Was federal coconut-oil excise tax paid directly by the importing manufacturer included in California use-tax measure?

Plain-English summary

The taxpayer imported coconut oil for use in its own manufacturing operations. Historical federal law imposed a per-pound tax whose taxable event was the oil's first use in the United States to manufacture or produce an article intended for sale, and the user paid that tax directly to the federal government.

California concluded that this directly paid federal excise tax was not included in the measure of California use tax.

Common questions

Who paid the federal coconut-oil tax?

The importer that used the oil in manufacturing.

Was that direct federal payment included in California use-tax measure?

No.

Did the opinion address tax reimbursed to a seller?

No. Its facts involved direct payment to the United States.

Citations and references

• Historical Internal Revenue Code §§ 2470–2483
• Audit staff's March 1, 1954 letter — taxpayer facts and question identified by the reply; full letter not reproduced in the official PDF
• Taxpayer's coconut-oil imports, geographic origin, own manufacturing use, articles intended for sale, federal excise-tax computations, and direct payments to the United States — facts and historical rates described; underlying purchase, import, customs, origin, inventory, production, sale, return, computation, and payment records not reproduced in the official PDF
• Complete historical federal excise-tax provisions and rate materials — operative rule summarized; full texts and administrative materials not reproduced in the official PDF
• Possible later use-tax return treatment, audit, assessment, refund claim, appeal, or other outcome after the advice — no follow-up or final outcome 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/235-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/235-0100.pdf

Original ruling text

STATE OF CALIFORNIA
BOARD OF EQUALIZATION

235.0100
March 4, 1954
San Jose – Auditing (RGS)
Headquarters – Sales Tax Counsel (BH)
REDACTED TEXT
In reply to your letter of March 1, we advise that Sections 2470-2483 of the Internal Revenue Code impose a tax of 3 cents per pound on coconut oil coming from the Philippine Island, United States possessions or the Trust Territory of the Pacific and a tax of 5 cents per pound on coconut oil coming from other places. The taxable event is the first use of the oil in the United States in the manufacture or production of an article intended for sale. The tax must be paid by the user. The subject taxpayer imports coconut oil for use in its manufacturing operations. It pays the tax directly to the United States. It is our opinion that the tax paid to the United States is not included in the measure of the California use tax. Bill Holden BH:ja