How did California distinguish transportation charges for contractor-consumed materials from charges involving fixtures sold by the contractor?
Apply this to your situation
This page answers the general question as of 1978. Ask about yours and see what current California tax law says, with citations.
Plain-English summary
California replaced earlier confusing guidance with a three-part distinction for construction contractors.
When a contractor consumes materials, transportation from the supplier to the contractor or directly to the jobsite is governed by Regulation 1628 with the supplier as retailer. Transportation from the contractor's own place of business to the jobsite is not included in the tax measure.
For fixtures, an unstated sale price is treated as the contractor's cost under Regulation 1521, producing the same transportation result as materials. If the customer contract states the fixture's sale price, the contractor is the retailer and Regulation 1628 governs its transportation charges.
Common questions
Who is the retailer when a contractor consumes materials?
The supplier.
Is the contractor's later transport of those materials to the jobsite included?
No, under the memorandum's rule.
When does fixture transportation receive different treatment?
When the contractor's customer contract states the fixture's sale price.
Citations and references
- Cal. Code Regs., tit. 18, reg. 1521 — contractor treatment of materials and fixtures, including cost-price treatment
- Cal. Code Regs., tit. 18, reg. 1628 — transportation-charge rules
Source
- Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
- Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/557-0000-all.html
- Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/557-0060.pdf
Original ruling text
State of California
Memorandum
To:
Mr. James E. Mahler
From:
T. P. Putnam
Subject:
S--- F---, Inc.
SR -- XX-XXXXXX
Board of Equalization
557.0060
February 7, 1978
After reviewing your draft of a memo to the Inglewood office, I have concluded that Annotation 557.0060 should be deleted since it causes confusion. Where a contractor is the consumer of materials, the charges for transportation of materials from his supplier to his place of business or directly to the jobsite are governed by Regulation 1628, recognizing the supplier as the retailer. Any charges for transportation of materials from the contractor’s place of business to the jobsite are not includable in the measure of tax. A contractor is the retailer of a fixture but, if his contract with his customer does not state the sale price of the fixture, the sale price is the cost price of the fixture to the contractor as provided in Regulation 1521 and the net effect with respect to transportation charges is the same as if materials were involved. However, if his contract with his customer states the price at which the fixture is sold, tax applies to that price and charges for transportation are governed by Regulation 1628, recognizing the contractor as the retailer. I will have this memo annotated in place of Annotation 557.0060. I am returning your draft with some suggested changes and am also returning the related material that you sent to me.
TPP:po
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