Was a pipe vendor reselling lumber used to block pipe safely in railroad cars when it did not separately bill customers for the lumber?

Plain-English summary

California treated a pipe vendor as consumer of lumber used to block pipe in railroad cars. The lumber prepared the vendor's products for safe shipment rather than resale, and the vendor said customers were not specifically billed for the blocking material.

Under former Ruling 60, Tax Counsel E. H. Stetson said sales tax or use tax applied to the lumber sale. The letter does not identify which tax applied, the seller, transaction location, delivery, storage or use facts needed to choose between them.

Request, Ruling 60, limited facts, and absent outcome

The December 10 letter responds to a November 28 request from a redacted assistant general auditor at a redacted California company. The source does not state the request year, although it identifies the response date. The request and account record are absent.

The only transaction facts are that the taxpayer used lumber to block pipe shipped in railroad cars and did not specifically bill customers for required blocking material. No lumber, pipe, railcar, shipment, customer, destination, supplier, quantity, price, contract, invoice, title, possession, return or reuse term is supplied.

Stetson reasoned that the taxpayer bought the lumber for a purpose other than resale: properly preparing its own products for safe customer shipment. The letter does not analyze whether the customer received the lumber, whether it remained in the railcar, or whether any general pipe price recovered cost.

The result relies on Sales and Use Tax Ruling 60, described as enclosed. The official PDF includes no copy and gives no title, date, text or other source, so this page does not infer its requirements beyond the letter's application.

The source says the sales tax or the use tax applies with respect to the sale of this lumber to you. It does not decide the tax type, identify a liable retailer, state a measure or rate, or supply a return, audit adjustment, assessment, payment, claim, appeal or outcome. A copy recipient, Mr. John B. Evans, is named without a role.

The live 400.0120 annotation compresses the result to lumber used to block pipe in railcars being consumed rather than sold by the pipe vendor. It omits the no-specific-charge fact, safe-shipment purpose, Ruling 60, sales-tax-or-use-tax uncertainty, request and missing record.

The official one-page PDF has a clean rendered text layer and only a small seal image. Two fresh downloads and extractions matched exactly, and the preserved source tail remains byte-identical after removal of only pdftotext's terminal newline and form feed. No case citation appears.

What this means for you

Manufacturers shipping their products

Materials used to make the seller's own goods safe for transport were treated as consumed where customers were not specifically billed for them. Document the shipping function, contract, charge, title, destination and disposition.

Accountants and tax professionals

Do not infer whether sales or use tax applies from this letter. Preserve supplier and delivery facts, invoices, storage and use, customer terms and current authority; the incorporated Ruling 60 is missing.

Common questions

What was the lumber used for?

Blocking the vendor's pipe so it could be shipped safely in railroad cars.

Did the customer receive a specific lumber charge?

The taxpayer stated that customers were not specifically billed for it.

Was the lumber treated as resold with the pipe?

No. Counsel treated the vendor as consuming it to prepare its own products for safe shipment.

Did counsel decide whether sales tax or use tax applied?

No. The letter says sales tax or use tax without choosing between them.

Is Ruling 60 available in the source?

No. It is described as enclosed, but the official PDF contains only this letter.

Was a tax amount assessed or paid?

The source gives no lumber price, measure, rate, return, audit, assessment, payment or outcome.

Citations and references

• Former California Sales and Use Tax Ruling 60 — historical shipping-material rule applied
• November 28 request — referenced but not included
• Requester and account; pipe, lumber and railcars; customer, supplier and destination; quantities and costs; contracts, invoices, title and disposition; tax type, measure and rate; return; audit; assessment; payment; claim; appeal; and outcome — described or implicated but not included

Verbatim support

From the official December 10, 1951 letter:

You state that you do not bill the customer specifically for the blocking material required.

It appears to us that you buy this lumber for some purpose other than resale, i.e., in order that you may properly prepare your products for safe shipment to your customer.

Accordingly, it is our opinion that, pursuant to Sales and Use Tax Ruling 60, copy enclosed, the sales tax or the use tax applies with respect to the sale of this lumber to you.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 400.0120
• Original supporting opinion: 400.0120 PDF

Original ruling text

400.0120

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

December 10, 1951

Mr. E. F. H--Assistant General Auditor
U--- S--- P--- and F--- C-----, California
Account No. X-XXXX
Dear Mr. H---:
This is in reply to your letter of November 28 setting forth the facts with respect to your use of lumber for blocking pipe shipped in railroad cars. You state that you do not bill the customer specifically for the blocking material required. It appears to us that you buy this lumber for some purpose other than resale, i.e., in order that you may properly prepare your products for safe shipment to your customer. Accordingly, it is our opinion that, pursuant to Sales and Use Tax Ruling 60, copy enclosed, the sales tax or the use tax applies with respect to the sale of this lumber to you. Very truly yours,

E. H. Stetson
Tax Counsel

EHS:ph
cc:

Mr. John B. Evans