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Business Taxes Law Guide—Revision 2024
Uniform Local Sales and Use Tax Court Decisions
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City of San Joaquin v. State Board of Equalization … (1970)
Firm Selling and Installing Deep Well Agricultural Pumps Is Not a Construction Contractor; Board’s Pooling Arrangement for Allocation of Local Taxes Is Valid
Application of Local Sales Tax When a Retailer Is Located on the Border Between Two Cities
The City of San Joaquin brought an action against the Board for a declaration as to whether a seller and installer of deep well agricultural pumps, which had its principal place of business in the city, was a construction contractor for purpose of allocating sales tax revenue to counties and cities in which pumps were installed (versus the City of San Joaquin, where the seller was located), and for a declaration of the legality of the Board’s administrative pooling procedure in allocating local revenues from construction contracts (which the city argued was an invalid underground regulation). Under the new administrative ruling, the Board began classifying the seller as a contractor and the pumps sold by the seller as fixtures, which resulted in a decrease in the amount received by the city on the pump sales. Consequently, the city challenged the Board's power to classify the pumps as fixtures as well as the legality of the "pooling procedure" used by the Board in allocating revenues from construction contracts.
The court of appeal found that the seller was engaged only in the business of installing machinery and equipment that did not improve real property, and thus it was taxable by the city. The court also found that the pooling procedure used by the Board was not a regulation, but an accounting system that did not unconstitutionally deprive plaintiff of its tax revenues. City of San Joaquin v. State Board of Equalization (1970) 9 Cal.App.3d 365.