Was orthopedic correction work on new shoes taxable when an independent shoe shop performed the alterations?

Plain-English summary

A shoe retailer arranged substantial orthopedic correction work requested by doctors and had an independent shoe repair shop perform it. The letter assumed every affected pair was new.

Under Ruling 15, as cited, the alteration labor was taxable fabrication because the customer wanted a particular finished product. Tax applied to the retailer's entire customer charge regardless of any division between labor and materials.

The independent shop's charge to the retailer was not taxable because the retailer resold the altered shoes. The letter recommended giving the shop a resale certificate to complete its records.

Citations and references

• California Sales Tax Ruling 15 (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/435-1480.pdf

Original ruling text

435.1480

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

December 17, 1954

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

Account No. X----------------

Dear Mr. X----------------:
Your letter of November 11 addressed to our Oakland office has been referred to this office for reply. In the course of your business you have a considerable amount of orthopedic correction work for various doctors. Often substantial modifications must be made to a shoe. You have this work done at an independent shoe repair shop. Assuming that in all cases the shoes are new shoes, any labor involved would be taxable fabrication labor pursuant to Ruling 15 (copy enclosed). In other words, the customer desires a certain finished product and tax applies on the entire charge which the customer must pay in order to obtain that product. It would be immaterial whether the price were broken down between labor and material. Accordingly, your present practice of paying tax on the entire charge is correct. Even though the repair shop has not been charging tax to you, it is possible that they have been paying tax to this Board on a portion of their receipts. The charge made by the repair shop is not taxable because you will resell the shoes. In any case, it would be advisable for you to furnish the repair shop with a resale certificate so that its records will be complete. Yours very truly,

Bill Holden
Assistant Counsel
BH:ja
Cc:

Oakland – Auditing