Laws, Regulations and Annotations


Business Taxes Law Guide—Revision 2024

Sales and Use Tax Annotations

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515.0000 Service Enterprises Generally—Regulation 1501

Annotation 515.0020

(a) In General—Service Distinguished from Sale

515.0020 "True Object of Transaction" Test. In distinguishing between the sale of a service (nontaxable) and the sale of tangible personal property (taxable) it is necessary to determine the true object of the transaction, i.e., is the real object sought by the buyer the "service" per se, or the finished articles produced by the service?

The court in Albers v. State Board of Equalization, 237 Cal.App.2d 494, in holding the tax applicable to the receipts of a draftsman, explained the distinction as follows:

"Plaintiff herein was not paid to conceive or to dictate any of the ideas, concepts, designs, or specifications in the drawings made by him. He simply applied his ability to the details supplied by the customer for the purpose of putting such details down on paper and thereby producing a drawing for use by the customer. In other words, the customer was purchasing the detailed drawing for his use, he was not purchasing the design or specifications pictured in the drawing." 7/11/66.