Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
435.0000 PRODUCING, FABRICATING AND PROCESSING PROPERTY FURNISHED BY CONSUMERS—GENERAL RULES—Regulation 1526
(c) MISCELLANEOUS OPERATIONS
435.0478 Adaption of Stock Cars to Racing Cars. A taxpayer contracts with an automobile manufacturer for the purpose of adapting the manufacturer's stock cars for racing and entering the cars in performance events. Under the terms of the contract, the taxpayer received possession and purportedly received title to the cars and related components supplied by the manufacturer. However, there were no formal documents of title executed. Also, pursuant to the terms and provisions of the agreement, the manufacturer retained complete control over the vehicles with respect to the performance events and all cars withdrawn from racing reverted back to the manufacturer.
Under these facts, a title clause standing alone is not conclusive of ownership for tax purposes when it appears that the manufacturer retains the essential indicia of ownership. Thus, ownership of the vehicles upon which taxpayer performed the modifications rested in the manufacturer and not the taxpayer.
Therefore, the modification and adaption of the cars consisting of (1) blueprinting the engine, disassembly and magnafluxing or zyglolding all parts, changing parts and reassembly, and (2) reducing weight of production cars, removing flammable materials, modifying hood, wheel width, etc., changing transmission, tires, wheels, etc., constitute a step or series of steps in the production of a racing model and are regarded as fabrication labor, the charges for which are subject to the tax. 12/11/73. (Am. 2000–1).