Were two life-size fiberglass whale models installed at an aquarium taxable fixtures or exempt museum works of art?

Plain-English summary

A taxpayer furnished and installed two life-size fiberglass whale models at an aquarium under a lump-sum construction contract.

California classified the models as fixtures, which ordinarily made the installer their retailer under Regulation 1521. It also concluded that the whale models qualified as works of art.

The sale therefore was exempt if the aquarium met section 6365's museum definition. A nominal charge to view the whales did not appear to defeat exemption because the majority of the museum's space was open to the public free of charge.

What this means for you

Aquariums, exhibit fabricators, museums, and tax advisers

Fixture status does not end the analysis. Confirm that the object is an original work of art, the purchaser qualifies as a museum, and any admission-charge arrangement fits the statutory access rule.

Common questions

Q: Were the whale models fixtures?

A: Yes.

Q: Could fixtures still qualify as works of art?

A: Yes.

Q: Did a nominal viewing charge automatically defeat exemption?

A: No, on the described museum-access facts.

Citations and references

• California Revenue and Taxation Code § 6365
• California Sales and Use Tax Regulation 1521

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 610.0680
• Original supporting opinion: 610.0680 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Audit Evaluation and Planning Unit

From:

E. Leslie Sorensen, Jr.
Tax Counsel

Subject:

M--- B--- A---

610.0680

Date:

April 9, 1985

SR -- XX-XXXXXX

This is in response to your memorandum of March 15, 1985 to Gary Jugum concerning the classification and tax status of two fiberglass life size model whales to be furnished and installed by the subject taxpayer for a museum. The museum, we understand, does not charge for admittance to its main location but will be making a nominal charge at the site where the whales will be exhibited. We have reviewed the contract and other documents you provided pertaining to the transaction in question and have concluded that the models are fixtures and the contract to furnish and install them is a lump sum construction contract pursuant to Regulation 1521. It follows, the taxpayer is a retailer of the models and tax would normally apply as indicated in subdivision (b)(2)(B) of the regulation. However, if the models qualify as “works of art” sold to a “museum” within the meanings of those terms as defined in Revenue and Taxation Code Section 6365, their sale would be exempt. I discussed the matter with Mr. Jugum and it is our conclusion that the models in question qualify as “works of art” under the statute. Assuming the “museum” in question meets the definitional criteria set out in the statute, then, the sale is exempt. We note that, although a nominal charge will be made to view the models, subdivision (d)(1) of the statute would still apparently not disqualify this transaction form exempt status since our understanding is that the majority of the museum’s space is open to the public free of charge.

ELS:rar