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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
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330.0000 Leases of Tangible Personal Property—In General—Regulation 1660
Annotation 330.1840
(a) In General
330.1840 Agreement to Treat Fixtures as Personal Property. Corporation A operates department stores in California. It entered into an agreement to sell certain store properties to Corporation B. Corporation C was a trust operating under the direction of Corporation B. Corporation B provided the funds for the transaction to Corporation C and was the owner of the trust. Under this agreement, Corporation C purchased stores from Corporation A, and leased the land upon which the stores were located from Corporation A. Corporation C then leased the stores and subleased the land to Corporation A as owner/trustee. Corporation A had the option to renew the lease and also had the right of first refusal in the event that Corporation B decided to sell the property.
The agreement between Corporation A and Corporation B provided that certain materials and fixtures incorporated into the realty were to remain tangible personal property for income tax and security purposes.
The agreement cannot change the character of the property. The lease of the materials and fixtures is not, in fact, a lease of tangible personal property. Section 6016.3 of the Revenue and Taxation Code does not apply because the lessor of the fixtures is also the lessor of the realty. Tax does not apply to the lease of items identifiable as materials and fixtures. 4/25/94.