Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Montgomery Elevator Co. v. State Board of Equalization . . . (1981)

Board Could Establish Retail Price by Using Plaintiff's Records

A construction contractor which constructed and installed specialized elevator systems brought an action to recover a portion of the sales taxes it had paid under a lump sum contract which included installation of the system as a part of the building. The tax had been imposed on the sales price for which tangible personal property was sold, excluding the amount charged for labor and services rendered in installing the property. The Board used plaintiff's bid sheets in calculating all anticipated contract costs and profits in determining the "retail price" of self-manufactured components on which the sales tax was assessed, and the trial court upheld that determination. As to electrical switching and controlling devices plaintiff purchased and assembled, the trial court agreed with plaintiff's contention that labor or service supplied by plaintiff was to be considered as labor or service required for the creation of a structure on land and not subject to the imposition of any sales tax, and ordered a refund.

The court of appeal reversed with instructions to enter judgment for the Board. The court held that the trial court was correct in denying any refund with respect to the self-manufactured components. As to the electrical switching and controlling devices, the court held it was not unreasonable for the Board to establish a sales price for those assembled components by taking into consideration the service costs incurred by plaintiff at its central facility, or to rely on the bid sheets and other records of plaintiff to establish a realistic "sales price" for those assemblies. Accordingly, the court held that that portion of the judgment awarding plaintiff a refund was erroneous. Montgomery Elevator Company v. State Board of Equalization (1981) 118 Cal.App. 887.