Could a title-passage statement in a written estimate establish when ownership transferred if the customer authorized the job verbally and no signed contract existed?

Plain-English summary

A manufacturer said its industry often worked without signed contracts: it gave a written estimate, received verbal authorization to build, and invoiced at the end. It asked how to document title passage for property manufactured, disassembled for shipment, and later reassembled.

California said the written estimate could state that title passed at the time and place of shipment. If the customer accepted that estimate, the statement satisfied the requirement that title pass before reassembly for the specific annotation issue discussed in the letter.

Common questions

Was a separately signed contract required?

Not under the described practice if the customer accepted the written estimate containing the title clause.

What wording did the source approve?

A statement that title passed at the time and place of shipment.

Did the advice decide every tax issue for manufactured property?

No. It answered the narrow evidence question tied to a prior annotation about disassembly, shipment, and reassembly.

Citations and references

• Official annotation date: November 3, 1993
• Signed supporting PDF date as printed: January 12, 2006
• Business Taxes Law Guide Annotation 435.0140, quoted in the official source

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/495-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/495-0675.pdf

Original ruling text

495.0675

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001) (916) 324-2608

MEMBER
First District
BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

January 12, 2006

GRAY DAVIS
Controller, Sacramento

BURTON W. OLIVER
Executive Director

Mr. S--- Z--S--- W--XXXX North -----, CA XXXXX Dear Mr. Z---: This is in response to your letter dated October 5, 1993, in which you state: "I am writing you to determine the proper terminology for the passing of title or ownership of manufactured property. "During our most recent audit, the State Board of Equalization quoted from paragraph 435.0140 of the sales and use tax annotations. "It is common practice in our industry to perform without signed contracts. A written estimate is given to the production company and a verbal commitment is given to us authorizing construction. An invoice is submitted at the end of the job. "I have enclosed an estimate. Please indicate how you would like me to include 'passing of ownership.'" The annotation your refer to provides: "When tangible personal property is manufactured and completely assembled at the retailer's plant, then disassembled for shipment

Mr. S--- Z---

-2-

January 12, 2006
495.0675

and reassembled at the buyer's place of business, the reassembling constitutes a reconditioning of the property rather than fabrication. Accordingly, separately stated charges for such reassembly are not subject to tax if title to the tangible property passed to the buyer prior to its reassembly and if the buyer was not required to hire the seller to do the reassembly. 11/14/67." You state you give a written estimate in advance. If, on that estimate, you include a statement which states that title passes at the time and place of shipment, and your customer accepts, that would satisfy the requirement that title to the disassembled tangible personal property passes to the buyer prior to its reassembly. If we can be of further assistance, please feel free to contact us. Sincerely,

Rachel M. Aragon
Staff Counsel

RMA:ljt