Were charges taxable for reassembling a crane that had been fully assembled before shipment and sold before erection?

Plain-English summary

A crane was fully assembled at the seller's plant, disassembled for shipment, and sold with title passing when it was shipped. The letter concluded that erecting it again at the buyer's location reconditioned the crane for its original use rather than fabricating property under section 6006(b).

The staff did not classify the reassembly itself as installation. That did not make the charge taxable, however, because the buyer was not required to hire the seller to erect the crane. The optional reassembly service therefore was not part of the sale.

The letter said this would be the staff's recommendation to the Board. It also withdrew inconsistent analysis from an earlier September 15 letter, so the source does not document final Board action.

Citations and references

• California Revenue and Taxation Code section 6006(b) (as cited)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/435-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/435-0140.pdf

Original ruling text

435.0140

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

November 14, 1967

Gentlemen:
This is in reply to your letter of September 25, 1967.
My earlier letter dated September 15 has generated a great deal of discussion not only from other members of our legal staff, but also from various individuals of our district offices. Therefore, I felt obligated to reexamine my analysis and conclusions set forth in my earlier letter. The result of the reexamination is set forth below. It is still our opinion that since the crane was completely assembled by your company prior to shipment to “G” and title to the crane passed to “G” at the time of shipment, the reassembly (i.e., erection) of the crane at “G” merely constituted the process of reconditioning the crane for the use for which it was originally purchased and not fabrication labor under Section 6006(b). The next question to be answered is whether or not the amount received for reassembly of the crane is included in “gross receipts”. It is noted that the price received for labor or services used in “installing” the property sold is specifically excluded from gross receipts. Initially there was some question in my mind as to whether or not the reassembly of the crane amounted to “installation”. However, it is now the opinion of the staff, in which I concur, that reassembly does not constitute installation. In view of this conclusion, we are required to determine whether the reassembly charges amount to a service that is part of the sale and, therefore, taxable. Since we understand that “G” was not required to hire your company to erect the crane, it is our opinion that the reassembly charges are not taxable as being a service that is part of the sale. Such will be our recommendation to the Board. Please accept my apology for any inconvenience our earlier letter caused you, and please disregard any inconsistencies between my earlier letter and this one. Very truly yours,

Glenn L. Rigby
Assistant Counsel
GLR:mh

[1b]