Were semi-trailer mobile CT-scan units mobile transportation equipment for California sales-and-use-tax purposes?

Plain-English summary

A lessor bought mobile CT-scan units ex-tax and leased them to a company that placed the units at hospitals and supplied two technologists to operate each one. Audit staff asked whether the units were mobile transportation equipment and, if not, whether the hospital arrangements were leases.

California classified the units as MTE. They looked like semi-trailer moving vans, their medical equipment was permanently affixed, and they could transport persons or property substantial distances at highway speeds.

The taxpayer's argument that the Vehicle Code classified the units as "special mobile equipment" did not change the sales-and-use-tax result. The memorandum reasoned that Revenue and Taxation Code section 6023 used "such as" before its MTE examples, reaching equipment akin to truck trailers and their component property.

Because the units were MTE, the memorandum did not analyze whether the hospital arrangements were leases.

What was reported—and what was not decided

The March 20, 1984 request said a lessor acquired several CT-scan units ex tax and leased them to a second company. That company contracted for the units to be present at different hospitals during specified periods each week and had to provide two experienced, full-time technologists to operate each unit onsite.

The units reportedly looked externally like semi-trailer moving vans, with all medical equipment permanently attached according to floor plans offered by the manufacturer. Counsel said the historical criteria—capacity to carry persons or property substantial distances at highway speeds—were “clearly” met and treated the combined trailers and component equipment as akin to items listed in section 6023.

The two-page memorandum provides no dimensions, weights, axle or registration data, speeds, trip distances, highway-use records, towing details, floor plans, or identification of what persons or property the trailers transported besides their permanently attached equipment. The audit request, vendor records, leases, hospital agreements, technologist records, and material supporting the taxpayer's Vehicle Code section 575 argument are also absent.

The source resolves only classification. It does not analyze the backup question whether the hospital agreements were leases, and it does not state the tax measure, election history, assessment, refund, or later disposition arising from the lessor's ex-tax acquisitions.

The live annotation preserves the trailer appearance, permanent medical equipment, hospital scheduling, technologist requirement, and MTE result. It omits the ex-tax purchases, taxpayer's special-mobile-equipment argument, section 6023 reasoning, and unanswered lease question.

Common questions

Did the permanently installed CT equipment keep the trailers from being MTE?

No. The source treated the units as truck-trailer-like equipment capable of transporting property substantial distances at highway speeds.

Did the Vehicle Code's special-mobile-equipment label control?

No. The memorandum found no exclusion for that classification in Revenue and Taxation Code section 6023.

Did California decide whether the hospital agreements were leases?

No. After classifying the units as MTE, the memorandum said the second question did not need analysis.

Did the memorandum determine the tax due on the ex-tax purchases?

No. It classified the equipment but gave no tax measure, election history, assessment, refund, or payment result.

Citations and references

• California Revenue and Taxation Code sections 6023 and 6024
• California Vehicle Code sections 465 and 575
• March 20, 1984 audit memorandum and special-mobile-equipment material — referenced but not included

Verbatim support

From the official April 26, 1984 memorandum:

Clearly, these criteria have been met in this case and the units in question must, therefore, be treated as mte.

Having concluded that the units are mte, there is no need to analyze the second question.

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/335-0049.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

335.0049

To:

Oakland – Auditing (NJC)

April 26, 1984

From:

HQ – Legal (ELS)

Subject:

L--- Corporation
XXXX --- Lane #XXX
--- ---, CA

SR --- XX-XXXXXX

M--- Incorporated
XXXX-XX --- Avenue
--- ---, CA

Unlicensed

This is in response to your memorandum of March 20, 1984. L--- Corporation (L---) acquired several mobile CT Scan Units ex-tax from its vendor and leased these units to M--Incorporated (M---). M---, in turn, entered into agreements with various hospitals whereby the units were to be present at those hospitals during certain periods each week. M--- was required to provide two full time experienced technologists to operate each unit on site. Externally, the appearance of the units is that of semi-trailer moving vans. All equipment is located and permanently affixed in the semi-trailers in accordance with various floor plans offered by the manufacturer of the units. You wondered first, if the units are classifiable as mobile transportation equipment (mte) and; second, if not so classifiable, whether the agreements between M--- and the hospitals should be construed as leases. Revenue and Taxation Code Section 6023 defines mte as follows: “‘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. ‘Mobile transportation equipment’ does not include passenger vehicles as defined in Section 465 of the Vehicle Code, trailers and baggage containers designed for hauling by passenger vehicles, or ‘one-way rental trucks’ as defined and identified pursuant to Section 6024.”

Oakland - Auditing (NJC)

-2-

April 26, 1984
335.0049

In the past, the criteria used in determining whether items such as the mobile CT Scan Units in question constitute mte are that the items be capable of being used to transport persons or property, substantial distances, at highway speeds. Clearly, these criteria have been met in this case and the units in question must, therefore, be treated as mte. We are not persuaded otherwise by the taxpayer’s argument that the units have been classified as “special mobile equipment” under section 575 of the Vehicle Code. Had the Legislature intended that such equipment not qualify as mte for Sales and Use Tax purposes, it would have so stated in section 6023. However, the Legislature’s use of the phrase “such as” prior to the list of items identified as mte indicates that items akin to those listed must be treated as mte. Here, the units in question are akin both in appearance and function to “truck trailers…and tangible personal property which is…a component part…” of those trailers. Having concluded that the units are mte, there is no need to analyze the second question.

ELS:fr

bc:

335.0049.doc

Oakland – D. A.