Could a removable diesel generator supplying only a missile-tracking computer qualify as machinery and equipment on a Navy project?

Plain-English summary

A seller supplied a 200-kilowatt diesel generator under a Navy construction chain. The unit provided auxiliary power to a computer used for a missile-tracking device.

Based on the stated facts, the letter classified the generator as machinery and equipment. It was not used to improve realty, could be readily removed as a unit, served the computer rather than a housekeeping function such as building lighting, and passed to United States title before contractor use.

The seller was instructed to obtain a resale certificate from the general contractor. The opinion remained subject to audit verification of the supplied facts.

Common questions

Did the generator qualify as machinery and equipment?

Yes, on the stated facts.

Would building-lighting use matter?

Yes. The opinion assumed no housekeeping use.

Was a resale certificate needed?

Yes.

Citations and references

• Historical Sales and Use Tax Ruling 12 — machinery-and-equipment conditions applied
• Historical Ruling 68 — additional guidance enclosed with the letter

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/565-0700.pdf

Original ruling text

565.0700

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
December 23, 1964
Gentlemen:
In your letter of December 15, 1964, you inquire regarding the application of the California Sales and Use Tax Law to the sale of a 200 KW diesel generator set for installation at REDACTED TEXT in California on Navy Contract REDACTED TEXT. Your contract is with a general contractor located in Los Angeles, California. Based upon information contained in the letter and information obtained by telephone December 23, 1964, it is our understanding that the equipment qualifies as “machinery and equipment” as the term is used in sales and use tax ruling 12, copy enclosed. We understand that the contractor will not use the diesel generator set in making an improvement to real property; that the unit, if attached to real property, is readily removable as a unit; that it is installed for the purpose of furnishing auxiliary power to a computer for a missile tracking device and that the power from the unit will not be used to perform a housekeeping function such as building lighting; and that title to the property passes to the United States before the contractor makes any use of it. As indicated by telephone, you should obtain a resale certificate from the general contractor. For your information in this area, we enclose a copy of ruling 68. The opinion expressed herein is based upon information furnished by you and is, of course, subject to audit verification. We trust this information is sufficient for your purposes; however, if you have further questions, feel free to inquire. Very truly yours, Jack D. Paulson Associate Tax Counsel JDP:o’b Enc. cc: Out-of-state – District Administrator New York (SS)