and a determination issued on April 22, 1977. The amount upon which the protested tax is based is $16,417. Contentions Petitioner contends that: 1. The equipment leased was not mobile transportation equipment, thus tax is not due on the purchase price; and 2.

The equipment was leased outside California, thus the lease was not subject to tax.

H. L. C--- Co.
SR --- XX XXXXXX

-2-

July 5, 1978
335.0019

Summary
1.
Petitioner is a corporation which is in the business of building and selling cattle feeding equipment. It began in business in August 1955. The last prior audit was for the period ending March 31, 1971. 2. Petitioner manufactures a piece of equipment called a feed wagon which mixes feed ingredients and is used to transport the feed to the feeding trough. The feed wagon is mounted on a standard truck chassis. The truck engine provides power for mixing. Typically feed ingredients are stored in bins. Predetermined amounts of each ingredient are placed in the feed wagon, where they are mixed to achieve homogeneity. The feed bins are usually located on the same feed lot or dairy as the feeding troughs. The feed wagon transports the mixed feed from the bins to the troughs, which are usually only a short distance ways. The feed wagon does not normally travel over highways except to be serviced. Petitioner purchases the truck chassis for resale, paying no tax or tax reimbursement. 3. In December 1975 petitioner leased a feed wagon mounted on a 1974 Ford truck chassis to G--- B--- F--- L--- for use at its operation in ---, Texas. Petitioner does not usually lease the equipment it manufactures but did so in this instance because G--- wished to perform an evaluation of the equipment. Petitioner delivered the feed wagon by driving it to G--- in Texas. G--- drove the feed wagon back to petitioner’s location in [California] at the conclusion of the lease period. The auditor considered the feed wagon to be mobile transportation equipment (MTE) and asserted tax based on the cost to petitioner. Analysis and Conclusions 1. Section 6006(g)(4) of the Revenue and Taxation Code excludes form the definition of “sale” leases of MTE. Section 6023 of the Code defines MTE to include trucks. Sales and Use Tax Regulation 1661(b) further defines MTE to include equipment for use in transporting persons or property for substantial distances. We have interpreted this to me equipment designed for such use. See Business Taxes Law Guide, Annotations 335.0048, June 26, 1975 (airline lift catering trucks) and 335.0005, September 26, 1974 (mobile truck cranes). Petitioner’s equipment is mounted on a truck chassis. It is capable of being driven for substantial distances. It was in fact driven from California to Texas and back. It could also be used to transport feed over a substantial distance from bins to troughs if the bins were a long distance from the troughs. It must be concluded that petitioner’s equipment is MTE. 2. Section 6201 of the Code applies the use tax to the storage, use or other consumption in this state of tangible personal property purchased at retail for such storage, use or other consumption. As stated above, the lease of MTE is not a sale by the lessor; the act of leasing, however, is a taxable use. The fact that the functional use under the lease is outside the state is immaterial. The lease of the equipment by petitioner is thus subject to tax even though the function al use of the equipment under the lease was outside the state. However, it is not

H. L. C--- Co.
SR --- XX XXXXXX

-3-

July 5, 1978
335.0019

necessary to rely on this use alone. Petitioner operated the equipment in this state in transporting it to Texas. That use would of itself make petitioner liable for tax. Recommendation Redetermine without adjustment.

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H. L. Cohen, Hearing Officer

July 5, 1978
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Date