Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Uniform Local Sales and Use Tax Annotations

700.0000 APPLICATION OF TAX—Regulation 1803

Annotation 700.0169

700.0169 Local Tax Allocation. A California county is building a regional medical center inside a city within the boundaries of the county. There are multi-million dollar purchases of materials, fixtures, and machinery and equipment used to build the medical center. Medical equipment will be purchased and installed later in order to enable the renter to operate as a hospital. The items in question were purchased from out-of-state vendors without the participation of any in-state offices any of those vendors may have. The installing contractor never obtains title to the property purchased by the county.

Under these facts, the contractor building the medical center is installing customer-furnished property rather than property it furnishes. As a result, the project is not a construction contract for sales and use tax purposes. Rather, it provides for the purchase of tangible personal property by the county for use in California. The county owes use tax on that use (section 6201). As the items at issue are delivered directly to the jobsite in the city, the first functional use occurs there. Therefore, the city's local use tax ordinance applies to these transactions. 1/19/96.