Lucent Technologies, Inc. v. Board of Equalization

— A manufacturer sells sophisticated telecommunications equipment to nine different telephone companies, who in turn use that equipment to provide telephone and Internet services to their customers. In the transactions between the manufacturer and telephone companies, the companies paid for (1) the equipment, (2) written instructions on how to use the equipment, (3) a copy of the computer software that makes the equipment work, and (4) the right to copy that software onto the equipment’s hard drive and thereafter to use the software to operate the equipment. In Nortel Networks Inc. v. Board of Equalization (2011) 191 Cal.App.4th 1259 [ 119 Cal.Rptr.3d 905 ] (Nortel), we held that an almost identical transaction satisfied the requirements of California’s technology transfer agreement statutes (Rev. & Tax. Code, §§ 6011, subd. (c)(10), 6012, subd. (cXIO)) and, as such, the manufacturer was responsible for paying sales taxes only on the tangible portions of the transaction (the equipment and instructions), but not the intangible portions (the software and rights to copy and use it). Notwithstanding Nortel, the Board of Equalization (Board) in this case persisted in assessing…