Did reusable bakery racks that carried fresh baked goods to distribution centers and stores qualify as exempt containers?

Plain-English summary

A bakery used specially designed bread racks to hold fresh baked products and transport them to distribution centers or retail outlets without damage.

California agreed that the racks functioned like specialized pallets in a specialized industry. They therefore counted as containers and qualified for the section 6364 exemption.

Common questions

Why were the racks treated as containers?

They held the bakery products during shipment and protected the products from damage that could make them unsaleable.

Does the PDF show the rack design?

No. The letter says photographs and attachments were persuasive, but those materials are not included in the published source.

Citations and references

• Cal. Rev. & Tax. Code § 6364 — container exemption applied by the source
• Cal. Code Regs. tit. 18, § 1589 — container regulation discussed by the requester and accepted by Chief Counsel
• Requester's December 21, 2001 letter, attachments, explanation, and photographs — relied on by Chief Counsel but not reproduced in the official PDF
• Chief Counsel distribution copies to the Sales and Use Tax Department and other interested parties — Janice Thurston, Ramon Hirsig, and Paul Steinberg are named on the copy list; no separate transmittals or later agency record are supplied 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/195-1563.pdf

Original ruling text

195.1563

STATE OF CALIFORNIA

JOHAN KLEHS
First District, Hayward

STATE BOARD OF EQUALIZATION
450 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-00XX)
TELEPHONE (916) 445-4380
FAX (916) 323-3387
www.boe.ca.gov

DEAN ANDAL
Second District, Stockton
CLAUDE PARRISH
Third District, Torrance
JOHN CHIANG
Fourth District, Los Angeles

January 14, 2002

KATHLEEN CONNELL
Controller, Sacramento

JAMES E. SPEED
Executive Director

L--- J. L---, CPA
Managing Director
The L--- C--- G---, Inc.
XXXX --- Boulevard, Suite XXX
--- --- ---, FL XXXXX
Dear L---:

Thank you for your letter of December 21, 2001. I found your attachments and explanation of Section 6364 and Regulation 1589 interesting and informative. Your pictures were very helpful. Based on this information, I am in agreement that the bread racks purchased by your client should be considered containers. Your argument that they are in the nature of and serve the same function as pallets is convincing. I believe that they can be appropriately considered as specialized type of pallet functioning in a specialized industry. In effect, the racks were developed to make the shipment, transportation and delivery of fresh baked products more efficient and effective. They contain the freshly baked products produced by your client and are used to transport these products to distribution centers or retail outlets. They are specially designed to function without damaging the product so as to render them unsaleable. Consequently, they constitute containers and qualify for the exemption under Revenue and Taxation Code section 6364. By copy of this letter, I will notify our Sales and use Tax department and other interested parties of this decision. Thank you for your cooperation and professional courtesy in resolving this matter. Very truly yours,

Timothy W. Boyer
Chief Counsel
Cc:

Janice Thurston
Ramon Hirsig
Paul Steinberg