Was operating a high-energy radiation facility taxable when customers brought samples for experimentation and received operators, advice, readings, and equipment use?

Plain-English summary

A facility operated a machine producing high-energy radiation pulses. Customers brought samples for experimentation and received operators, technical advice, radiation-level readings, and use of oscilloscopes.

California treated the facility's charge as a nontaxable service. The provider transferred no property or report, did not transfer possession of its equipment, and did not fabricate or process customer-furnished property.

The taxable transaction was the facility's own acquisition of machine components, which the opinion assumed had already borne tax during construction.

What this means for you

Testing laboratories

Facility access with operators and technical support was a service when no customer property or report was produced or transferred.

Accountants and tax professionals

Review reports, processed samples, equipment possession, operator control, technical advice, facility charges, and component purchases.

Common questions

Q: Was the irradiation charge taxable?

A: No.

Q: Did the facility fabricate customer property?

A: No.

Q: Who owed tax on machine components?

A: The facility when acquiring them.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 515.1060
• Original supporting opinion: 515.1060 PDF

Original ruling text

515.1060
October 17, 1966
Attention: REDACTED TEXT
Gentlemen:
Mr. E. H. Stetson, Tax Counsel, is presently on vacation. In his absence, your letter of October 3, 1966, has been referred to me for answer. Our understanding of your question is that you operate a machine used to stimulate high energy radiation pulses. Persons may bring samples to your plant for experimentation. In the process of providing this service, one or more operators are furnished by you. Technical advice as required, readings of radiation levels, use of two oscilloscopes, etc., are also furnished. As a result of the operation, there are no products or reports connected with the operation of the machine. There is no transfer of possession of any property by you. There is no fabrication or processing of customer furnished property. However, the customer does take advantage of the use of your facility to test his materials. It is our opinion that what you provide is a nontaxable service. The only taxable transaction would be in the acquisition of the components of the machine. We assume that the proper tax has been previously paid with respect to the construction of the facility. If you have further questions regarding this matter, feel free to inquire. Very truly yours,

JDP:ab
cc: Oakland – District Administrator

Jack D. Paulson
Associate Tax Counsel