Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2012

Sales And Use Tax Court Decisions

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City of San Joaquin v. State Board of Equalization . . . (1970)

Firm Selling and Installing Deep Well Agricultural Pumps Is Not a Construction Contractor; Board's Pooling Arrangement for Allocation of Local Taxes Is Valid

Plaintiff was a pump company engaged in the business of selling and installing deep well agricultural pumps. It had a permanent place of business in the City of San Joaquin, Fresno County, and conducted all of its business from that plant, but it installed the pumps at various sites throughout Fresno, Kings, Tulare, and Madera Counties.

Under ruling 11, the Board had classified all retail dealers of deep well agricultural pumps as construction contractors, and had classified the pumps as fixtures. The effect of this was to make each jobsite where the pumps were installed a place of business of the pump company. This meant that the Bradley-Burns uniform local sales and use tax due on sales of pumps was then to be allocated to the county where each pump was installed rather than to the City of San Joaquin.

The court held that these deep well agricultural pumps were not fixtures, because they were not affixed to the land in a permanent fashion, had a useful life of only a few years, and did not become an integral part of an irrigation system. Because they were set in open spaces, were held in place by gravity, were movable, and were often moved from one well to another and were moved to San Joaquin for repairs, the pump company was not a construction contractor, but was instead a seller and installer of machinery and equipment with regard to these pumps.

On another issue in the same case, the court upheld the Board's pooling arrangement for allocation of Bradley-Burns local taxes generated by construction contracts. On over the counter sales, the revenues are allocated to each taxing jurisdiction in direct proportion to the reported sales attributable to that jurisdiction. Taxes derived from construction contracts are not allocated on a transaction for transaction basis, but are placed in a countywide pool and allocated to each jurisdiction in the same proportion as the revenue from over-the-counter sales for the same quarterly periods. City of San Joaquin v. State Board of Equalization (1970) 9 Cal.App.3d 365.