Ezel / Tax Rulings / CA

Were licensed contractors' charges for inspecting real property and delivering written building-code reports taxable?

Short answer No. California treated the inspections as professional technical services, with written reports incidental to the service, where the inspectors performed no repairs.
State
CA
Ruling
Annotation 515.0012.900
Tax type
Sales and Use Tax
Issued
1990-06-07
Issued by
California State Board of Equalization
Requested by
A property-inspection company (identity redacted)
Topics
property inspections inspection reports professional services
Source
View Original PDF

Apply this to your situation

This page answers the general question as of 1990. Ask about yours and see what current California tax law says, with citations.

Currency note: this ruling is from 1990
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is a California State Board of Equalization Assistant Chief Counsel opinion dated June 7, 1990, published by CDTFA as support for a sales and use tax annotation. It addresses licensed general contractors who inspected property for real-estate transactions, reported needed building-code repairs, and did not perform the repairs. Another inspector or contractor should check current inspection, report, repair, bundled-contract, digital-delivery, and contractor rules. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

A company hired licensed general building contractors to inspect property in connection with real-estate transactions and tell owners what repairs were needed to meet building-code requirements.

The inspectors did not perform the repair work. California treated their work as a professional technical service rather than a sale of tangible personal property.

Providing a written inspection report did not change the result because the report was incidental to the inspection service.

What this means for you

Property inspectors

The opinion's nontaxable result depended on providing inspection expertise and information, not repair work or a separately sought report product.

Accountants and tax professionals

Review whether the provider also repairs property, sells other items, separately markets reports, or bundles taxable deliverables with the inspection.

Common questions

Q: Were the inspection charges taxable?

A: No.

Q: Did a written report make the transaction taxable?

A: No.

Q: Did the inspectors perform repairs?

A: No.

Citations and references

  • California Sales and Use Tax Regulation 1501

Source

Original ruling text

515.0012.900

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 445-3723
June 7, 1990

Dear REDACTED TEXT,
This is in reply to your letter of May 24, 1990. You have sought to clarify the state sales tax status of your company, REDACTED TEXT. The company was recently founded to perform property inspections for real estate transactions and to inform property owners of repairs needed to meet building code requirements. All work inspections are done by licensed general building contractors. The inspectors do not do repair work on the property. We are of the opinion that the charges you make to the clients are not subject to sales tax. You are performing a professional technical service, not selling tangible personal property, even though you may furnish written inspection reports to your clients. See our Regulation 1501, “Service Enterprises Generally,” copy enclosed for your reference. Very truly yours, Gary J. Jugum Assistant Chief Counsel GJJ:sr cc: Honorable William M. Bennett bc: Mr. E. L. Sorensen, Jr.

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