Were separately stated delivery charges taxable when a cabinet maker's signed contract passed title at shop completion before its own truck delivered?

Plain-English summary

A custom cabinet maker built cabinets at its shop, delivered them directly to customers in its own truck, and separately stated the delivery charge. It did not install the cabinets.

The customer contract required a signed return copy and stated that title to the completed cabinetry passed when the shop work was finished. California found that language sufficient to establish a sale before transportation began.

Under the stated conditions, the separately stated delivery charges were excluded from tax. The fact that the retailer's truck insurance would cover damage during delivery did not change the title analysis.

Common questions

Did delivery in the retailer's own truck automatically make the charge taxable?

No.

What established the earlier sale?

The signed contract's statement that title passed upon completion at the shop.

Did the retailer's delivery insurance control?

No.

Citations and references

• Cal. Code Regs., tit. 18, reg. 1628(b)(2) — separately stated retailer-facility transportation after the sale
• Cal. Code Regs., tit. 18, reg. 1628(b)(3)(D) — default destination title passage unless an earlier explicit written agreement applies

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/557-0106.pdf

Original ruling text

State of California

Board of Equalization
Legal Division (MIC:82)

557.0106
Memorandum
To

:

Ms. Karen Berlin
Return Review Section (MIC:35)

From :

Thomas J. Cooke
Staff Counsel

Subject:

Application of Sales Tax to Delivery Charges
C--- C--- - SR -- XX-XXXXXX

Date:

May 31, 1995

This office has received your memorandum dated May 18, 1995 in which you requested an opinion as to the taxability of separately stated transportation charges pursuant to the above taxpayer's contract with its customers. In your memorandum, you state that the taxpayer manufacturers cabinets for his customers. The taxpayer builds cabinets according to the specifications supplied by its customers. The taxpayer builds the cabinets in its shop and when completed, delivers the cabinets in its own truck to the purchaser. The taxpayer's truck is fully insured, and if for some reason the cabinets were damaged during delivery, the taxpayer's insurance company would pay for the damaged cabinets. The retailer does not install any of the cabinets that are sold. The taxpayer does state the delivery charges separately on the invoice. The cabinets are delivered from the retailer's place of business directly to the purchaser. Regulation 1628(b)(2) provides, in part “... when transportation is by facilities of the retailer ..., tax applies to charges for transportation to the purchaser, unless (a) the transportation charges are separately stated, (b) are for transportation from the retailer's place of business or other point from which shipment is made directly to the purchaser, and (c) the transportation occurs after the sale of the property is made to the purchaser. When the sale occurs before the

Ms. Karen Berlin

-2-

May 31, 1995
557.0106

transportation to the purchaser commences, the tax does not apply to separately stated charges for the transportation. ...” Regulation 1628(b)(3)(D) provides, in part “Unless explicitly agreed that title is to pass at a prior time, the sale occurs at the time and place at which the retailer completes his performance with reference to the physical delivery of the property. ... When delivery of the property is by facilities of the retailer, title passes when the property is delivered to the purchaser at the destination unless there is an explicit written agreement executed prior to the delivery that title is to pass at some other time.” Each of the contracts that you submitted for our review contains the following language: “Please indicate color, delivery date and appropriate options, sign and return one copy with check for one third of total. Be advised that title to your completed custom cabinetry passes upon completion of the work at our shop.” It is our opinion that this language is sufficient to exclude separately stated transportation charges from tax under the conditions stated in your memorandum. We do not believe that the taxpayer's insurance coverage on its truck is a relevant consideration.

TJC:plh