Prototypes are a hairy area, tax-wise. If you want a bulletproof answer to this, it might be worth consulting the state's Department of Revenue (or whatever the California equivalent is); it was surprisingly easy to get in touch with the DOR in Washington, but even they don't have a clear answer to this.
The general line is this: Sales tax isn't necessary if the delivery of the prototypes is considered part of "work for hire." So, if the prototypes are developed and delivered inside a services contract, it's treated as a transfer of paid work and IP rather than as a sale. In this case, you pay standard excise/B&O taxes on your income from the services contract (and any materials expenses you bill to the client), but no sales tax is charged on the prototype hardware.
(The flip side of this is that you can't request a sales-tax exemption on any materials you purchase to build your prototypes, as those discounts apply to wholesalers where sales tax will be collected on the items down the line. I've seen people run afoul of this and try to get away with paying no sales tax on either end.)
Are you being paid for design services, or for the prototypes? That'll be the key question to answer.