Were removable, frequently replaced retorts used to manufacture magnesium machinery and equipment?

Plain-English summary

After reviewing the available information, Board counsel changed its view and classified retorts used to manufacture magnesium as machinery and equipment under historical Ruling 12.

The retorts performed a manufacturing function. They were not part of or essential to a structure, and even if the surrounding furnace was a structure, the furnace could function without them. The retorts were also readily removable and had to be replaced frequently.

The memorandum discusses resin soap and sales of other plant property as separate issues, but those matters do not control this annotation.

Common questions

Did the retorts perform a manufacturing function?

Yes. They were used in manufacturing magnesium.

Were they essential structural components?

No. The memorandum said they were not necessary to the furnace's functioning.

Could the retorts be removed?

Yes. They were readily removable and frequently replaced.

Citations and references

• Historical Sales and Use Tax Ruling 12 — machinery-and-equipment classification applied by the memorandum

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/565-0880.pdf

Original ruling text

State of California

Board of Equalization

565.0880
Memorandum
To:

Oakland – Auditing (JFR)

From:

Headquarters – Sales Tax Counsel

Subject:

REDACTED TEXT

Date:

April 30, 1953

Soap
Confirming our telephone conversation of April 28, it is our opinion that soap used to create voids in the plaster mixture, resulting in increased insulation properties of the wallboard being manufactured, is purchased for some purpose other than resale. The soap appears to serve a purpose similar to a mold and we cannot distinguish the purpose from that performed by lace used in the manufacture of clay or porcelain figurines. The Board held that the lace was bought for a purpose other than resale. Even assuming that the soap remains in the finished product, its purpose would appear to have been entirely fulfilled by the time the plaster mixture hardens. REDACTED TEXT states in the petition for redetermination, "The exclusive reason for incorporating this resin soap into the core of the gypsum board products is to capture and hold air bubbles in the plaster mixture until the mixture hardens". (Underscoring added.) After that, the soap does not appear to serve any purpose. Retorts Upon examination of all of the data made available to us, we now view the retorts as "machinery and equipment" under Ruling 12. They are certainly used in performing a manufacturing function (manufacture of magnesium), and are not a part of, or essential to, a structure. Even regarding the furnace as a structure, the retorts are not necessary to the functioning of the furnace. They can be readily removed, and must be frequently replaced. Sale of REDACTED TEXT Plants It is our understanding that the owner of these plants is a lessee of the land, and has the right under the lease to remove the affixed machinery and equipment at any time without the necessity of obtaining permission of the lessor. Consistent with our administrative practice we think the sale of the machinery and equipment is a sale of tangible personal property. We distinguish the sale of the REDACTED TEXT plant by REDACTED TEXT Company covered by our letter of January 11, 1950, upon the basis that at the time of the sale the seller owned the

underlying realty, there being thus no separate ownership of the affixed machinery and equipment. Thus, in the hands of the seller, the affixed machinery and equipment was real property. E. H. Stetson EHS:ph