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Business Taxes Law Guide—Revision 2024

BTLG Table of Contents > Sales and Use Tax Annotations > I > 315.0000 Installing, Repairing, Reconditioning in General > entire section

Sales and Use Tax Annotations

A B C D E F G H I J L M N O P R S T U V W X

315.0000 Installing, Repairing, Reconditioning in General—Regulation 1546

315.0000 Installing, Repairing, Reconditioning in General—Regulation 1546

See Fur Repairers, Alterers, and Remodelers; Miscellaneous Repair Operations; Vehicle Engine Exchanges. Maintenance contracts, see Returns, Defects and Replacements. Producing, fabricating, processing distinguished, see also Producing, Fabricating and Processing Property Furnished by Consumers—General Rules.

(a) In General

315.0010 Applying Teflon Coating to New and Used Equipment. Taxpayer is in the business of applying Teflon coating at its place of business in California to new and used equipment furnished by its customers. Taxpayer is performing fabrication when it applies the Teflon to new equipment, and tax applies to the taxpayer's total charge unless the sale is otherwise exempt.

Taxpayer is repairing or reconditioning property when it applies Teflon to the used equipment of its customers. Thus, taxpayer is the consumer of the Teflon it furnishes in such operations if the retail value of the Teflon (and any other materials furnished) is 10 percent or less of taxpayer's lump-sum charge. If such is the case, tax applies to the sale to or use by taxpayer of the Teflon (and other materials). If, however, the taxpayer separately states its charges for the Teflon (and any other materials) regardless of its retail value or if its value exceeds 10 percent of the taxpayer's total charge, the taxpayer is the retailer of the Teflon and other materials it furnishes. If such is the case, tax applies to taxpayer's separately stated charge (or if not separately stated, the fair retail value) for such property unless the sale is exempt from tax. 6/26/97.

315.0030 Body Shop Repair Supplies. A body shop and repair operator has charged its customers a flat fee for supplies "rated" to the job. Usually such fees relate more to the operator's own formula than to the actual value of the supplies used. The operator uses this approach in an attempt to avoid paying the sales tax to the sellers of the supplies. The supplies are items such as sandpaper, paint thinner, etc.

If a purchaser who has a valid seller's permit insists on its purchasing for resale property of a kind not normally resold in its business and makes such a statement on the resale certificate, the retailer would have no alternative but to accept the resale certificate as taken in good faith and the seller would then be exempt from the imposition of sales tax. The purchaser who gave the certificate would be liable for the use tax if in fact it used the items rather than resold them.

Items purchased and used by the body shops such as masking tape, thinner and the like are not regarded by the Board as items sold by the repairer and, accordingly, the repair shop should not charge tax to its customers. As a consumer of such materials, the body shop is guilty of a misdemeanor under the Sales and Use Tax Law when "tax" or "tax reimbursement" is charged to the customers. Such charges will be regarded as excess tax reimbursement and will have to be refunded to the customers or they will be retained by the Board.

In addition, the purchaser (body shop) will still be liable for use tax measured by the purchase price of those items purchased from the supplier under a resale certificate and used on the job. In such cases, the shop operator would be responsible for the payment of the use tax directly to the Board without any offset for the amount of tax reimbursement that was collected from the customers.

Also, if a particular individual continues to collect excess tax reimbursement, the Board has the authority to revoke his seller's permit. 5/26/77.

(Note.—Subsequent statutory change re excess tax reimbursement.)

315.0055 Computer Additions. A computer company receives a computer, which was bought elsewhere, from a customer. The company produces and installs into the computer an amplifier.

If the computer is a new computer, sales tax applies to the entire charge for the installation of the amplifier.

If the computer is a used computer, and the amplifier simply amplified the audio output of the computer and does not refit the computer for a use different from which it was originally produced, the charge for the amplifier and parts furnished to the customer is taxable. Tax does not apply to the charge for labor to install the amplifier. 4/13/92.

315.0060 Consumer of Replacement Merchandise—Repairer as. The purchase of new merchandise by a repairer to replace merchandise of customers lost through fire on repairer's premises is a retail taxable sale to the repairer. If such merchandise is purchased ex-tax under a resale certificate it must be reported as consumed goods for no resale takes place under such circumstances. 7/27/53.

315.0070 Crushing of Broken Concrete Rubble. The crushing of broken concrete rubble to be used as a base for road and building construction is not a repair or reconditioning operation. Rather it results in a processed product having different characteristics, shape, form and qualities from the rubble it was crushed from. As such, the charges for crushing represent taxable processing under section 6006(b), when performed for a consumer. 1/21/77.

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.

315.0100 Engineering Services. Charge for supervision of installation and initial operation of equipment by a competent engineer is excludible from taxable gross receipts.

Charges for drawings, plans, diagrams, etc., relating solely to the general layout arrangement and integration of various items of machinery would be considered as charges for installation of the property and likewise excludible from gross receipts. That portion of such charges, however, which relate to design or production of the equipment would be subject to tax. 3/27/53.

315.0108 "Fair Retail Selling Price." A company proposes that it segregate repair parts and materials from labor on each billing by ascertaining an average cost of materials used in each repair category (i.e., minor, general, major, or maximum repairs). It plans to use available statistics and compute an average as a constant or weighted percentage of the total charge which would be representative of the cost of parts for each type of repair. The balance of the charge would constitute labor and thus not be subject to the sales tax.

It appears reasonable to conclude that the charges to be made by the company, using its minor, general, major, and maximum classifications, may within each category reasonably approximate the fair retail selling price of parts and materials. It is clear that tax reimbursement may not be charged to the customer based upon the total repair price and that any charge for parts and materials cannot be based upon an average of parts and materials used in all classifications of repair. It is reasonable, however, to accept the practice that has been proposed as being in compliance with the regulation if in effect the "fair retail selling price" of the parts and materials used in any particular repair transaction is reasonably ascertained.

The exception to the acceptance of this procedure would occur where no parts or materials are utilized in a repair. The company would not be permitted to collect tax or tax reimbursement from its customers based upon the "fair retail selling price" of parts where in fact no parts were sold. 6/4/76.

315.0121 Installation. Installation includes unpacking, lubricating, adding fluids, and testing of the property. 12/29/86.

315.0122 Installation of Boards in a Computer. A purchaser contracts to have utility boards installed in a computer. If the computer is new, the installation of the utility boards is a step in providing the final product. The entire charge is taxable regardless of whether the boards are installed by the seller of the computer, the seller of the boards, or someone else hired by the purchasers. 6/20/94.

315.0123 Installation Cost—Cabinets. Installation charges in connection with a contract to furnish and install cabinets are excluded from the measure of tax even though they are not separately stated in the bid, contract, or invoice. (Section 6012 (c)(3).) 1/23/92.

315.0124 Installation of Motherboard/Added Memory—Used Computer. A taxpayer is in the business of changing the motherboard of, or adding memory to, a customer's used computer. Assuming the motherboard or additional memory merely upgrades the used computer by increasing its existing memory and does not refit the computer for a use different from which it was originally produced, the charge for the labor to install these items is not subject to sales tax. The charge for the motherboard or additional memory furnished to the customer is taxable. 1/21/97.

315.0125 Installation of Satellite Television Systems. A retailer of satellite television systems provide installation as an option. The installation includes putting a post in concrete, putting five pieces of the satellite disk on the post, putting electronics on the disk, running wire from the disk to the inside of the house, hooking up electronics to the wire, aligning the disk, and programming the receiver.

This is a construction contract. Charges for labor or services used in installing or applying the property sold are excluded from the measure of tax. 1/4/93.

315.0140 "Lift Gates" on Used Trucks. A "lift gate" is an accessory rather than an integral part of a truck. Separately stated charges for installation labor would not be included in the measure of tax where the installation is made on a used truck. 4/15/57.

315.0142 "Lift Gates" on New Trucks. A vehicle is traditionally regarded as "new" when 1) the vehicle qualifies as a new vehicle when it is registered with DMV and 2) the contract for fabrication operations on the vehicle is entered into within 60 days of the registration date.

The labor to install an accessory, such as a lift gate, in a new vehicle, is a step in the manufacturing process resulting in the creation or production of a vehicle produced as specified by the consumer. Installation of accessories on a new vehicle is subject to tax as fabrication labor. 11/28/01.

315.0150 Low Emission Motor Vehicles and Retrofit Devices. Pursuant to section 6356.5(a), Revenue and Taxation Code incremental costs of the sale of and storage, use, or other consumption in this state of new low emission motor vehicles certified by the Air Resources Board are exempt from tax provided the incremental cost is separately stated on the manufacturer's label affixed to the vehicle, the manufacturer's invoice to the retailer, and the retailer's contract of sale with the purchaser. Incremental cost is the difference between the actual price of a new low emission vehicle and the manufacturer's suggested retail price for a comparably equipped conventional fuel vehicle.

Pursuant to section 6356.5(b), Revenue and Taxation Code, the sale of, and the storage, use or other consumption in this state of any retrofit device is exempt from tax provided low emission labeling appears on the device itself or its packaging, the documentation from the manufacturer to be retained by the retailer upon sale, and the retailer's contract of sale with the purchaser.

A retrofit device is exempt when sold as a kit or when installed on a customer's vehicle. The labor to install will generally qualify as exempt installation or repair labor. If the dealer purchases a vehicle, installs the retrofit device and sells the vehicle with the device, the vehicle does not qualify as a new low emission vehicle, nor is it a sale of a retrofit device, and the entire selling price of the used vehicle is a taxable transaction not exempt pursuant to section 6356.5(a) or (b). 11/13/92.

315.0158 Mandatory vs. Optional Maintenance Contract. If a seller/lessor is willing to sell or lease equipment without also requiring the purchase of a maintenance contract, a maintenance contract purchased in connection with the purchase of that equipment will be regarded as an "optional maintenance agreement." The fact that the customer's "request for proposal" required the bid to include a maintenance contract will not alter the optional status of the contract. Therefore, as long as the charge for the maintenance contract is separately stated, and the purchaser/lessee could have purchased or leased the property, without also purchasing the maintenance contract, the sales price of the maintenance contract is not subject to tax. 10/30/86.

315.0160 Mounting Gun Scope. Mounting a scope on a new gun constitutes fabrication and the charges therefore are taxable. Mounting a scope on a customer's used gun constitutes installation labor and the charges therefore are exempt. 7/23/68.

315.0180 Lease in Lieu of a Sale. A home furnishing store sells merchandise on a lease contract basis, the lease being in lieu of a sale, and taxable as a sale of the property covered by the lease. Installation charges, such as connecting a stove, a washing machine, laying carpets, etc., in the contract, are excludible from taxable gross receipts. 12/4/53.

315.0200 Lessor Using Repair Parts. Sales tax does not apply to repair parts used by lessor in maintenance of equipment in possession of lessee under a rental agreement and upon which lessor is paying sales tax measured by rental receipts. Such repair parts may be regarded as part of the equipment in rental service. 6/9/54.

315.0205 Mandatory Maintenance Contracts. When a lessor leases property in substantially the same form as acquired and makes a timely election to pay sales tax reimbursement or use tax measured by the purchase price then the lease including any mandatory maintenance contracts is not regarded as a sale under the Sales and Use Tax Law. If the lessor purchases parts to use in repairing the leased property, the lessor is also the consumer of those parts since they are being incorporated into property which the lessor is not reselling. 3/5/92.

315.0206 Travel or Mileage Fees. Separately stated travel or mileage fees in connection with a repair of tangible personal property are not includable in the measure of tax if the vendor does not furnish any tangible personal property or if the tangible personal property furnished by the repairer is as a "consumer" pursuant to Regulation 1546(b).

If the repairer also furnishes parts for which it is the retailer under Regulation 1546, the issue of whether part or all of the charge is includable in the measure of tax depends on whether the charge is related to the parts, labor, or both. If the charge is related solely to parts, it is includable in the measure; if related solely to labor, it is excluded; if it is related to both, it should be prorated in the respective ratio of the charges for parts and labor.

When a contract which provides for a "mileage and truck charge" for having trucks stocked with all necessary tools and common material to complete a service call without making a trip to a supply shop, saving additional labor charges, and for small supplies, the charge is an overhead charge related to both labor and parts and should be prorated. Part of such a charge is for stocking parts on the truck.

On the other hand, when a firm which makes a "service charge" in connection with dispatching a truck to repair, changes or replaces a tire as needed, the charge is not related to the sale of tangible personal property when circumstances dictate that a tire be replaced and such a charge is not added when the customer brings in a vehicle for a tire replacement. 9/17/82; 1/27/95.

315.0207 Maintenance Contracts. A retailer of computers and software sells maintenance contracts with the following features:

(1) Software updates provided on diskette, including the right to use, i.e., the right to copy software updates into the customer's computer.

(2) Media and manuals on how to install/apply software updates.

(3) Hardware parts replacement, on site support, telephone support and hotline.

The customer has the option of purchasing these feature(s) in the following combinations. Feature 1 (by itself), feature 1 and 2 or feature 1, 2 and 3, or feature 1 and 3 (without feature). If the customer purchases feature 1 it may be used only on one computer. A separate purchase is required to use the software on any other computer. On the other hand only one purchase of feature 2 is required regardless of how many computers are involved. For example, the customer may purchase 100 units of feature 1 and only one unit of feature 2.

If a person enters into a contract which includes features 1, 2 and 3, the charges for features 1 and 2 are subject to tax. Since feature 3 is optional with the customer, a separately stated charge for this feature is not subject to tax. Rather, the use of parts by the repairer fulfilling the contract would be taxable.

The fact that feature 3 cannot be purchased without purchasing feature 1 or feature 1 and 2 does not change its optional nature. The customer may purchase the tangible personal property (features 1 and 2) without purchasing feature 3. 4/18/91.

315.0207.150 Miscellaneous Materials—Body Repair Shop. A body and paint shop may purchase for resale items such as lubricants, adhesives, and nuts and bolts which are physically transferred to the customer. On the other hand, items such as shop rags, paper products, abrasives, cleaners, masking tape, and paper are not transferred to the customer and title to them would not pass to the customer in the absence of an appropriate title passage clause. In the absence of such a clause, these items may not be purchased for resale. When a taxpayer makes a miscellaneous material charge for both classes of items based on an hourly charge, the taxpayer may only obtain sales tax reimbursement on the portion related to the items resold, e.g., lubricants, nuts and bolts, and adhesive. 2/21/97.

315.0208 Optional Maintenance Contracts. The repairer is the consumer of tangible personal property used in the performance of optional maintenance contracts on property owned by the U.S. government, even if the contract contains a title clause declaring that title passes to the owner of the item being repaired upon installation to that item, and even if the repairer makes no use of the property other than installation to the item being repaired. 8/22/90.

315.0209 Optional Repair Warranties. A manufacturer of service station equipment sells optional warranty policies to purchasers of its equipment. It contracts with an independent repair facility to make repairs under the warranties. The manufacturer manufactures all repair parts. The repair facility purchases repair parts for inventory from the manufacturer. The value of repair parts and materials used on repair jobs exceeds 10 percent of total charge.

In some cases, the repairer takes items from its own stock to make repairs. Upon completion of the repairs, the manufacturer replaces the parts without charge to the repairer. In other cases, the manufacturer provides parts directly so that the repairer does not have to remove parts from its inventory. In still other cases, the repairer purchases parts from a distributor. The distributor gives full credit for the purchased parts when defective parts are returned.

Since the warranty policies are optional, the manufacturer is the consumer of the repair parts and materials. When the repairer furnishes parts which it purchases in a repair operation, there is a retail sale to the manufacturer even though the manufacturer replaces the parts or the distributor accepts defective parts as payment. The definition of "sale" includes barter. Tax applies to the retail selling price of the parts. If the manufacturer provides parts directly (the repairer is installing parts owned by the manufacturer), tax applies to the raw material cost of the parts. 2/18/94.

315.0210 Optional Warranties. Optional warranties may be provided by other than the seller of the property. A repairer who enters into a warranty contract which is not required as part of the sale of tangible personal property is providing an optional maintenance contract under Regulations 1546(b)(3) and 1655(c)(3) whether or not that person was also the seller of the property for which the warranty is issued. That person is the consumer of materials and parts furnished in performing the repairs and tax applies to the sale of such property to the repairer or to the use by the repairer of that property. 8/23/90.

315.0211 Optional Warranties. A seller of equipment also sold optional lump-sum maintenance agreements to its customers. This seller then subcontracted the actual maintenance work, also for a lump-sum amount. Irrespective of whether the optional maintenance agreement was purchased from the seller of the equipment or from some other party, the subcontractor actually doing the repair work is the consumer of the parts used because that sub-contractor was performing repairs under the optional maintenance agreement it sold. 10/21/88.

315.0215 Out-of-State Repairs. Charges for repairs made on an item of tangible personal property at a service center outside California and then shipped to the customer's location inside California by common carrier or U.S. Postal Service would not be considered a sale in this state subject to sales tax.

If the repairman is the retailer of parts used to perform the repair work, use tax would apply to the customer's purchase of repair parts. The repairman is the retailer of the parts if the retail value of the parts is more than 10% of the total charge or if a separate charge is made for the repair parts. Otherwise, the repairman is the consumer of the property. In that case, the customer will not be liable for use tax on the purchase of the repair parts since the out-of-state repairman is the consumer of the items.

In a second situation, repairs are made on an item of tangible personal property at a service center located in California and then shipped to the customer's location outside California by common carrier or U.S. Postal Service.

If the repairman is the consumer of the parts as described above, tax applies to the repairman's purchase of the repair parts from his vendors. If the repairman is the retailer of the parts, either because the value of the parts exceed 10% of the total charge or because the repairman makes a separate charge for the repair parts, the repairman would not be liable for the sales tax if the repairman is required by the contract of sale to ship the parts out of state and does, in fact, ship the parts out of state. 10/31/88.

315.0221 Painting Repair Parts. A charge made by a repair person to paint a new part used in the repair operation is not subject to tax. The charge is considered "for repainting or refinishing used articles" under Regulation 1551. This is true whether the new part is painted before or after installation. 8/30/99. (2000–1).

315.0240 Pipe Coating—Well Stop Charges. A chemical formulation is injected into oil wells for the purpose of coating the metal surfaces of pumps, tubing, and sucker rods to protect against corrosion, scale and bacterial attack. The chemical is forced under pressure from a tank truck into the well, where the well pump distributes it. The performance of the injection services requires skilled technicians, and may or may not be performed by the supplier who furnishes the chemicals. The injection services are not required as a condition of the sale by the retailer of the chemicals and in all cases the well operator controls the quantity and formulation of the chemicals applied. Under these circumstances, the injection services represent nontaxable installation labor. The charges for the chemicals are subject to tax. 11/25/70.

315.0260 Pole Lines. The charge for the stringing of wires on existing utility lines and other installations such as making connections, installing apparatus and guy wires, etc., are nontaxable installation charges. The tax applies only to the extent of the selling price of the materials furnished by the contractor. 6/18/57.

315.0283 Providing Workers. A company provides only workers to an independent business without furnishing the place of work, any supervision of the worker or any materials, tools, equipment or supplies used in performing the work. The payment for the work is based merely on an hourly rate for the labor. The workers furnished will be considered "special employees" of the business to whom they are furnished and the furnisher will not be considered as producing, fabricating, or processing consumer furnished tangible personal property under Regulation 1526. It is immaterial that the workers may bring with them some of the tools required to perform a specific job. 6/6/75.

315.0285 Purchase of Drums. A client of a container service company purchases a quantity of drums to guarantee availability of the drums when needed during a season. The client takes title and possession of the drums and requests the company to store the drums until needed. The company charges a storage fee. Later, the client takes some drums and requests the company to recondition some of the other drums, for which the company charges a reconditioning fee.

Assuming the company sells the drums prior to storage (i.e., contract provides that title passes, payment is made, and tax reported at that time), the charge for storage after the sale is not part of the taxable gross receipts from the sale as long as that storage is not mandatory. If the drums are used drums and the reconditioning is for the purpose of restoring the drums to their original condition, the application of tax is as provided by Regulation 1546. If the reconditioning prepares the drums for a new and different purpose, the reconditioning is fabrication and the entire charge for the reconditioning is subject to sales tax. If the drums are new, the reconditioning is fabrication, by definition, and the entire charge is subject to sales tax. 7/7/92.

315.0287 Reassembly Charges. A taxpayer sells and installs pumps. Customers may contract to purchase the pumps with or without installation. The taxpayer purchases pumps from an out-of-state manufacturer. The manufacturer assembles the pumps at the factory for testing and disassembles them for shipment. The taxpayer reassembles and installs the pumps at the customers' sites if the customer desires. The customers issue separate purchase orders for the pumps and for reassembly and installation. The taxpayer issues separate invoices. The negotiations for sale and for reassembly and installation are conducted separately and by different personnel.

Since the reassembly and installation are separately negotiated, ordered and invoiced, the charges are not charges related to the sale of tangible personal property. Reassembly constitutes reconditioning rather than fabrication regardless of whether it is performed by the manufacturer or a different person. Accordingly, tax does not apply to the charges for reassembly or installation. 4/22/88.

315.0289 Reconfiguration of a Wall System. Reconfiguration of an existing wall system, which is not attached to realty, is considered to be a nontaxable repair. If a reconfiguration involves a substantial change from the original wall system due to the addition of many new components, that reconfiguration would be taxable fabrication. 12/24/86.

315.0290 Re-Covering Lithographic Printing Rollers. A company requested information regarding the sales or use tax application to re-covering lithographic printing rollers. The repair process is described as follows:

(1) The roller is picked up at the company's place of business.

(2) The old rubber cover is removed from the steel core.

(3) If bearings are present, they are removed. The core is sandblasted and cleaned. If the journals need to be repaired, the roller core is sent to an outside machine shop for repair.

(4) The core is prepared to accept the rubber compound, which is applied in the proper thickness.

(5) The core and rubber covering are put into a furnace and cured for the appropriate time.

(6) The roller is machined or ground to specification.

(7) The roller is wrapped and prepared for return.

It is assumed that the new roller cover is custom made and is fabricated at the time the roller is refurbished rather than one which is merely pulled from existing stock. It is also assumed that most of the charge for the repair of the journals is labor, that few new parts are put in, and that the journals are mostly inspected and cleaned.

The reference to a "rubber compound" and the need to use the compound indicates that the refurbishers fabricate a new cover from raw stock. Consequently, steps 4 and 5 are steps that result in the creation or production of tangible personal property, and the labor charges are considered taxable fabrication labor. In step 3, the removal and presumably, the replacement of the bearings would be considered repair and installation labor. The repair of the metal journals appears to be a process that takes place, if necessary, whether or not a custom or ready-made cover is used. From the statement that the greater amount of the repair bill for the journals or roller end is labor, it appears that the charges for the job are repair labor. The sandblasting and cleaning of the core would be considered non-taxable repair labor if a ready-made cover were used but a step in the production of tangible personal property if a custom cover is used. The charges for removal and replacement of the bearings (step 3) and steps 1, 2, 6 and 7 are nontaxable repair and installation labor. Based on the facts supplied, the refurbishment of the roller ends or journals appears to be nontaxable repair labor. 9/5/90; 2/5/91. (Am. 2001–3).

315.0292 Remanufacture of Mobile Concrete Mixer Drums. Steps in remanufacturing of mobile concrete mixer drums are as follows:

(1) Remove old drum from truck.

(2) Buy the steel.

(3)(a) Remove concrete build-up.

(b) Skip cut drum—cutting slots in old shell so it can be removed later.

(4) Lay out, cut and form steel to fit drum.

(5) Tack weld the new steel over old shell.

(6) Remove the old shell from the inside.

(7) Weld inside and outside weld seams.

(8) Install new internal parts.

(9) Leak check, clean and prime.

(10) Install on truck.

Based on the above described process, the nontaxable repair and installation labor consists of removing the old drum (item 1), removing the concrete (item 3a), and installing the new drum (item 10). The charges for all the other work listed are subject to sales tax as part of the charge for fabricating the new drum. 8/25/87.

315.0296 Repair Work on Property Used on a Contract with the U.S. Repair or maintenance work on property owned by a contractor and used in the performance of a contract with the U.S. is subject to tax in the same manner as such work would be if performed for any other purchaser. 10/28/82.

315.0297 Repairs Under Warranty. A taxpayer provides a warranty to its customers as part of its sale of equipment. When the equipment is returned for repair under warranty, the taxpayer contracts with a subsidiary or with independent service centers for the repair. In some cases, the taxpayer provides parts from its resale inventory to the subsidiary or to the independent service center to accomplish the repair. The warranty work is generally performed at the site of the user of the equipment.

When the taxpayer furnishes the parts, the charge by the subsidiary or service center for labor is not taxable. If the warranty is optional, the taxpayer is liable for tax on the cost of parts removed from its resale inventory unless the parts are installed outside California. If the warranty is mandatory, the parts are regarded as having been sold with the original sale of the equipment.

When the taxpayer does not furnish parts, the subsidiary or the service center is regarded as selling the parts to the taxpayer if the parts are separately invoiced to the taxpayer or if the retail value of parts and materials exceeds 10% of the total charge. Otherwise, the subsidiary or the service center is the consumer of the parts. If the taxpayer is regarded as purchasing the parts, tax will not apply to parts installed outside California or to parts provided under mandatory maintenance contracts. 11/10/94.

315.0298 Screenprint onto Used T-Shirt. Screenprinting onto a customer's T-shirt which has been worn previously is regarded as repairing the T-shirt. If a separate charge is made for materials incorporated onto the T-shirt, the taxpayer is regarded as the retailer of those materials and sales tax applies to those material charges. If a separate charge is not made for materials but the retail value of those materials is more than 10 percent of the total charge made, then the taxpayer is also regarded as the retailer of materials. The remainder of the charges for repairs would not be subject to sales tax.

When the taxpayer performs repairs and is not regarded as a retailer (i.e., value of materials is less than 10 percent and the charge is billed lump sum) as discussed above, the taxpayer is the consumer of all materials furnished in connection with repairs. Sales or use tax applies to the taxpayer's purchase of such materials. 9/17/91.

315.0299 Shelving—Installation of. Charges for installation labor are not taxable, whether or not they are separately stated. Labor for providing shelving is regarded as taxable assembly labor rather than installation labor, unless part of the shelving is attached to the real property and the remaining components of the shelving are sequentially attached to the part already attached to create the shelving. 8/14/79.

315.0300 Shoe Braces. Leg braces are attached to a pair of new shoes. The braces constitute a separate finished product and the labor of attaching them to the shoes is exempt installation labor rather than taxable fabrication labor. 9/2/55.

315.0305 Silicon Wafers—Repair or Fabrication. Silicon wafers originally purchased as "test wafers" are sent to a manufacturer for reprocessing. If the wafers have been used to test other wafers or other property or used in research and if the reprocessing restores them to their original condition, the charge is for repair labor which is not taxable.

If the term "test wafers" means that the wafers were tested by the customer and determined to be inadequate or substandard because they did not meet specifications, such wafers are new, not used. In such case, the reprocessing constitutes taxable fabrication labor for property furnished by a consumer. 3/24/93.

315.0308 Spare Parts—Optional Maintenance Contracts. A taxpayer purchased spare parts ex-tax from out-of-state vendors or from California vendors under a resale certificate. The parts were stored in the taxpayer's California facility pending need. The parts in question were subsequently used in performing repairs on optional maintenance contracts on leased equipment located out of state and were transferred to an out-of-state facility for storage or use there. The taxpayer claimed depreciation deduction on the parts held for use in performing maintenance contracts on its income tax return.

Property purchased in California under a resale certificate or from out-of-state vendors and subsequently shipped to a point outside the state without any use other than that outlined in section 6009.1 is not subject to use tax.

With respect to the taxpayer's income tax depreciation deductions on this property, there is no income tax rule which precludes a taxpayer from claiming depreciation deductions on such property merely because the holding of the property is excluded from "use" for sales and use tax purposes. Thus, the claiming of depreciation deductions does not preclude the taxpayer from obtaining the benefits of section 6009.1.

However, when the taxpayer is aware, at the time of purchase, that it will be a consumer of parts purchased for use on its optional maintenance contracts, it should not issue a resale certificate for this type of property. If it does issue resale certificates, it will be liable for tax under section 6094.5. 2/29/88.

315.0310 State Inspection and Emission Stickers. State and emission inspections are regarded as a sale of labor and, therefore, charges for these inspections are not taxable. The state and emission inspection certificates (stickers) are regarded as a record of the inspection and not as tangible personal property. As such, sales tax does not apply. If any repairs are performed as a part of the inspection, sales tax applies to the repair charges in accordance with Regulation 1546. 2/6/95.

315.0320 Subcontracting Repairs. Sales tax does not apply to the full charge for repair services even though the retailer subcontracts the repairs. The tax will apply only to the charge for materials and parts furnished in connection with the repair. The retailer, in turn, can give the repairman who actually performs the repair service a resale certificate to cover the sale of the repair parts by the repairman to him. 3/30/51.

315.0325 Subcontractors. A subcontractor performs repair work for a retailer. The provisions of Regulation 1546(b)(2) would apply to the subcontractor. That is, if the parts and material the subcontractor furnishes in connection with the repair work will be ten percent or less of the total charge to the retailer and if the subcontractor does not separately state the charge for those parts and material, the subcontractor is the consumer of the parts and material and tax applies to the sale to him/her. 1/30/90.

315.0328 Third Party Service Repair Contracts. A taxpayer located in California performs third party service/repair calls for customers. The taxpayer is hired by customers who are located out of state and have no employees in California. Taxpayer is hired to perform repairs on products which are covered by some type of maintenance agreements issued by its customers.

If the taxpayer's customers contract for the repairs because they are obligated pursuant to optional maintenance agreements, the customers are the consumers of the parts the taxpayer sells. Therefore, the taxpayer's sales of parts to them are retail sales and sales tax applies to such charges for those parts. If the taxpayer's customers are obligated pursuant to mandatory maintenance agreements, the customers are the retailers of the parts they purchase. Thus, taxpayer's sales of the parts to them are nontaxable sales for resale.

When the repair service is performed on office equipment owned by the federal government, the application of the tax is the same as explained above. Although sales of tangible personal property directly to the United States are exempt from sales tax, this exemption does not apply here since the taxpayer will not be making the sales to the United States. Rather, taxpayer's sales of the parts are to the out-of-state customer under either an optional or mandatory maintenance agreement. (Regulations 1546(b)(3)(A) and 1655(c)(1).) 1/28/94.

315.0330 Tinting Windows. Tinting windows on used vehicles, vessels, and aircraft is considered a repair operation. If no separate charge is made for the tinting material itself, and the fair retail value of the material is 10 percent or less of the total charge, the repairman is the consumer of the material. As such, no tax applies to the charge for the tinting. The repairman should pay the sales tax to its suppliers when purchasing the tinting material.

On the other hand, when the retail value of the tinting material is more than 10 percent of the total charge, the repairman is the retailer of the material, and must segregate on the customer's invoice and in his records the fair retail selling price for the material. 8/25/92.

315.0335 Training Customer's Staff. As a part of the "installation charge," taxpayer spends two-thirds of the time charged for "installation" on training the staff of the customer in operating and maintaining the new machinery.

Charges for such training which are separately identifiable and optional to the customer may be excluded from the measure of tax. On the other hand, if the training is practically or contractually mandatory, then the charges applicable to the training may not be excluded from the gross receipts of the machinery. 10/4/76.

315.0340 Tuning, Testing and Adjusting of Organ. Separate charges for labor of tuning, testing, and adjusting during installation of, for purpose of adapting tone to the acoustics of the building in which installed are deductible as installation charges. 9/21/50.

315.0345 U.S. Government Contract—Repairs. A firm providing yearly maintenance services for medical equipment for the United States is a consumer of parts used in the maintenance. Although the contract with the United States provides in part "all newly installed replacement parts became the property of the government," the provision does not affect the application of tax. Such a clause does not provide that title passes prior to the use by the taxpayer. The lack of a timely passage of title is the factor which distinguishes the contract from the contract in the Aerospace Case. 3/9/93; 5/20/96.

315.0349 Waterbeds. The connecting of the components of a waterbed constitutes taxable assembly labor and not nontaxable installation labor. Filling a waterbed with water is nontaxable installation labor and is nontaxable even if not separately stated. 10/17/80.

(b) Exchanges of Used for Reconditioned Property

See Vehicle Engine Exchanges.

315.0353 Airplane Engine Exchanges. A small commercial aviation operator contracts with the manufacturer of the engines which it uses on its aircraft to provide engine maintenance and repair. The manufacturer similarly contracts with several other small operators to provide the same engine maintenance and repair. Since these small operators cannot afford to have an inventory of engines used as modular repair units, the manufacturer owns and maintains a pool of such modules. The operators are charged for participation in the pool by a fixed charge based on operating hours. All modules removed for maintenance or repair are replaced by other modules from this pool to minimize aircraft down time.

The module transactions are regarded as the exchange of used for reconditioned similar property. The amount subject to tax is the amount charged by the engine manufacturer for participation in the pool. 9/21/83.

315.0360 Bumpers Rechromed. Auto bumpers which are sent out for rechroming are taxable if the general practice of the chroming industry in a given area is to commingle bumpers received so that the customer receives an equivalent bumper, though not necessarily the same one. However, if the rechromer keeps adequate records to prove that the bumper returned is the identical bumper sent in, the charge is nontaxable as a repair. 1/29/69.

315.0370 Core Deposits. New Parts: The customer purchases the parts, leaves a core deposit, and is charged tax on the total. Later, the customer brings in a used part. Under these circumstances, the customer would be entitled to a refund or credit for the core deposit only. Tax paid with respect to the core deposit should not be refunded or credited to the customer.

Reconditioned Parts: The customer purchases the part, leaves a deposit, and is charged tax on the total. Later, the customer brings in a used part. Under these circumstances, the customer would be entitled to a credit or refund of the core deposit plus tax paid with respect to it. 2/27/80.

315.0380 Deposits. If the original transaction is clearly understood and designated to be an exchange, the tax will not apply to the amount of deposit placed with the retailer to insure delivery to him of the worn part, in the event that the customer does deliver the worn part to the retailer and receives a refund of the deposit. The amount of the deposit should, of course, be entered separately in the retailer's books as a deposit.

In the event that the customer does not deliver the worn part to the retailer pursuant to the exchange agreement, the transaction will be regarded as a straight sale of the reconditioned part.

In this event the retention of the deposit by the retailer will be regarded as an appropriation of the amount thereof to the payment of the retail sales price of the part, which will be regarded as the full amount charged by the retailer, including the amount originally received as a deposit. The tax will apply, in this case, to the full retail sales price. 1/19/50.

315.0400 Deposits—Reimbursement. Auto parts stores may use, in a proper case, that portion of the Regulation 1546 which allows tax to be measured, in the case of an exchange of a worn part for a reconditioned part, by the cash received. Where a "core deposit" is taken to insure that the worn part will be turned in after the reconditioned part replaces it in the car, tax reimbursement should be charged on the deposit to protect the retailer in case the worn part is not turned in and the deposit forfeited. In this case, the transaction is a straight cash sale. However, tax reimbursement on the deposit must be returned to the customer with the deposit, otherwise it constitutes excessive tax reimbursement under section 6901.5. 11/4/64; 9/29/89.

315.0410 Identical Property. In order for Regulation 1546(b)(4) to apply, the reconditioned property must be virtually identical to the used property delivered by the customer. This type of transaction is the functional equivalent of one in which the customer's own property is reconditioned and tax applies only to the value added or exchange price of the reconditioned property. If the property delivered by the customer is not virtually identical, it is a "trade-in" under Regulation 1654(b)(1). 11/29/90.

315.0415 Subcontracted Repairs. Regulation 1546(b)(4) applies to the exchange of a reconditioned part for a used part. The focus is on the character of the goods, not on the act of reconditioning. Thus, whether the reconditioned part is repaired by the retailer or the retailer's subcontractor is irrelevant. In either event, tax is measured by the amount the repairman or reconditioner charges for the repaired or reconditioned property. 5/9/90.

(c) MISCELLANEOUS REPAIRS

315.0420 Conversion of Transport Loader from hydraulic to mechanical operation constitutes a repair operation in which value of repair parts used is substantial. 8/1/51.

315.0440 Convertible Top. Putting a new top on an automobile is regarded as a repair or reconditioning operation. The materials furnished, however, are regarded as the fabricated top ready for installation, rather than the materials from which the top is fabricated. The tax, accordingly, applies to all charges for fabrication but does not apply to separately stated charges for removing the old top and installing the new. 5/29/51.

315.0460 Cotton Picker Spindles. Charges for resharpening and rechroming mechanical cotton picker spindles resulting in the restoration of the spindle to approximately its original condition, are exempt from tax. 7/2/53.

315.0480 Electric Clocks. Repairers of electric clocks are regarded as retailers of parts and materials furnished if the retail value of such parts and materials is more than 10% of the total charge, or if a separate charge is made for such property. 1/5/77.

315.0500 Embossing customer's name on new milk cans, charge for is taxable, but not on used cans. 1/26/50.

315.0520 Fire Extinguishers, Recharging. The sales tax applies to that portion of the price for recharging fire extinguishers which represents the fair retail value of the materials furnished. 5/11/54.

315.0525 Fringe Replacement on a Rug. Replacing fringe on a rug is a repair operation. As such, the repairer is either the retailer or the consumer of the materials used to make the repair, as governed by Regulation 1546(b). 12/21/92.

315.0540 Lacquering new film, charges for, are taxable, while charges for lacquering old worn and scratched film are nontaxable repair charges. 6/13/51.

315.0555 Locksmith. A locksmith is hired to furnish a new key for a vehicle ignition lock. The locksmith makes separate charges for going to the customer's location, for disassembly and reassembly of the steering column, and for the key.

The charge for travel is for service and is not subject to tax. The charge for disassembly and reassembly of the steering column is regarded as a charge for repair labor which is not subject to tax. It involves the reconditioning of property to refit it for the use for which it was originally intended. The charge for the key is taxable as a sale of tangible personal property. 10/27/82.

315.0580 Lubricants Used in Lubrication Service, where no separate charge made for, regarded as consumed by lubricator whereas transmission and motor oil are regarded as resold. 3/19/52.

315.0600 Machinery Rolls, chrome plating of used, is regarded as a repair operation and the plater is regarded as the consumer of materials used, if he does not make a separate charge for such materials. 9/26/50.

315.0606 Modifying a Machine. A taxpayer has a contract to modify an offset type printer to operate in the manner for which it was designed. The machine malfunctioned from the day the taxpayer's customer received it. The taxpayer has been retained to perfect the logic of the pick and place system. In order to accomplish this, the taxpayer will need to spend considerable time learning about the functions the machine was designed to perform and then determine how to correct the machine so that it will operate as originally intended. The cost to repair the machine will be approximately one third of the original cost of the machine itself. About 80 to 90 percent of the labor will involve reworking the existing hardware. Approximately $10,000 will be spent on the project, with $1,000 or approximately 10 percent of the repair, attributable to replacement parts.

Based on the above information, any fabrication or manufacturing relative to the printer is to refit a used piece of equipment for the use it was originally intended. Accordingly, the taxpayer will be performing repairs within the meaning of Regulation 1546. As set forth in Regulation 1546, the taxpayer is regarded as the retailer of the parts and materials it furnishes in connection with its repairs if the retail value of that property is more than 10 percent of the taxpayer's total charge, or if the charge for the property is separately stated to the customer. When the repairer fabricates a part, the charge for the fabrication is part of the retail value of the part, and is not regarded as repair labor.

When the retail value of the parts and materials furnished (including any fabrication of parts) is 10 percent or less of the taxpayer's total charge and the taxpayer does not separately state a charge for that property, the taxpayer is considered the consumer of the parts and materials. When the repairer is regarded as consuming the parts, sales or use tax applies to the sales price of such property to the repairer. Whether a consumer or a retailer of parts, the repair charges for repair labor are not taxable. The taxpayer's charges for repair labor are not taxable. 6/14/95.

315.0610 Mounting and Balancing. The separately stated charges for mounting of a tire on a wheel are not taxable if the service is optional with the customer. The fact that the retailer sold both the tire and the wheel does not alter this conclusion. Likewise, charges for the balancing of the tire are nontaxable when separately stated. The retailer is the consumer of weights or valve stems unless a separate charge is made for them. 3/21/75.

315.0640 Plating. Rechroming of parts of a used automobile is considered a repair operation. The plater is the consumer of the materials used and sales tax does not apply to the charges for such rechroming, provided the rechromed part is the identical part delivered to the repairer for rechroming. 5/6/54.

315.0660 Printing Press Units. Use tax does not apply to the charge for reconditioning labor performed in the alteration of used printing press units to adapt them to smaller news-print rolls and narrower columns. The tax applies, however, to the charge for any materials or parts furnished in connection with the reconditioning. 10/22/62.

315.0680 Purifier of Used Transformer Oil and Used Paint Thinner, who does not commingle materials of different customers, treated as repairer not furnishing any parts or materials. 12/14/50.

315.0700 Rebabbitting. Charges for rebabbitting a bearing constitute a repair operation. If a lump-sum charge is made for labor and materials and the value of the materials is insignificant in relation to the total charge, the repairer is the consumer of the materials. If the value of the materials is substantial, the repairer is regarded as the seller and tax applies to the fair retail selling price thereof. 4/16/54.

315.0710 Reboring of Pipe Mold. In its production of cast iron pipe, a foundry purchases new steel pipe molds. These flask molds are 10 feet in length and come in various sizes capable of producing cast iron pipe ranging in diameter from 1½ to 8 inches. The average life of a pipe mold is 600 to 1000 castings, after which the mold becomes so pitted that it is no longer usable. Except in the case of the molds for the largest size pipes, the new pipe molds contain sufficient steel to permit them to be rebored once. This reboring process doubles the life of a mold and enlarges its interior dimensions, resulting in the production of a larger pipe. For example, 1½ inch and 2 inch pipe molds were rebored to make 3 inch molds.

The reboring process which extends the life of the molds and which, necessarily, also enlarges them, should not be considered fabrication or creation of tangible personal property. The dies are in a completely fabricated condition when originally purchased. The pipe molds are specifically designed and purchased with the idea of extending their life by reboring. The alteration in size of the molds which results from the reboring process is not a substantial modification and their use remains essentially unchanged. Aside from the enlargement of the interior dimensions, the molds are, in fact, restored to their original condition. Reboring is the only practical way of performing this restoration and it is not a substantial change as to be considered fabrication. The reboring process constitutes repair and reconditioning labor and is not subject to tax. 12/28/79.

315.0720 Rebuilding and Enlarging of cabin on pleasure boat, adding sleeping facilities, boat remaining pleasure boat, treated as repair, not fabrication operation. 2/2/51.

315.0740 Rechroming. Polishing and rechroming of used stainless steel parts constitutes a repair activity and the person performing such work is the consumer of all materials used and the tax does not apply to his charges. 11/5/54.

315.0760 Reconditioning of Saw Blades. Where the identical saw blades delivered to a reconditioner are not returned to the customer and in lieu thereof similar blades are returned, the tax applies to the amount charged by the reconditioner for the reconditioned property. 4/10/53.

315.0765 Refurbishing of Lighting Fixtures. A taxpayer contracted with the owner of a chain of restaurants to rework the old lighting fixtures in the restaurant and to install energy saving fluorescent lamps. The contract called for the taxpayer to paint, repair and refurbish the old lighting fixtures. The refurbishing of the old lighting fixtures consisted of removing the plastic pieces and cutting glass to fit in the existing fixtures. The glass was soldered in place and a portion of the glass was beveled. The customer was billed for the amount of labor and material separately.

Even though the fixture was cosmetically more attractive and more energy efficient because of the fluorescent bulbs, the light was now refit for the use for which it was originally produced. Therefore, the labor was repair or reconditioning and not fabrication labor. Tax applies to the sales price of the parts and materials which were billed separately. 6/2/91.

315.0766 Repair Parts Shipped Out of State. A company enters into optional maintenance contracts with purchasers of its equipment. The customer sends the part to be repaired to the company. The company sends the part to an out-of-state repairer. The repairer returns the repaired parts to the company and the company sends its technicians to the customer's location to install the parts. In some cases, the part may be sent by the company to the customer for installation by the customer. The out-of-state repairer sells parts to the company as part of the repairs. Since those sales occur outside California, sales tax does not apply. The tax, if applicable, is use tax. However, the storage of the parts in California for future use solely outside California is not subject to use tax. The installation of the parts by the company's technician is a taxable use. If the installation by the company occurs outside the state, tax does not apply. However, if the company ships refurbished parts to out-of-state customers for installation by the customer, tax applies at the time of shipment. This is because at the time of shipment, the company passes title to the part to the customer in California making a complete use of the part in meeting its obligation under the optional warranty. Such use does not come within the section 6009.1 exclusion. 12/6/93.

315.0768 Service/Supply Kits. A company that sells photocopy machines and related services and supplies also sells an optional service/supply kit. The kit is optional when sold with the copier and the customer can buy additional kits at a later time. The kit consists of all the service and supplies, except paper, that is necessary to run the copier for a fixed number of copies. The amount of "service" required to maintain the machine for the required number of copies under the agreement is not determinable at the time the kit is purchased. Presumably, the "service" provided under the service/supply kit consists of the furnishing of labor and materials (i.e., parts) necessary to maintain the copier for the required number of copies.

The sale of the service/supply kit is a sale of both an optional maintenance service contract and tangible personal property for a lump-sum price. A charge for an optional maintenance contract is nontaxable. Where both taxable and nontaxable items are sold for a single price, an allocation must be made between the taxable and nontaxable charges. The fair retail selling price of the supplies initially furnished under the contract must be segregated on the invoices to the customer and in the records from the charges for the optional maintenance contract. Tax only applies to the fair market value of supplies initially furnished to the customers under the service/supply agreement. Since the company is considered the consumer of the parts and materials used in the maintenance contract to repair the copier, the sale of such items to the company for subsequent use in meeting its obligation under the maintenance contract is subject to tax. 5/1/84.

315.0770 Solar Window Tinting and Vinyl Pinstriping. A taxpayer requested information regarding the sales tax application for applying solar window tinting and vinyl pinstriping to commercial storefront windows, homes, cars, boats and airplanes. The customers are billed for a single lump sum, with no separate itemization of materials and labor.

When tinting or pinstriping real property, (store-front windows and homes), the taxpayer is a construction contractor and the consumer of such property. The sale of the property to the taxpayer, or the use of the property, is subject to sales or use tax.

At the time of performing the tinting, it is assumed that the windows are component parts of used, rather than new vehicles, vessels, and aircraft. Based on this assumption, the taxpayer is performing repairs. Since there is no separate charge for the property, furnished in connection with the repairs (tinting), the taxpayer is the consumer of such property if the retail value is 10 percent or less of the total charge. The sale of the property to the taxpayer, or the use of the property, is subject to sales or use tax. When the retail value of the property furnished in connection with the tinting is more than 10 percent of the total charge, the taxpayer is the retailer of such property, and must segregate on the invoices to the customers, the fair retail selling price of such property.

Pinstriping cars, boats and airplanes is considered the same as applying lettering to these items. Lump sum charges for pinstriping vehicles, vessels, and aircraft are not subject to tax. Sales tax reimbursement should be paid when purchasing the items applied as pinstriping. 8/25/92.

315.0780 Reprocessing of Welding Flux. This constitutes a repair operation in which parts furnished are insignificant. However, if identical flux is not returned to the customer, the "exchange" rule governs. 10/25/51.

315.0800 Rethreading of Pipe. Charges for rethreading damaged pipe brought in by customers constitutes repair work restoring property to its original condition and exempt from tax. 6/26/53.

315.0820 Retipping of Tools. The repairman is the consumer of materials used in the retipping of oil well drilling tools, the materials not being a separately identifiable part and their cost being insignificant in relation to the total charge. 8/9/57.

315.0840 Stress Relieving. Preheating of pipe to relieve stress is a repair operation rather than fabrication and exempt from tax. 10/6/54.

315.0860 Television Sets, conversion of used sets to larger screen size is regarded as repair or reconditioning, not as fabrication, and tax applies to charge for materials only, if separately stated. 1/12/50.

315.0880 Television Sets. Under a lump-sum agreement the picture tube of a used television set is replaced, the balance of the set is overhauled, new parts installed where needed, and the parts and labor are guaranteed for one year. The repairer is the retailer of whatever parts are furnished, whether originally furnished or pursuant to the warranty. The transaction involves exempt repair labor. Sales tax applies to the sale price of the parts, same to be determined by the fair retail price of such parts. 10/21/55.

315.0885 Titanium Nitride Coating. The titanium nitride coating of used cutting tools constitutes a repair operation and if a lump-sum charge is made for labor and materials and the retail value of the materials is 10 percent or less of the total charge, the repairer is the consumer of the coating material and tax applies to the purchase price of the property to the repairer. (Regulation 1546(b)(2).)

When a new tool is coated for a consumer, it constitutes a fabrication process and the total charge is subject to sales tax. (Section 6006(b).) The coating materials incorporated into the new tool may be purchased ex-tax by issuing a resale certificate or a tax paid purchases resold deduction may be taken for those material purchased tax paid and resold.

The coating of new items for a dealer who will resell the tool is also considered a sale even though the dealer furnishes the item. Since the coating is done for dealers who will resell the tools, the coating material may be purchased ex-tax for resale. ( Regulation 1525(b).) 5/5/88; 2/16/88.

315.0900 "Undersealing" of used car constitutes a repair operation in which value of materials furnished is insignificant. 1/8/52.

315.0908 Vehicle Window Retinting. Retinting restores a used vehicle's windows to its former condition and is a repair operation. If the person makes a separate charge for the materials used or if the retail value of those materials constitute more than 10% of the total charge, the person is a retailer of the materials. Otherwise, the person is the consumer of the materials. 10/24/89.

315.0920 Welding. In the manufacture of pipe by electric welding, a flux is used on the weld which becomes waste slag. A process has been developed to return this slag to its original form by heating and crushing. Each manufacturer's lot of slag will be kept as a separate unit without mixing it with any other lot. No material is added. The charge made for this work constitutes reconditioning not subject to sales tax. Under Regulation 1546, however, if there were any commingling of different customer's lots of slag, the tax would apply. 11/17/54.

315.0940 Wheel Weights. Wheel balancer is consumer of weights used unless he separately states the charges. 8/2/77.