Were custom wax models taxable when a manufacturer used them to create metal casts and most of the model price reflected fabrication labor?

Plain-English summary

A manufacturer bought custom wax models and used them to create metal casts sold at wholesale and retail. The supplier's principal cost was fabrication labor, with only a small amount of wax used.

The model sale was taxable. The models were tangible personal property bought as manufacturing aids rather than ingredients of the metal casts. Sections 6006(a), 6007, and 6012 included the full retail price without deducting labor, service cost, or other expenses simply because material cost was minor.

The manufacturer's later retail cast sales were taxable. Casts sold to buyers for resale could qualify with proper resale certificates under then-current Ruling 68.

Citations and references

• California Revenue and Taxation Code sections 6006(a), 6007, and 6012 (as cited)
• California Sales and Use Tax Rulings 14 and 68 (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/440-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/440-0360.pdf

Original ruling text

440.0360

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

February 16, 1954
Mr. C--- E. P--I--- S--Box XXX
---, California

Your letter of January 27
Account No. - - XXXXX

Dear Mr. P---:
You state that you have had wax models made for you. From these wax models you make metal casts. The casts are sold by you both at wholesale and retail. We understand that the wax models constitute manufacturing aids under the first paragraph of Sales and Use Tax Ruling 14 (copy enclosed) inasmuch as they are apparently purchased for use in creating the metal casts rather than becoming an ingredient of these casts. In creating the wax models for you your supplier only uses a small amount of wax, fabrication labor being his principal cost in the manufacture thereof. You inquire whether the sales tax applies on the sale of the wax models to you. Section 6006(a) of the California Sales and Use Tax Law defines a sale as including any transfer of title of tangible personal property for a consideration. Gross receipts subject to the sales tax under Section 6012 of the Law include the total sale price of retail sales of retailers without any deduction on account of the cost of the materials used, labor or service cost, or any other expense. The fact that the cost of the materials used may be insignificant and that the labor cost may be high does not result in an exempt transaction. The sale to you is taxable as a retail sale of personal property inasmuch as a retail sale is defined in Section 6007 of the Law as a sale for any purpose other than resale in the regular course of business. Where you sell your metal casts at retail, the tax will, of course, apply. Where you sell them to a person who intends to resell them in the regular course of his business prior to making any use thereof, you sale to him is an exempt sale for resale and he should supply you with a resale certificate in the form and under the conditions prescribed in Ruling 68 (copy enclosed). For your reference we are enclosing a pamphlet copy of the Law. If you have any further questions, do not hesitate to write. Yours very truly,

W. W. Mangels
Assistant Counsel
WWM:ja
cc:
Woodland - Auditing