Were center-mount cranes MTE even when limited speed and cost made self-propelled trips over 10 miles uneconomical?

Plain-English summary

Two crane lessors challenged California assessments that treated several rubber-tire and truck-based cranes as mobile transportation equipment.

For the P&H/W350 and P&H/W100 center-mount cranes highlighted by the annotation, the dominant purpose was lifting heavy material at construction sites, and their rough-terrain bases, limited speed, and operating cost made self-propelled trips over 10 miles uneconomical. Some moves also required special trip permits.

The hearing officer still classified the cranes as MTE. Mobile transportation of each crane was a necessary and essential part of its design and functional use, the cranes did not operate only within a confined area, and highway transportation was an admitted use. The hearing officer rejected a varying classification based on an arbitrary mileage cutoff.

The companion decisions reached the same classification for other truck-crane models. One recommended no adjustment to purchase-price tax. The other directed a reaudit and allowed potential credit for tax paid by lessees only when the required customer statement and waiver were obtained.

Two petitions, models, and protested measures

Both petitions were heard in Oakland on June 1, 1976 and produced separate June 24 reports. The July 7 transmittal says the taxpayers could request Board oral-hearing consideration after further audit verification. The official PDF contains no later hearing, adopted Board order, withdrawal, settlement, payment, or final disposition.

The first petition covered January 1, 1972 through June 30, 1975 and protested a $538,777 purchase-price measure for cranes classified as MTE. It included rough-terrain P&H/W350 and P&H/W100 center-mount cranes and truck-base P&H T-300 and T-750 models. The report says some adjustment already had been allowed for rental-receipt tax where a customer statement and tax waiver were obtained under audit schedule 10A-5-6. It recommended redetermination without further adjustment.

The second petition covered January 1, 1970 through December 31, 1973 and protested a $218,311 measure of excess tax reimbursement on R. O. Truck Crane Models TC-4B, TC 70-2A, TC 120-4D, and TC 120-6D. That taxpayer was an authorized seller and retailer, had reported use tax on a fair-hourly-rental basis, and also collected tax reimbursement from customers. The audit had denied credit because amounts were not returned under section 6054.5. The report called the lease reimbursement terms ambiguous but recommended a reaudit and credit for each lessee supplying the approved statement and waiver.

Missing evidence and incomplete case citation

The first report incorporates a May 21 taxpayer memorandum and refers to photographs; the second relies on representative photographs in a brochure. The transmittal says hearing-report copies and audit workpapers were attached. None of the memorandum, brochures, photographs, audit schedule, workpapers, lease, lessee statements, waivers, invoices, registrations, permits, travel records, returns, collections, refunds, or reaudit results is reproduced.

The reports print Culligan Water Co. v. State Board of Equalization, “17 Cal. 3d” followed by a blank page field and “[decided on 6/4/76].” That exact incomplete citation cannot parse. A normalized 17 Cal.3d 86 resolves to Culligan Water Conditioning of Bellflower, Inc. v. State Board of Equalization, decided June 4, 1976, matching the printed date. The missing page is not inserted into the original text.

The live 335.0600 annotation summarizes only the P&H/W350 and P&H/W100 facts and MTE reasoning. It omits both procedural records, the other six crane models, hearing date, two audit periods and measures, prior credit, ambiguous lease, customer-statement/waiver condition, reaudit, no-adjustment recommendation, missing incorporated evidence, incomplete Culligan citation, and absence of a final Board disposition.

Common questions

Did an uneconomical range over 10 miles prevent MTE status?

No. The source rejected a fixed mileage cutoff and focused on highway movement as an essential design and functional use.

Was lifting rather than transportation the cranes' main purpose?

Yes, but that did not control. The decision said equipment can have multiple uses and transportation remained necessary and essential.

Did every petition receive the same tax adjustment?

No. One recommendation upheld the determination without adjustment; the companion matter called for a reaudit and conditional credits based on customer statements and waivers.

Were these final Board decisions?

The source labels them hearing-officer decisions and recommendations, and the later transmittal offered Board oral-hearing consideration. No final Board disposition is included.

Citations and references

• California Revenue and Taxation Code sections 6006(g)(4), 6023, 6024, and 6054.5
• California Sales and Use Tax Regulation 1661
• California Vehicle Code section 465
• Culligan Water Co. v. State Board of Equalization — printed as 17 Cal. 3d with the page blank and June 4, 1976 decision date; normalized 17 Cal.3d 86 resolves to Culligan Water Conditioning of Bellflower, Inc. v. State Board of Equalization
• Taxpayers' May 21 memorandum, crane brochures and photographs, audit schedule 10A-5-6, lease, lessee statements and waivers, hearing-report copies, and audit workpapers — referenced but not included
• July 7, 1976 transmittal — offers later Board oral-hearing consideration; no final Board disposition is included

Verbatim support

From the official June 24, 1976 hearing-officer report:

It seems clear that the dominant or primary purpose of the cranes is not transportation. On the other hand, it is equally clear that mobile transportation of the property is a necessary and essential purpose of its design and functional use.

A varying exclusion for cranes made dependent on their range is not considered desirable. It follows that the cranes must be classified as mobile transportation equipment within the meaning of the law and regulation.

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/335-0600.pdf

Original ruling text

335.0600

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6366

July 7, 1976
Mr. G--- M. L--T---, M---, J--- & B--Attorneys at Law
--- --- ----- ---, CA XXXXX
Re:

SR -- XX XXXXXX
B--- C--- R--- Co.
SR -- XX XXXXXX
I--- E--- Corporation

Dear Mr. L---:
Attached are our decisions and recommendations on the above-named taxpayer’s petitions for redetermination of sales and use taxes. Our recommendations are premised primarily upon a finding that self-propelled transportation over the public highway is an essential functional use of the property. The length of the transportation appears to vary widely with the size and design of the particular crane. We have considered and rejected as unworkable a varying ruling for selfpropelled cranes dependent upon an arbitrary mileage figure. 1. We have recommended that credits be granted to I--- E--- for tax payments collected from leases and reported where a statement is secured from the lessee of the form and content allowed in the B--- C--- R--- audit. 2. When further audit verification is completed, please advise if you desire to have these taxpayer’s petitions considered by the board at an oral hearing. Very truly yours,

W. E. Burkett
Tax Counsel
WEB/vs
Attachments
cc:
B--- C--- R--- Co.

I--- E--- Corporation

B--- C--- R--- Co.
SR--- XX XXXXXX-010

-2-

July 7, 1976

I--- E--- Corporation

SR -- XX XXXXXX

bc:

--- – District Administrator
Attached are two copies of each
of the captioned hearing reports
And the audit work papers.

335.0600-1

STATE OF CALIFORNIA
BOARD OF EQUALIZATION

In the Matter of the Petition
for Redetermination Under the
Sales and Use Tax Law
B--- C--- R--- CO.

Petitioner

)
)
)
)
)
)
)
)

335.0600

DECISION AND RECOMMENDATION
OF HEARING OFFICER
Account No. SR -- XX-XXXXXX-010

This matter came on regularly for hearing in Oakland, California on June 1, 1976 before W. E. Burkett, Hearing Officer. Appearances

For the Taxpayer:

Mr. R. W. B---, Manager
Mr. G--- L---, Attorney at Law
Mr. R--- S---, President
C--- E--- D--A--- of Northern California (CEDA).

For the Board

Mr. L. F. Ferreira, Supervising Auditor
Mr. Robert Stamatis, Field Audit Supervisor
Mr. J. S. Rose, Field Audit Supervisor

Protested Item
(Period 1-1-72 to 6-30-75)

Purchase price of cranes determined to be mobile
Transportation equipment.

$538,777

Contentions of Taxpayer
1.

The cranes were improperly classified as mobile transportation equipment.

2.

An allowance should be made for the taxes paid on the crane rentals. Summary of Petition

The taxpayer is a domestic corporation engaged in the business of leasing.

B--- C--- R--- Co.
SR -- XX XXXXXX-010

-2-

June 24, 1976
335.0600

The protested measure of tax consists of the purchase price of rubber tire equipped cranes classified as mobile transportation equipment subject to tax measured by the cost price of the property. An adjustment has been allowed for taxes paid on rental receipts collected from customers where a statement and a tax waiver was obtained from the customer (see audit schedule 10A-5-6). It is the taxpayer’s contention that the cranes do not constitute mobile transportation equipment and are, therefore, subject to use tax measured by the leasing charge. The equipment in question includes the P&H/W 350 and P&H/W 100 center mount cranes. These are large power equipped cranes designed for use in the movement of heavy material at varying heights, chiefly at construction sites. Their base is specially designed for use in rough terrain. The cranes are self-propelled and capable of movement over the public highway. However, according to the taxpayer’s representative, it is not economically feasible to move the cranes by this method for distances in excess of 10 miles. This follows because of their limited speed and operating costs. The cranes are licensed for movement over the public highway but require special trip permits for some moves. The determination also includes the net purchase price of truck crane models P&H T-300 and P&H T-750. These are large truck base cranes constructed as a single unit. They are designed with a multiple wheel base. Examination of the photographs of these types of cranes indicate that they would be capable of movement over the highway for substantially greater distances than the rough terrain type cranes. Some minor adjustments are required to provide for movement of the property over the public highway. The taxpayer’s arguments are set forth in a written memorandum prepared by Attorney G--- L--dated May 21, 1976, a copy of which is attached hereto and incorporated herein by reference. Analysis and Conclusions The general issue presented is whether the items in question constitute mobile transportation equipment excluded from classification as leasing sales and therefore, subject to tax measured by the full cost price at the time of purchase or first use (Revenue and Taxation Code section 6006(g)(4)). Revenue and Taxation Code section 6023 provides the following definition of “mobile transportation equipment”:

B--- C--- R--- Co.
SR -- XX XXXXXX-010

-3-

June 24, 1976
335.0600

“6023. ‘Mobile transportation equipment.’ ‘Mobile transportation equipment’ includes equipment such as railroad cars and locomotives, buses, trucks (except ‘one-day 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 or baggage containers designed for hauling by passenger vehicles, or ‘one-way rental trucks’ as defined and identified pursuant to Section 6024.” The cranes in question do not come within the exclusion for “one-way rental trucks” as defined by Revenue and Taxation Code section 6024. Nor do they constitute a “passenger car” since they are not maintained for the transportation of persons (Vehicle Code section 465). The provisions of section 6023 are by definition illustrative of the type of property sought to be included. We therefore look to the provisions of Sales and Use Taxes Regulation 1661 (Leases of Mobile Transportation Equipment) promogulated [sic] by the board to implement this section of the law. It provides the following definition of “mobile transportation equipment”: “(b) LIMITATIONS ON THE TERM ‘MOBILE TRANSPORTATION EQUIPMENT’ AND DEFINITIONS OF PARTICULAR KINDS. “(1) The term ‘mobile transportation equipment’ includes only equipment for use in transporting persons or property for substantial distances. The term does not include items of a kind commonly used only in loading or unloading persons or property, or short distance moving within the confines of a limited area, such as a loading dock, warehouse, terminal, bay or airport. Examples of such items are hand dollies, forklift trucks, mine cars, lighters or barges specifically designed to be carried regularly aboard vessels for substantial distances. The term does include pickup trucks and tangible personal property which is or becomes a component part of mobile transportation equipment.” The term substantial distances is a relative term. Its use here, however, is to be considered in light of the entire definition which further defines the exclusion to include property “commonly used only for loading or unloading, [clearly not applicable]. . .or short distance moving within the confines of a limited area, such as loading dock, warehouse, terminal, bay or airport”. (Emphasis added.) It seems clear that the dominant or primary purpose of the cranes is not transportation. On the other hand, it is equally clear that mobile transportation of the property is a necessary and essential purpose of its design and functional use. A multiple use of transportation equipment has been recognized by the board for a variety of equipment.

B--- C--- R--- Co.
SR -- XX XXXXXX-010

-4-

June 24, 1976
335.0600

The cranes do not move within the confines of a limited area and transportation over the public highway is admittedly one of their uses. A varying exclusion for cranes made dependent on their range is not considered desirable. It follows that the cranes must be classified as mobile transportation equipment within the meaning of the law and regulation. The board’s classification is entitled to substantial weight and will not be overturned unless found to be clearly erroneous (see discussion in Culligan Water Co. v. State Board of Equalization, 17 Cal. 3d ___[decided on 6/4/76]). Recommendation It is recommended that the taxes be redetermined without adjustment.

__________
W. E. Burkett

6/24/76
____
Date

STATE OF CALIFORNIA
BOARD OF EQUALIZATION

In the Matter of the Petition
for Redetermination Under the
Sales and Use Tax Law
I--- E--- CORPORATION

Petitioner

)
)
)
)
)
)
)
)

335.0600

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

This matter came on regularly for hearing in Oakland, California on June 1, 1976 before W. E. Burkett, Hearing Officer. Appearances

For the Taxpayer:

Mr. R. W. B---, Manager
Mr. G--- L---, Attorney at Law
Mr. R--- S---, President
C--- E--- D--A--- of Northern California (CEDA).

For the Board

Mr. L. F. Ferreira, Supervising Auditor
Mr. Robert Stamatis, Field Audit Supervisor
Mr. J. S. Rose, Field Audit Supervisor

Protested Item
(Period 1-1-70 to 12-31-73)

Measure of excess tax reimbursement collected
in connection with leases of mobile transportation
equipment.

$218,311

Contentions of Taxpayer
1.
The application of an offset for use tax liability measured by a fair hourly rental charge was improper. The property utilized is not mobile transportation equipment. It is special construction equipment. 2. In any event, credit should have been granted for the taxes voluntarily paid with returns measured by actual rental collected from the lessees.

I--- E--- Corporation
SR -- XX XXXXXX

-2-

Junee 24, 1976
335.0600

Summary of Petition
The underlying facts and circumstances for this taxpayer’s petition are essentially the same as reported in the companion petition of B--- C--- R--- Company, Account No. SR -- XX XXXXXX, which by agreement of the parties, was held at the same time. The following exceptions are noted: 1.

The cranes involved here are R. O. Truck Cranes Models TC-4B, TC 70-2A, TC 120-4D, and TC 120-6D.

Representative photographs of the cranes are available in a brochure provided by the taxpayer’s representative. Our review of the photographs indicates that the crane apparatus is mounted immediately to the rear of the cab of the truck. The chassis upon which the crane is affixed appears to involve less custom design than existed in the companion case. However, we are advised that the truck cranes are purchased as a single unit. The cranes appear to be highly mobile. 2. This taxpayer is an authorized seller and retailer of cranes of the type which are the subject of this petition for redetermination. The audit staff has concluded that the taxpayer was authorized to measure its use tax liability by a fair hourly rental charge for the cranes (per Regulation 1661(e)(2)). The taxpayer has in fact reported on this basis. However, in each case it collected tax reimbursement from its customer. No credit has been allowed for the taxes collected from the customer and paid over to the state since the amounts were not returned to the customers (per Revenue and Taxation Code section 6054.5). Analysis and Conclusions With respect to the contention that the cranes do not constitute mobile transportation equipment, our conclusions are the same as set forth in the aforementioned companion petition which we reproduce in pertinent part as follows: The general issue presented is whether the items in question constitute mobile transportation equipment excluded from classification as leasing sales and therefore, subject to tax measured by a fair hourly rental charge. Revenue and Taxation Code section 6023 provides the following definition of “mobile transportation equipment”:

I--- E--- Corporation
SR -- XX XXXXXX

-3-

Junee 24, 1976
335.0600

“6023. ‘Mobile transportation equipment.’ ‘Mobile transportation equipment’ includes equipment such as railroad cars and locomotives, buses, trucks (except ‘one-day 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 or baggage containers designed for hauling by passenger vehicles, or ‘one-way rental trucks’ as defined and identified pursuant to Section 6024.” The cranes in question do not come within the exclusion for “one-way rental trucks” as defined by Revenue and Taxation Code section 6024. Nor do they constitute a “passenger car” since they are not maintained for the transportation of persons (Vehicle Code section 465). The provisions of section 6023 are by definition illustrative of the type of property sought to be included. We therefore look to the provisions of Sales and Use Taxes Regulation 1661 (Leases of Mobile Transportation Equipment) promogulated [sic] by the board to implement this section of the law. It provides the following definition of “mobile transportation equipment”: “(b) LIMITATIONS ON THE TERM ‘MOBILE TRANSPORTATION EQUIPMENT’ AND DEFINITIONS OF PARTICULAR KINDS. “(1) The term ‘mobile transportation equipment’ includes only equipment for use in transporting persons or property for substantial distances. The term does not include items of a kind commonly used only in loading or unloading persons or property, or short distance moving within the confines of a limited area, such as a loading dock, warehouse, terminal, bay or airport. Examples of such items are hand dollies, forklift trucks, mine cars, lighters or barges specifically designed to be carried regularly aboard vessels for substantial distances. The term does include pickup trucks and tangible personal property which is or becomes a component part of mobile transportation equipment.” The term substantial distances is a relative term. Its use here, however, is to be considered in light of the entire definition which further defines the exclusion to include property “commonly used only for loading or unloading, [clearly not applicable]. . .or short distance moving within the confines of a limited area, such as loading dock, warehouse, terminal, bay or airport”. (Emphasis added.) It seems clear that the dominant or primary purpose of the cranes is not transportation. On the other hand, it is equally clear that mobile transportation of the property is a necessary and essential purpose of its design and functional use. A multiple use of transportation equipment has been recognized by the board for a variety of equipment.

I--- E--- Corporation
SR -- XX XXXXXX

-4-

Junee 24, 1976
335.0600

The cranes do not move within the confines of a limited area and transportation over the public highway is admittedly one of their uses. A varying exclusion for cranes made dependent on their range is not considered desirable. It follows that the cranes must be classified as mobile transportation equipment within the meaning of the law and regulation. The board’s classification is entitled to substantial weight and will not be overturned unless found to be clearly erroneous (see discussion in Culligan Water Co. v. State Board of Equalization, 17 Cal. 3d ___[decided on 6/4/76]). We have examined the taxpayer’s lease agreement with the customer relative to the contract right to obtain reimbursement form the lessee for the cost and expense of the tax burden. The provisions of the lease are ambigious [sic] and uncertain as to the intent of the parties. However, in view of the parties’ contention and the administrative action taken in the companion case, we conclude that the taxpayer should be afforded a credit for tax payments made by each lessee who provides the taxpayer with a statement and tax waiver of the form and content approved in the companion case. Recommendation District audit staff to conduct a reaudit and initiate adjustments in accordance with the foregoing conclusions.

__________
W. E. Burkett

6/24/76
____
Date