Were corrugated potato-chip containers exempt when sold with their contents even though some might later be repurchased?

Plain-English summary

An audit disputed corrugated containers used to ship potato chips to retail food stores. After an informal hearing, the hearing officer recommended treating containers sold with their contents as nonreturnable containers, and the Board approved that recommendation.

The original container sale was exempt when no deposit was charged and the seller did not retain title. The possibility that some containers might later be repurchased, or that someone might receive a finder’s fee for returning them, did not change that result.

Common questions

Did a possible later repurchase make the original container sale taxable?

No. The letter says repurchase or a finder’s fee did not affect the original exempt status.

Citations and references

• Sales and Use Tax Ruling 49 — historical nonreturnable-container rule applied in the hearing recommendation; copy listed as an enclosure but not included in the official PDF
• Requester's March 25, 1964 letter — potato-chip container tax question referenced; separate letter not reproduced in the official PDF
• Audit of the redacted taxpayer, resulting determination, and petition for redetermination — procedural history described; separate records not reproduced in the official PDF
• Informal hearing — no transcript was made, according to the opinion
• Hearing officer recommendation — nonreturnable-container treatment summarized in the opinion; separate recommendation not reproduced
• Board approval — recommendation reported as approved without separate minutes or order in the official PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/195-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/195-0320.pdf

Original ruling text

195.0320

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

April 2, 1964

--- --- ----- --- ------, -- XXXXX

Gentlemen:
This is in reply to your letter of March 25, 1964 concerning the application of sales tax with respect to sales of corrugated containers for shipping potato chips to retail food stores, as determined in connection with an audit of “B”. As a result of the audit, a determination was issued and a petition for redetermination was filed. There was an informal hearing before a hearing officer. No transcript of this hearing was made. The hearing officer recommended that sales of corrugated containers which were sold by the purchaser along with the contents should be regarded as nonreturnable containers within the meaning of Ruling 49, copy enclosed. This recommendation was approved by the Board, and so the rule is that these containers when sold by the purchaser along with the contents, there being no deposit charged and title not being retained, constitute exempt sales of nonreturnable containers. The fact that some of the containers might be repurchased or an amount paid as a “finders fee” for their return does not affect the exempt status of the original sale of these containers. Very truly yours,

E. H. Stetson
Tax Counsel

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