Were cooler units attached to building air-conditioning systems machinery and equipment rather than fixtures?

Plain-English summary

A taxpayer argued that cooler units should be machinery and equipment under historical Ruling 129 because that category covered property installed to perform a function not essential to the structure itself.

After reviewing a photograph and detail drawing, the legal staff concluded that the units were integral parts of the ducts and other materials forming each building's air-conditioning system. Because the air-conditioning system would be incomplete without the cooler unit, the unit became an essential part of the structure.

The letter therefore classified the cooler units as fixtures under historical Ruling 12 and recommended denial of the petition and refund claim.

Common questions

Were the cooler units treated as machinery and equipment?

No.

Why were they fixtures?

They were integral and essential parts of the buildings' ducted air-conditioning systems.

Was the taxpayer's refund position accepted?

No. The legal staff recommended denying the petition.

Citations and references

• Historical Sales and Use Tax Ruling 129 — machinery-and-equipment conditions argued by the taxpayer
• Historical Sales and Use Tax Ruling 12 — fixture classification applied by the legal staff

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/565-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/565-0240.pdf

Original ruling text

STATE OF CALIFORNIA

565.0240

STATE BOARD OF EQUALIZATION
3-12-57 (to taxpayer's attorney)
Thank you for the enclosed photograph and detail drawing of the cooler units involved in your client's petition and refund claim. You contend that the cooler units should be regarded as “machinery and equipment” as defined in Sales and Use Tax Ruling 129 wherein the term “machinery and equipment” means property to which each of the four conditions set forth in the ruling applies. You will note that condition three provides “it is installed for the purpose of performing a manufacturing operation or some other function not essential to the structure itself.” This matter has been discussed thoroughly with members of the legal staff, and the picture and detail drawing were viewed by each member during the discussion. It was the combined thinking of this group that the cooler units involved are integral parts of systems composed of ducts and other material which comprise air-conditioning systems for the respective buildings to which they are attached. It appears obvious to us that the system of ducts, vents, etc., is an integral part of each building and the material from which it is formed would, without question, be regarded as "material" under ruling 12. Since the air-conditioning obviously would not be complete without the cooler unit, we believe that it necessarily becomes an essential part of the structure. A very similar factual situation was presented to the board some time back and it was decided at that time that the units involved were “fixtures” as that term is used in ruling 12. Under the circumstances, we believe the air-conditioning units involved in this petition are properly classified as "fixtures." In view of the foregoing, we must recommend to the board that the petition be denied; however, we do not wish to discourage you in any way from discussing this matter with us. In light of our expressed thinking on this matter, should you feel that new or different reasons could be advanced for changing our views, we will be glad to discuss the matter with you. vty : wwm Warren W. Mangels Legal Division