Were used bottles acquired by a California bottler for refilling subject to sales or use tax?

Plain-English summary

A California auditor asked about a bottler that acquired used bottles from another bottler in Arizona. The bottles supposedly had not previously entered California.

California applied section 6364's exemption for returnable containers resold for refilling. The memorandum said that treatment covered used beer bottles acquired by breweries and likewise covered the used bottles in the bottler's transaction.

Neither sales tax nor use tax applied under the stated facts.

Common questions

Did the bottles have to be new to qualify?

No. The memorandum specifically addressed used bottles.

Did buying them from Arizona create California use tax?

No, because the refilling exemption applied to the acquisition described.

Citations and references

• Cal. Rev. & Tax. Code § 6364(c) — returnable containers resold for refilling
• Board auditor J. S. Knight's December 20, 1949 memorandum and February 21, 1950 follow-up — used-bottle question and audit facts described; separate communications not reproduced in the official PDF
• Previous Board holdings on breweries' acquisition of used bottles — practice and conclusion referenced; names, dates, identifiers, and separate holdings not supplied in the official PDF
• Audit of a California soda bottler acquiring used bottles from an Arizona soda bottler — transaction described; audit workpapers, assessment, and later outcome not 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/195-1660.pdf

Original ruling text

State of California

Memorandum

To:

Mr. J. S. Knight (JHMcC)

From:

E. H. Stetson

Subject:

Taxability of purchases of
used bottles by bottlers,
brewing companies, and others

Board of Equalization

195.1660
Sacramento
March 8, 1950

This is in reply to your memo of December 20, 1949, and follow-up of February 21, 1950, concerning the application of tax with respect to the sales of used bottles. You refer to previous holdings in connection with the acquisition of used bottles by breweries and inquire whether there has been any change in our thinking on this subject. You state that you are now auditing a bottler of [soda] who has acquired used bottles from another [soda] bottler in Arizona, none of these bottles supposedly having formerly entered California. Section 6364 of the Sales and Use Tax Law, effective July 1, 1943, provides in part that there are exempted from the tax the receipts from the sale of, and the storage, use, or other consumption of “(c) returnable containers… when resold for refilling”. This provision of the statute would appear to remove all doubt as to the legality of the practice to which you refer respecting acquisition of used beer bottles by breweries, and it appears equally applicable with respect to the transaction involving the acquisition of used [soda] bottles mentioned in your memo. Accordingly, it would appear that, by virtue of specific statutory exemption, the acquisition of such bottles would not be a transaction with respect to which either the sales tax or the use tax applies.

EHS:ph