Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2012

Sales And Use Tax Court Decisions

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Coast Elevator Co. v. State Board of Equalization . . . (1975)

Board's Categorization of Elevator Components as Fixtures and Materials Is Not Arbitrary or Unreasonable

Plaintiff, which furnished and installed elevators, claimed that Regulation 1521 and General Bulletin 67-9, distinguishing for sales tax purposes between fixtures and materials incorporated into structures, are vague, uncertain, ambiguous, conflicting, and unreasonable, and in addition, result in taxation of real property contrary to law.

Regulation 1521 provides that construction contractors are the consumers of materials and the retailers of fixtures which they furnish and install in the performance of construction contracts. Where the contractor is the manufacturer of the fixtures, the retail selling price is considered to be the prevailing price at which similar fixtures in similar quantities ready for installation would be sold to contractors. General Bulletin 67-9 categorizes elevator components as either materials or fixtures. Plaintiff claimed that elevator systems that it installs constitute an integrated portion of the structures, are not accessory to the structures, and are required for the operation of the services of the structures. They cannot be removed without substantial damage to the structure and clearly seem to meet all of the tests of materials incorporated into a structure. The court, following General Electric Co. v. State Board of Equalization (1952) 111 Cal.4th 180, held that the legal issue is not the status of the subject matter in the hands of the buyer but in the hands of the seller. Even if General Electric Co. v. State Board of Equalization were not followed, services included in the sales price of personal property are subject to tax. Where a retailer fabricates parts which are incorporated into a fixture, such fabrication is included in the sales price of the fixture. Where classifications established by an administrative agency are not arbitrary or capricious, a court will not substitute its own judgment for that of the agency. The showing made by the plaintiff failed to establish that the rules and policies of the Board were arbitrary or had no rational basis. Coast Elevator Co. v. State Board of Equalization (1975) 44 Cal.App.3d 576.