Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2012

Sales And Use Tax Court Decisions

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Chula Vista Electric Co. v. State Board of Equalization . . . (1975)

Tax Applies to Purchase Price of Materials Used in the Installation of an Electric Transmission Line on Real Property Owned and Occupied by the United States

Plaintiff contracted with the United States to replace electrical transmission cable on real property owned and occupied by the United States. The Board asserted and collected use tax based on the purchase price of the cable, and plaintiff sued for a refund. Plaintiff claimed that no tax was due because the cable was machinery and equipment exempt from tax under Section 6381 of the Revenue and Taxation Code as personal property sold to the United States. Plaintiff further claimed that if the cable was not machinery and equipment, it was not tangible personal property covered by the Sales and Use Tax Law because it was an electrical transmission line excluded from the definition of tangible personal property by Section 6016.5 of the Code.

The trial court denied plaintiff's claim, and the court of appeal affirmed. The court held that the electrical transmission line as a whole was a structure which was part of the real property and the cable was a fixture in relation to it; thus the cable was used in the performance of a contract with the United States to improve real property within the state and subject to tax under Section 6384 of the Code and under Regulation 1615, which interpreted that section. The court also held that Section 6016.5 of the Code excludes from the definition of tangible personal property only completed electrical transmission lines and not components used in the construction or repair of the lines. Accordingly, the purchase of the cable by plaintiff to use in the performance of the contract to improve real property was subject to tax. Chula Vista Electric Co. v. State Board of Equalization (1975) 53 Cal.App.3d 445.