Was a demountable jet-aircraft noise-suppressor system designed to move between air bases machinery and equipment?

Plain-English summary

A subcontractor furnished a noise-suppressor system for jet aircraft. The system could be removed as a unit, moved from one air base to another as needed, and sized for transport in military cargo planes.

The letter classified it as machinery and equipment under historical Ruling 12. The subcontractor's sale was therefore a sale for resale to the United States, which owned the equipment.

The subcontractor could accept a resale certificate from the prime contractor even though that contractor lacked a seller's permit, because an actual resale to the Bureau of Yards and Docks occurred. The letter separately noted that the prime contractor technically should have a permit.

Common questions

What facts supported machinery-and-equipment treatment?

Ready removal as a unit and intended movement among air bases.

Was the subcontractor's sale taxable?

No, under the stated resale facts.

Did the prime contractor's missing seller's permit invalidate the resale?

No, although the letter said it technically should hold one.

Citations and references

• Historical Sales and Use Tax Ruling 12 — machinery-and-equipment classification applied by 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/565-0720.pdf

Original ruling text

565.0720

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
July 12, 1966

Gentlemen:
This is in reply to your letter of June 30, 1966, written following our telephone conversation of June 29. You explain that you acted as a subcontractor under a prime contractor and that you furnished a Demountable Noise Suppressor System for jet aircraft. You point out that the equipment being demountable can be readily removed as a unit, can be moved from air base to air base, and is manufactured in a size to fit into military cargo plans. We agree with your understanding that this equipment is “machinery and equipment,” and that term is used in sales and use tax ruling 12, copy enclosed. Your sale of the equipment to
__ is, accordingly, a sale for resale to the United States Government, which owns the equipment. You may accept a resale certificate from _ for this equipment even though that firm does not hold a seller’s permit, in view of the fact that the equipment is, in fact, resold by
___ to the Bureau of Yards and Docks.
Very truly yours,

E. H. Stetson
Tax Counsel
EHS:fb
Enclosure
cc:

Our of state – District Administrator
Los Angeles District – District Administrator
San Diego – District Administrator:
Technically, ______ should have a permit as they are selling machinery and equipment to the Bureau of Yards and Docks.