Boyd v. State Bd. of Equalization
| Decision Date | 30 May 2001 |
| Docket Number | No. F033234.,F033234. |
| Citation | 107 Cal.Rptr.2d 520,89 Cal.App.4th 706 |
| Court | California Court of Appeals Court of Appeals |
| Parties | RICHARD BOYD INDUSTRIES, INC., Plaintiff and Appellant, v. The STATE BOARD OF EQUAIZATION, Defendant and Respondent. |
Tritt & Tritt and James F. Tritt, Fresno, for McHale Sign Co. et al, as Amici Curiae on behalf of Plaintiff and Appellant.
Bill Lockyer, Attorney General, Lawrence K. Keethe and Robert D. Milam, Deputy Attorneys General, for Defendant and Respondent.
This case involves the differing tax consequences between a contractor's consumption of "materials" and its sale of "fixtures" as defined in section 1521 of the Board of Equalization's (Board) Sales and Use Tax Regulations (Cal. Code Regs, tit. 18, §1521; hereafter Regulation 1521). Richard Boyd Industries (Boyd) manufactures and installs various kinds of signs on real property. During the audit period in question, Boyd purchased all its supplies free of tax for resale and issued valid resale certificates to its suppliers. However, Boyd did not report sales tax on the sales of the fixtures that it installed. Boyd concedes the deficiency assigned by the auditor on its consumption of materials but disputes the portion of the deficiency assigned to its sales of fixtures. We reject Boyd's attempt to redefine the term "fixtures" in Regulation 1521 to mean personal property that is not permanently attached to real property.
On March 31, 1997, Boyd filed a first amended complaint for refund of sales and use tax and declaratory relief. The complaint also included Commercial Neon, Inc., as a party plaintiff. The gist of the action for refund is that the Board misapplied Regulation 1521 in calculating Boyd's tax liability, and the declaratory relief action requested a declaration that Regulation 1521 is void. The Board filed a demurrer to the complaint, which was sustained on the ground the claims of the two plaintiffs were improperly joined. The court made an order severing trial for the plaintiffs because the amendment to the complaint did not cure the defect caused by the improper joinder.
During a bench trial the parties entered a joint stipulation of facts for trial, as follows:
In addition to the stipulated facts, Boyd testified at trial that he had been in the contracting business for over 20 years, doing signage since 1978. Every construction contract Boyd has involves placing signs that are permanently affixed to buildings. Boyd owns the signs up until the point he installs them. Once installed, Boyd receives lien rights, but he does not have the right to remove the signs. The intent of the parties to the construction contracts is that the signs that Boyd installs become a part of the real property.
Joseph Franklin Jaggard, Jr. testified he had been employed as a tax auditor with the Board for approximately six years. He did not perform the audit in question, but reviewed it. Upon his review, Jaggard found a mistake in the audit because one job involved the federal government as a customer. In that situation Boyd is to be considered a consumer, not a retailer, of the signs. The United States is exempt from bearing the burden of state taxes. He testified the intent of the parties is irrelevant for purposes of determining tax liability. Jaggard explained that installation labor of a sign is exempt, but the fabrication labor is taxable. Therefore, in reviewing the audit, he looked to see whether a sign was fabricated into the site or whether the sign was prefabricated, either at the job site or in the shop, and simply installed or attached at the site, in determining whether a tax was due. If the sign was prefabricated and then installed, it is considered a fixture. If the sign is manufactured into the structure or real property, it is considered a material. Jaggard explained that certain signs, such as monument signs, could constitute both materials and fixtures for purposes of tax consequences. The material used to construct the monument would be considered "material," while a plate or sign attached to the monument would be considered a "fixture." The basis for this determination is the plate or sign is removable without damaging or destroying the monument and because the plate or sign does not lose its identity when it is installed.
Evan D. Oliver testified he had been in the construction and contracting business since the early 1930s, and had testified as an expert witness in the superior and federal courts. The subject matter of his expert testimony in those courts was not revealed. Further, although Boyd asserts in his opening brief that Oliver "is qualified as an expert in the construction field with a substantial experience in the anal[]ysis of sales and use tax liability of construction contractors," no testimony was elicited regarding Oliver's expertise in sales and use tax law. Oliver was never offered, nor was he expressly accepted by the court, as an expert on any given subject matter. Unlike Jaggard, who was designated as an expert witness by the Board, the record fails to show Oliver was designated as an expert witness by Boyd.
Oliver testified to his opinion on the definitions of several terms contained in Regulation 1521, such as the terms "fixtures," "accessory," and "component." "[A] fixture is normally considered in the regulation as stated as an accessory to the structure." Oliver testified none of Boyd's signs He testified Boyd's signs were "all improvements to realty." "[T]hese are all materials because they become components of the realty." "A fixture is not an improvement to realty." "[T]here's no reason why the[ ] signs should not be classified as materials, because they are components of the structure and they are other personal property that's installed." Except to opine that the term "accessory" "means something that is not a material," Oliver gave a conflicting definition for that term. Oliver's final attempt at defining fixtures and accessories was as follows:
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