Were charges taxable when a customer disassembled new lacquered brass hardware and hired a finisher to remove lacquer and restore the polish?

Plain-English summary

Customers bought new polished, lacquered brass hardware, disassembled it, and sent the pieces to a finisher. Removing the lacquer tarnished the brass, so the finisher also restored the polished finish before the customer reassembled and installed the hardware.

Because the hardware was new, removing the lacquer and restoring the finish were taxable fabrication and processing. The rule taxed painting, polishing, and other finishing connected with producing a finished product for consumers, whether the customer or finisher supplied the article.

The letter distinguished work on used property, where repair or reconditioning rules could produce a different result.

Citations and references

• California Revenue and Taxation Code sections 6006(b) and 6051 (as cited)
• California Sales and Use Tax Regulation 1524, subsection (3) (as cited)
• Sales and Use Tax Annotation 435.1220 (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/435-1365.pdf

Original ruling text

435.1365

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
916-324-8208

June 21, 1991

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

Re:

Application of Sales Tax to Polished Brass Finishing

X-------------------:
By letter dated May 20, 1991, you requested our opinion concerning the application of sales tax to work your company performs on new polished brass and lacquered hardware. In your letter you state: “A customer brings in new polished brass and lacquered hardware which they purchased from someone else and then they disassemble them. “These pieces come to us to have the lacquer removed and the polished brass finish restored, which is tarnished in the lacquer removal process. “The customer then reassembles the hardware and then installs it.” You ask whether these parts are treated as new items are taxable or as used items for refinishing and therefore nontaxable. Revenue and Taxation Code section 6051 imposed a sales tax on all retailers measured by their gross receipts from retail sales of tangible personal property. Section 6006(b) provides that, for sales tax purposes, a “sale” includes the fabrication or processing of tangible personal property for a consideration for consumers who furnish the material used in the fabricating or processing. The Board has promulgated Regulation 1524, entitled “Manufacturers of Personal Property,” which is based on these statutes. Subsection (3) of this regulation provides, in pertinent part, as follows: “(3) PAINTING, POLISHING, FINISHING. Tax applies to charges for painting, polishing, and otherwise finishing tangible personal property in

connection with the production of a finished product for consumers, whether the article to be finished is supplied by the customer or by the finisher….” In addition, the Board’s staff has issued and published opinions on questions similar to yours in the Sales and Use Tax Annotations of the Business Taxes Law Guide. In Annotation 435.1220 the staff determined that charges for chrome, nickel, or alumulite plating applied to fittings supplied by a customer constitutes taxable fabrication labor when performed on new personal property and that sales tax applies to the entire charge. If the property is used and such work is performed to repair or recondition the property, different rules apply. In our opinion, because the hardware furnished by your customers is new, your charges for removing lacquer and restoring the polished brass finish represent charges for fabrication and processing of tangible personal property for consumers. Therefore, all of your charges on these transactions are taxable. If you have other questions concerning sales tax law, please write to us again. Sincerely,

Elizabeth Abreu
Tax Counsel
EA:cl
Bc:

San Francisco District Administrator