Were truck-mounted aerial lifts, cranes, and digger-derricks drawn from an interstate rental fleet mobile transportation equipment?

Plain-English summary

A California equipment seller acted as rental agent for a national lessor's fleet of about 250 aerial lifts, mobile cranes, and digger-derricks. Units were brought into California for short-term customer needs and later moved to other states as demand changed. The agent had been charging and reporting tax on periodic rental receipts.

California classified the truck-mounted units as mobile transportation equipment. They moved from state to state under their own power, carried the driver needed to deliver and operate them, and transported the rig permanently attached to the truck chassis and body.

Because the equipment was MTE, the rental receipts were not taxable and the agent should not charge the lessee tax on them. The source said that any tax generally due would instead be measured by the units' cost and owed by the national leasing company, subject to the detailed guidelines enclosed with the letter.

Rental operation and unresolved tax questions

The requester principally sold and serviced utility equipment for a utility, a telephone company, California, municipalities, and contractors. For customers' abnormal workloads or equipment breakdowns, it acted as the Northern California rental agent for a separate national leasing corporation. The agent supplied no operator; it arranged delivery from a national fleet of approximately 250 mobile units.

The reported California rentals were daily, weekly, or monthly rather than long-term lease-purchase contracts. Units entered California for temporary needs and idle units moved to other states as demand arose. The requester had regularly invoiced customers for California tax measured by periodic rentals and included the rentals and tax in Board reports.

The classification was specific to combination units consisting of truck chassis and bodies with aerial lifts, cranes, diggers, or similar rigs permanently attached. Counsel reasoned that the trucks traveled state to state under their own power, carried the driver needed for delivery and jobsite movement, and transported their attached rigs. The source supplies no unit models, weights, road records, customer leases, delivery records, or evidence testing any differently mounted equipment.

The instruction to stop taxing rental receipts did not resolve the prior reporting history. The letter does not authorize a refund or credit, identify periods or amounts, or say whether the agent or national lessor had paid purchase-price tax. It says only that, “generally speaking,” any tax due would be on unit cost and owed by the national lessor. The agency urged an in-person meeting because of the matter's complexity and possible tax consequences.

The PDF says Regulation 1661 and cost-tax guidelines were enclosed, but it ends after an unitemized “Enclosures” line and copy list. The May 20 request and its supporting materials are also absent. The live annotation now says only that certain kinds of mobile truck cranes constitute MTE; it omits the fleet, attachment, travel, reporting, and unresolved cost-tax facts.

Common questions

Why did the units qualify as MTE if their main job was lifting or digging?

They were trucks designed to move substantial distances and carried both the driver and the permanently attached equipment.

Were the short-term rental receipts taxable?

No. The source directed the California agent not to charge tax on those receipts.

Who generally bore any tax on the equipment?

The letter said tax, if due, generally applied to the national lessor based on the units' cost.

Did the letter decide how to recover rental-receipts tax already reported?

No. It told the agent not to charge tax on future MTE rental receipts but gave no refund or credit procedure for prior reports.

Citations and references

• California Revenue and Taxation Code section 6023
• California Sales and Use Tax Regulation 1661
• May 20, 1975 request and supporting materials — referenced but not included
• Regulation 1661 copy and cost-tax guidelines — listed as enclosures but not included

Verbatim support

From the official June 26, 1975 letter:

Under these circumstances, it is our opinion that these units are mobile transportation equipment. Accordingly, the rental receipts are not subject to tax and therefore you should not charge your lessee any tax thereon.

Generally speaking, if there is any tax due on these units, it is due on the cost of the units and would be owed by U---.

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/335-0048.pdf

Original ruling text

STATE OF CALIFORNIA

335.0048

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)

June 26, 1975

Mr. D. R. H--P--- P--Post Office Box “--”
---, CA XXXXX

Dear Mr. H---:
SR – XX XXXXXX

We have just completed our review of the material you enclosed with your letter of May 20, 1975. We understand that the principal activity of your company is the sales and service of utility equipment (aerial lifts, mobile cranes, digger-derrick equipment) to P--- G--- & E--- Co., P--- T--- Co., the State of California, various municipalities and some contractors. Some of your customers have occasional need for temporary rental of such equipment at times when they have abnormal work loads, equipment breakdowns, etc. Although your company does not own and supply rental equipment, you have an arrangement with a national firm, U--- E--- L--- Corporation (U---) based in --- whereby you act as their northern California rental agent. When one of your customers desires to rent equipment (you do not supply the operator), you make arrangements with the --- headquarters of U--- to deliver a specific unit into California for the temporary rental need. The California requirements are supplied by drawing on a national fleet of approximately 250 such mobile units maintained by the leasing corporation. California rentals are short term (monthly, weekly, or daily) rather than long term lease purchase contracts. Idle rental equipment is removed to other states as requirements arise elsewhere. In the belief that these rentals are taxable, it has been your practice to invoice customers for California tax, measured by the periodic rental charges. These rentals and the appropriate tax have been regularly included in your tax reports to the State Board of Equalization. The first question to be answered is whether the items in question, i.e., aerial lifts, mobile cranes, digger-derrick equipment (this type of equipment is a combination unit made up of a truck chassis and body with the crane, digger, etc., attached thereto in a permanent manner) is mobile transportation equipment.

Mr. D. R. H--SR – XX XXXXXX

-2-

June 26, 1975
335.0048

Section 6023 defines mobile transportation equipment as including: “‘Mobile transportation equipment’ includes equipment such as railroad cars and locomotives, buses, trucks, (except ‘one-way rental trucks’), truck tractors, truck trailers, dollies, bogies, chassis, reusable cargo shipping containers, aircraft and ships, and tangible personal property which is or becomes a component part of such equipment….” (Emphasis added) Under Regulation 1661, copy enclosed, mobile transportation equipment is limited to those units that are designed for carrying persons or property substantial distances. Clearly the units in question are trucks. Since the units are moved from state to state by their own power when the need arises, they are also clearly the kind of property that is designed to be moved substantial distances. The only remaining question is whether they are designed to carry persons or property substantial distances. Clearly they are designed to carry persons because someone must drive the unit to the lessee from in or out of the state. Also, it is used to move the driver of the unit to the jobsite. It is also used to transport the rig that is attached to the truck chassis and body Under these circumstances, it is our opinion that these units are mobile transportation equipment. Accordingly, the rental receipts are not subject to tax and therefore you should not charge your lessee any tax thereon. Generally speaking, if there is any tax due on these units, it is due on the cost of the units and would be owed by U---. In this regard we have attached hereto some guidelines that can be used in determining whether U--- owes any tax on the cost of the units. In view of the complexity of this matter and the possible tax consequences, we suggest you contact Mr. Zelle of our Sacramento District office in order that you may arrange a meeting to personally discuss your problem. His phone number is 445-4915. Very truly yours,

Glenn L. Rigby
Tax Counsel
Lb
Enclosures

Bc:

Sacramento – Auditing (FZ)
Oakland – (VF)
San Francisco (NL)