Were parts used to repair accessibility equipment on city buses and vans exempt?

Plain-English summary

California concluded that parts installed to repair disability-access equipment on city buses and mini-vans were exempt. Although repair parts are generally taxable unless an exemption covers repairs, section 6369.4 and Regulation 1591(l) broadly covered items and materials used to modify a vehicle for transporting people with disabilities. Once installed, the repair parts continued to perform that modifying function.

The exemption applied whether the retailer installed the property or sold it for someone else to install. Charges for installation labor by outside repairers were also excluded from sales tax. Tools and supplies used in the work but not incorporated into, attached to, or installed on the vehicle were not covered.

Common questions

Did it matter that the accessibility equipment was already installed when repaired?

No. The opinion treated the new repair parts as items and materials used to maintain the vehicle's qualifying modification.

Was outside installation labor taxable?

No. The letter treated the labor charge as excluded under section 6012(c)(3) and Regulation 1546(a).

Were all repair-shop supplies exempt?

No. The quoted rule excluded tools and supplies that were not incorporated into or attached to the vehicle.

Citations and references

• California Revenue and Taxation Code section 6369.4 — items and materials used to modify qualifying vehicles
• California Sales and Use Tax Regulation 1591(l) — vehicle-modification rule applied to transit vehicles and repair parts
• California Revenue and Taxation Code section 6012(c)(3) and Sales and Use Tax Regulation 1546(a) — installation-labor treatment

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/425-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/425-0163-500.pdf

Original ruling text

STATE OF CALIFORNIA

425.0163.500

STATE BOARD OF EQUALIZATION
916-324-3828
October 19, 1990
REDACTED TEXT
Dear REDACTED TEXT,
Confirming our telephone conversation of September 25, 1990, Mr. Gary Jugum, Assistant Chief Counsel, Business Taxes, has referred your letter of September 4, 1990, to me for response. You want to know if the purchase of parts for repairing handicapped accessibility equipment on vehicles is exempt as well as the initial purchase and installation. I.

FACTUAL BACKGROUND

During our telephone conversation, you indicated that the City of REDACTED TEXT had previously purchased transit vehicles (busses and mini-vans) which have been modified for handicapped access. The busses came with the modifications as original equipment but the mini-vans were modified subsequent to purchase. The city is now buying parts to repair the equipment. II.

OPINION

California Sales and Use Tax Law imposes a tax on the gross receipts of retailers from the retail sale of tangible personal property in this state unless such sale is otherwise exempt or excluded from taxation by statute (Rev. & Tax. Code § 6051). Revenue and Taxation Code Section 6369.4 exempts from tax the gross receipts from the sale “of items and materials when used to modify a vehicle for physically handicapped persons.” 18 California Code of Regulations, Regulation 1591(1), “Medicines and Medical Supplies, Devices and Appliances,” which interprets and applies the Code, provides as follows: “ …tax does net apply to the sale, storage, use or other consumption, in this state of items and materials when used to modify a vehicle for physically handicapped persons which are necessary to enable the vehicle to be used to transport a physically handicapped person or persons. Tax does not apply whether the property is installed by the retailer or is sold for installation by other persons. The exemption does not extend to tools and supplies used in modifying the vehicle and not incorporated into, attached to, or installed on the vehicle.”

(Tax regulations are Board rulings which have the force and effect of law.) “Vehicles” qualifying under the section mean and include vehicles, such as busses, used in the public transport of physically handicapped persons. (Reg. 1591(1)(3).) The general rule is that purchases of parts to repair an item of tangible personal property are not exempt from sales or use tax, even where the original purchase of the item was exempt, unless the statute providing the exemption covers repair as well as purchase. (See, e.g., National Aircraft Leasing, Ltd. v. State Bd. of Equalization (1979) 90 Cal.App.3d 549 153 Cal.Rptr. 4007.) In this case, while the statute does not expressly refer to “repairs,” both the statute and the regulation exempt the purchase of “items and materials when used” to modify a bus or van. We conclude that this language is broad enough to cover repairs since repair parts are “items and materials” and once installed, are “used” to modify the vehicle for transportation of physically handicapped persons. Additionally, any charges that the city may incur for labor to have these parts installed by outside repairmen rather than city employees is excluded from sales tax. (§ 60l2(c)(3), Reg. l546(a).) I hope this discussion answers your question. If you need anything further, please do not hesitate to write again. Very truly yours, John L. Waid Tax Counsel JLW:sr