Proper classification of business assets for purposes of taxation is a question of law. (May Department Stores Co. v. County of Los Angeles (1987) 196 Cal. App. 3d 755, 761-762 242 Cal. Rptr. 162.) Review is therefore de novo.
While statutes granting property tax exemptions are generally construed strictly, that approach "does not require that the narrowest possible meaning be given to words descriptive of the exemption, for a fair and reasonable interpretation must be made of all laws, with due regard for the ordinary acceptation of the language employed and the object sought to be accomplished thereby." (Cedars of Lebanon Hosp. v. County of L. A. (1950) 35 Cal. 2d 729, 735 221 P.2d 31, 15 A.L.R.2d 1045).
Business inventories are exempt from taxation. the Legislature has defined business inventories as "goods intended for sale or lease in the ordinary course of business." (Rev. & Tax. Code, § 129).
Section 133, subdivision (c) further provides that property held by nonprofessional service enterprises constitutes business inventory if it is regularly delivered to the customer as part of the service provided.
We conclude, however, that the statutory definition of "business inventories" as "goods intended for sale or lease in the ordinary course of business" indicates the critical consideration is whether the goods are to be transferred away from the business pursuant to sale, not whether they are to be delivered directly to the customer or to a third party designated by the customer. (Rev. & Tax. Code, § 129).
The fact that the letters are delivered for the customer rather than to the customer is not relevant to the statutory scheme, nor does the distinction appear significant in the context of the regulation read as a whole. Regulations must be construed in a manner consistent with the legislative purpose, and may not conflict with the statute. (Gov. Code, § 11342.2; City of San Jose v. Department of Health Services (1998) 66 Cal. App. 4th 35, 41-42 77 Cal. Rptr. 2d 609).