When did a 1984 California memorandum treat veterinary x-ray films as consumed rather than sold?

Plain-English summary

The February 8, 1984 memorandum clarified an earlier position that a lump-sum veterinary charge had to be allocated between x-rays and professional services. It said the 1982 amendment to section 6020 required allocation only when the veterinarian made a sale of x-rays under section 6006.

The agency understood that veterinarians commonly produced x-ray films to diagnose animals while retaining title and possession. When a veterinarian did not transfer title or possession to the customer, the memorandum found no taxable sale and treated the veterinarian as the consumer of the materials and supplies used to produce the films.

A temporary transfer to another veterinarian also was not a sale when the then-existing veterinary rule required the original veterinarian to provide the film on a written request authorized by the owner and required its return within a reasonable time.

An independent x-ray laboratory that furnished animal x-ray films to a veterinarian for consideration was different. The memorandum clearly treated that producer as a retailer of tangible personal property. Its next sentence, addressing a diagnosis or report and retained-title storage, is grammatically incomplete in the official PDF; the current live annotation supplies a coherent version, described below.

Live annotation and source posture

The current live annotation largely preserves the retained-title-and-possession and temporary-transfer conclusions. It says the transferred film must return to the vendor who originally treated the animal, while the source says it must return to the veterinarian. The live page also calls the laboratory transaction a taxable sale or lease; the source says only that a taxable sale occurs.

The source's last sentence visibly begins on page one with Also, and continues on page two as such a producer of x-rays is considered a retailer of diagnosis or report .... That sentence is grammatically incomplete and does not itself contain the live page's full statement. The live annotation says the producer remains a retailer even though it may furnish a diagnosis or report with the film, retain title, and permanently store the film after use. This page attributes those repaired conditions to the live annotation rather than silently inserting them into the memorandum.

The memorandum cites People v. Grazer (1956) 138 Cal.App.2d 273. Independent legal research found that 138 Cal. App. 2d 273 identifies Skaggs v. City of Los Angeles, while People v. Grazer begins at 138 Cal. App. 2d 274. The source tail remains unchanged, and its printed reporter page does not verify the named authority.

The July 18, 1983 memorandum is described as an enclosure but is not in the official two-page PDF. The redacted inquiries are also absent. No veterinarian, customer, animal owner, laboratory, film, request, permission, return, contract, bill, allocation, report, storage record, audit, assessment, refund or applied outcome is supplied.

CDTFA's Annotated Legal Opinions collection says these letters are summarized as annotations and statutory law controls over an inconsistent annotation. The PDF consists of native text with no raster image, so no OCR was required. Two fresh direct PDF downloads and two live-page downloads were byte-identical; duplicate default text extractions also matched.

What this means for you

Separate a veterinarian's consumption of diagnostic-film materials from a transfer of film for consideration. The no-sale conclusion depended on retained title and possession or a narrow temporary transfer meeting the written-request, owner-permission and return conditions of a historical rule. Confirm the current custody rule and actual records before applying it.

Common questions

Q: When was the veterinarian the consumer of the film materials?

A: When the veterinarian produced films for diagnosis and did not transfer title or possession to the customer.

Q: Why was the temporary transfer not a sale?

A: The cited rule required a written request by another veterinarian, permission from the animal owner, and return to the original veterinarian within a reasonable time.

Q: When did the memorandum treat an x-ray producer as a retailer?

A: When the producer furnished animal x-ray films for consideration to veterinarians who ordered them.

Q: Does the source clearly state the diagnosis/report and permanent-storage branch?

A: No. Its final sentence is incomplete; the coherent version appears on the current live annotation.

Missing evidence and references

• July 18, 1983 memorandum — described as enclosed but absent
• Redacted later inquiry and internal request — described but absent
• Veterinarian, customer, owner, laboratory and animal identities — absent
• Films, written requests, owner permissions and return records — implicated but absent
• Contracts, bills, allocations, reports and storage records — implicated but absent
• Returns, audits, assessments, refunds and later outcomes — not supplied

Verbatim support

From the official February 8, 1984 internal memorandum:

In our view, a taxable sale does not occur in such a situation.

Therefore a veterinarian is to be considered a consumer of the materials and supplies he uses to produce diagnostic x-ray films for his own use, provided the veterinarian does not transfer title or possession of these x-ray films to his customers.

This section further provides that the transferred x-ray film must be returned to the veterinarian who originally treated the animal within a reasonable time.

It is our position, however, that a taxable sale occurs when a producer of x-ray films (e.g., an x-ray lab) furnishes x-ray films of animals, for a consideration, to veterinarians who order them.

Citations and references

• California Revenue and Taxation Code §§ 6006 and 6020
• 1982 California Statutes, chapter 301 (SB 1252)
• Former California Administrative Code, title 16, § 2031(b)(2)
• People v. Grazer (1956), printed at 138 Cal. App. 2d 273; the named case begins at page 274
• July 18, 1983 memorandum — described enclosure absent

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 420.0675
• Original supporting opinion: 420.0675 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

To:

X-----------------------

From:

Charles J. Graziano

Subject:

Application of Tax to Lump-sum Billing by X-ray Laboratories

420.0675

Date:

February 8, 1984

X-------------- has recently raised a question concerning a matter discussed in my memo of July 18, 1983 to you. The pertinent part of this memo (copy enclosed) concerns taxation of lump-sum charges by veterinarians for professional services (not related to the sale of tangible personal property) and x-rays. Because of X--------------‘s inquiry, X----------- has asked me to write to you in order to clarify and elaborate on our position regarding this matter. In my memo, I stated that a proration of the lump-sum charge must be made by the veterinarian between the charges for the sale of x-rays and for the nontaxable services. Due to the recent amendment to Section 6020 of the Revenue and Taxation Code (SB1252, Ch. 301, Stats. 1982), an allocation is required in transactions where a veterinarian makes a “sale” of xrays, as that term is defined under Section 6006 of the Revenue and Taxation Code. We understand that it is a common practice among veterinarians for them to retain title and possession of the x-ray films they produce for the diagnosis of animals they treat. In our view, a taxable sale does not occur in such a situation. Therefore a veterinarian is to be considered a consumer of the materials and supplies he uses to produce diagnostic x-ray films for his own use, provided the veterinarian does not transfer title or possession of these x-ray films to his customers. Also, it is our opinion that a sale does not occur when there is a temporary transfer of possession of x-ray films between veterinarians pursuant to Section 2031 (b)(2) of Title 16 of the California Administrative Code, Chapter 20, “Board of Examiners in Veterinary Medicine.” As provided under this section, a veterinarian must transfer possession of x-ray films he takes on animals he treats to another veterinarian making a written request for such films with the permission of the animal’s owner. This section further provides that the transferred x-ray film must be returned to the veterinarian who originally treated the animal within a reasonable time. It is our position, however, that a taxable sale occurs when a producer of x-ray films (e.g., an x-ray lab) furnishes x-ray films of animals, for a consideration, to veterinarians who order them. Under these circumstances, the producer is a retailer of tangible personal property. Also,

such a producer of x-rays is considered a retailer of diagnosis or report to the veterinarian along with the x-ray film, or it may retain title to the x-ray and permanently store the film after utilization by the veterinarian (see People v. Grazer (1956) 138 Cal.App.2d 273). CJG:ba