Were charges taxable when a technician cut customer-furnished rock samples, cemented thin sections to glass, and returned research microscope slides?

Plain-English summary

An independent technician received rock samples from geologists, removed a small portion, cemented it to a furnished glass slide, cut it thin, and returned both the remaining sample and the prepared research slide.

California distinguished a nontaxable service accompanied by incidental property from a taxable transaction whose true object was the property produced.

The customer's desired object was the prepared rock microscope slide. The technician's entire gross receipts were therefore taxable even though the customer supplied the rock.

Citations and references

• California Revenue and Taxation Code section 6006(b) (as cited)
• California Sales and Use Tax Regulation 1501 (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/435-1056.pdf

Original ruling text

435.1056

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

WILLIAM M. BENNETT
First District, Kentfield

1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-3828

CONWAY H. COLLIS
Second District, Los Angeles
ERNEST J. DRONENBURG, JR
Third District, San Diego
RICHARD NEVINS
Fourth District, Los Angeles
KENNETH CORY
Controller, Sacramento

April 22, 1985
DOUGLAS D. BELL
Executive Secretary

Mr. D--- H. S--Owner
P--- P--- - L--XXXX --- --- Road
P.O. Box XX
--- ---, California XXXXX

Dear Mr. S---:
As I indicated to you in a prior telephone conversation, your letter of February 28, 1985, has been assigned to me for a reply. You ask about the application of the sales and use tax to your business. You described your business as follows: “I am an independent technician providing services to geologists engaged in research on rocks. Among the methods used by such scientists is microscopic examination of sections of rock samples, and the service I provide is the preparation of the microscope slides used for that examination. “In brief, the scientist collects and sends to me a rock sample from which I remove a small portion. I cement that portion to a one-inch by two-inch glass microscope slide, cut it very thin, and return all of the original sample with the prepared slide to the scientist. The prepared slide is of use only to the scientist and then only in the course of his research.” Under California sales and use tax law, tax applies to the gross receipts from the sale of tangible personal property without any deduction for the cost of labor or services. However, tax does not apply to a service where the transfer of tangible personal property is merely incidental to that service. Sales and Use Tax Regulation 1501 states: “The basic distinction in determining whether a particular transaction involves a sale of tangible personal property or the transfer of tangible personal property

Mr. D--- H. S---

-2-

April 22, 1985
435.1056

incidental to the performance of a service is one of the true object of the contract; that is, is the real object sought by the buyer the service per se or the property produced by the service. If the true object of the contract is the service per se, the transaction is not subject to tax even though some tangible personal property is transferred.” Your business receives rock samples from the customers. You take a small portion of the rock and place it with a glass slide provided by you. The result is a slide of the rock for microscopic examination. Revenue and Taxation Code Section 6006 states that a “sale” means and includes: “(b) The producing, fabricating, processing, printing, or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing or imprinting.” We are of the opinion that the true object of the transactions with your customers are the slides with the rocks on them prepared for microscopic examination. Tax applies to the gross receipts from the sale of said slides even though the rocks were provided by the customers. If you have any further questions, please do not hesitate to contact us again. Very truly yours,

Vickie B. Owen
Tax Counsel

VBO;ms
bc:

Mr. Donald Hennessy