When was neon-sign work nontaxable repair, when was it taxable tube fabrication, and how were painted building signs treated?

Plain-English summary

Replacing an electrode in an existing neon tube and repumping the tube with gas was nontaxable repair labor.

Making a complete replacement tube was different. Cutting and bending new glass, installing electrodes, pumping in gas, and sealing the tube produced a completed tube, so the related labor was taxable fabrication rather than repair.

For a simple painted sign, painting directly on a building or on a signboard attached to the building while the work was performed improved real property. The painter was the consumer of the paint and other materials, whether the sign was new or existing and whether the work changed its name or copy.

Citations and references

• No numbered statute or regulation was cited in the source letter.

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/435-0320.pdf

Original ruling text

435.0320

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
November 17, 1954
X----------------------

Attention:

X------------------Bookkeeper

Gentlemen:
You letter of September 16 addressed to our Fresno office and Mr. X---------’s reply of September 21 have been forwarded to this office for review. We find Mr. X----------’s letter correct, but wish to elaborate on it in certain respects. If repair of a neon sign involves merely replacing an electrode in the tube and repumping the tube with gas, the labor charges would not be subject to tax. However, if it was necessary to replace a complete tube and if this involved cutting glass tube to length, bending, placing electrodes, pumping with gas, and sealing the new tube, we would consider that you were selling a completed tube. The labor charges in connection with fabricating that tube, placing electrodes, and pumping with gas would be taxable fabrication labor rather than exempt repair labor. In the case of a simple painted sign without neon lighting, a distinction must be made between real property and personal property. Painting on the side of a building or on a signboard which is attached to the building while the painting is being done represents an improvement to real property and the painter is the consumer of paint and other materials used. This is true whether the sign be an existing or a new sign and whether a change in name or copy is involved. The basis for this distinction is that the sales tax applies to sales of tangible personal property and that a person improving real property is not regarded as selling the tangible personal property used in making the improvement. Yours very truly,

Bill Holden
Assistant Counsel
BH:ja
Cc:

Fresno – Tax Administrator