Were architectural models taxable retail sales when a professional model builder transferred title to architects and designers who used rather than resold them?

Plain-English summary

A professional model builder made architectural models under contracts with architects and designers.

Based on the facts described, the builder transferred title to the models for consideration. That was a sale under section 6006.

The architects and designers apparently used the models rather than reselling them, making the transfers retail sales under section 6007. Because the builder conducted the activity for gain, benefit, or advantage, the source treated the builder as a retailer under section 6015 and liable for sales tax under section 6051.

Professional skill did not exempt the receipts. The source compared the builder to photographers and artists who create property through professional skill but still make taxable transfers.

California invited submission of the written contracts and further reasons if the taxpayer disagreed.

What this means for you

Model builders, architects, and designers

Professional creativity did not override title transfer of completed models to customers for their own use.

Accountants and tax professionals

Document the written contract, title transfer, consideration, customer use or resale, professional services, model deliverables, and seller status.

Common questions

Q: Were the architectural-model transfers taxable?

A: Yes.

Q: Why were they retail sales?

A: The customers used the models rather than reselling them.

Q: Did the builder's professional skill create an exemption?

A: No.

Citations and references

• California Revenue and Taxation Code §§ 6006, 6007, 6015, and 6051

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 515.0500
• Original supporting opinion: 515.0500 PDF

Original ruling text

515.0500

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

December 30, 1954
--- --- ----- --- ----- --- --Dear Mr. ---:
We acknowledge your letter of December 27 in which you describe the activities of your client, --- ---, who builds architectural models under contracts with architects and designers. In the event any written contracts between your client and the various persons for whom he builds models are available, we would appreciate the opportunity of examining one or more of such contracts. From what is said in your letter, however, it appears that --- --- transfers title to these models for a consideration and is, therefore, making a sale within the meaning of Section 6006 of the Sales and Use Tax law, and as the architects and designers apparently use these models rather than resell them, your client’s sales are retail sales as defined in Section 6007. As this activity of your client is engaged in by him for gain, benefit, or advantage, it appears that he is a retailer under Section 6015, and is, therefore, liable for payment of sales tax imposed under Section 6051. The fact that his work is primarily of a professional nature does not exempt his receipts from the sales tax. Many retailers are professional people, such as photographers, artists, and the like, but who nevertheless transfer title to tangible personal property produced or created by them through their professional skill. If, after reviewing the provisions of the Sales and Use Tax Law, you believe your client is not under an obligation to pay the sales tax to the State, we shall be very glad to have a further statement of your reasons for this conclusion. Very truly yours,

H. H. Stetson
Tax Counsel

EHS:ph
cc:
Los Angeles – Tax Administrator