Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2015
Sales and Use Tax Annotations
315.0000 INSTALLING, REPAIRING, RECONDITIONING IN GENERAL—Regulation 1546
(a) IN GENERAL
315.0090 Engineering and Reassembly Charges. An out-of-state manufacturer of ovens used for drying and smoking food products sold and installed an oven for a customer in California. Included in the contract price were separately stated charges for "engineering," which was for the labor of designing the oven to the customer's specifications, and for "oven labor", which was for reassembly labor and installation.
The oven is considered to be a fixture. The manufacturer was the retailer of the oven and also a construction contractor. Since there was no local participation in the transaction by any office, salesperson or representative of the manufacturer, the applicable tax due is the use tax, which the manufacturer is required to collect from the purchaser. The charge for engineering (design labor) is a "service that is part of the sale" and is includable in the measure of tax. The oven labor (reassembly labor) is not subject to tax if title passed prior to the reassembly and the customer was not required to hire the seller to do the reassembly. In this case, while title may have passed prior to reassembly, there was no evidence to show that the customer could have hired another person to do the reassembly. Accordingly, the charge for reassembly is includable in the measure of tax. 9/27/91.