Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
190.0000 CONSTRUCTION CONTRACTORS—Regulation 1521
(a) IN GENERAL—ACTIVITIES CONSTITUTING CONTRACTING OR MAKING OF IMPROVEMENTS
190.0460 Joint Venture. Two California corporations form a joint venture for the fabrication and erection of structural steel. The joint venture will bid for and enter into a number of construction contracts over a significant period of time and will purchase all materials necessary to the performance of such contracts. The joint venture will hold its own contractor's license. Fabrication and erection activities will be performed by employees of the individual venturers. The joint venture will treat the labor as contributions to capital. Revenues from the joint venture will be distributed based on contributions to capital.
Tax does not apply to contributions to capital of a commencing corporation or commencing partnership in exchange solely for first issue stock in the commencing corporation or an interest in the commencing partnership. In this case, the "contribution" extends over a long period of time and could not be regarded as a contribution to a commencing entity. Thus when an employee of an individual venturer performs only fabrication for the joint venture, the venturer is making a taxable sale to a consumer (the joint venture). On the other hand, when a venturer contracts with the joint venture to both fabricate and install, the venturer is the consumer of any fabrication that it installs, and tax does not apply. 1/7/94.