Does a candle remain nontaxable resale inventory when a retailer partly burns it to demonstrate the design and then keeps it only for display?

Plain-English summary

A candle retailer bought candles for resale and partially burned some of them to show customers the designs that formed after burning. It then left the partly burned candles on display.

Section 6244 protected demonstration or display only while the merchandise was still held for sale in the regular course of business. Because the retailer kept these partly burned candles for display only and no longer offered them for sale, the Board treated the retailer as consuming them.

The letter directed the retailer to report that use on line 2 of its sales and use tax return.

What this means for you

Retailers demonstrating consumable products

Demonstration alone is not enough. The same item must remain held for sale in the regular course of business for section 6244's protection to apply.

Merchandisers maintaining permanent displays

When a displayed unit is permanently removed from sale, the business may have consumed inventory even if the original reason for altering it was to demonstrate product features.

Accountants and tax professionals

Track display units separately from saleable stock and record when an item stops being offered for sale.

Common questions

Q: Was partially burning the candle a demonstration?
A: Yes, it showed the design created by burning. But that did not resolve whether the candle remained held for sale.

Q: Why was the candle treated as consumed?
A: After burning, it was retained only for display and was no longer held for sale in the regular course of business.

Q: Would every product demonstration trigger tax?
A: No. Section 6244 protects demonstration or display while the same merchandise remains held for sale.

Q: Where did the letter say to report the use?
A: Line 2 of the retailer's report, under the return format then in use.

Citations and references

• California Revenue and Taxation Code § 6244
• Requester's July 20, 1967 letter — partial-burning and display facts described; separate letter not reproduced in the official PDF
• Line 2 of the then-current sales and use tax report — report form not reproduced in the official PDF

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 210.0055
• Original supporting opinion: 210.0055 PDF

Original ruling text

210.0055

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-5550

August 2, 1967

Mrs. F--- J. J--dba T--- C--XXX --- Street
---, CA XXXXX

SR -- XX-XXXXXX

Dear Mrs. J---:
In your letter of July 20, 1967, you ask whether candles which you partially burn, are subject to tax. The facts, as we understand them, are that you purchase candles for resale. However, to show the designs such candles will form after they have been burned, you partially burn some yourself. According to your letter, the candles that you burn are “left on display.” Section 6244 of the Sales and Use Tax Law exempts from use tax merchandise purchased for resale that is used for demonstration or display while holding it for sale in the regular course of business. Since you keep the partially-burned candles for display only, you are no longer holding them for sale in the regular course of business and, therefore, you are considered to have consumed the property. Line 2 on your report would be the proper place to report such a use. Should you have further questions, please feel free to write. Very truly yours,

T. P. Putnam
Tax Counsel
By ______
A. Wells Petersen
AWP:dse