Was federal ozone-depleting-chemical excise tax included in the California sales- or use-tax measure?

Plain-English summary

California included the federal section 4681 excise tax in gross receipts subject to sales tax when the tax was imposed on ozone-depleting chemicals sold or used by their manufacturer, producer, or importer. As a manufacturer or importer excise tax included in the property's price, it remained in the California measure whether or not separately stated.

The section 4682 tax on chemicals held on January 1, 1990 by someone other than a manufacturer, producer, or importer was different. That self-declared floor tax arose after the sale and was paid directly to the United States, so it was not part of purchase price subject to California use tax.

For an imported taxable product used by the importer as consumer, the self-declared federal tax likewise was not included in purchase price. If the importer sold the product and recovered the federal tax as an expense, California tax applied to that recovered amount whether separately stated or included in the selling price.

Common questions

Was the section 4681 manufacturer tax included in California gross receipts?

Yes.

Was the 1990 post-sale floor tax included in purchase price?

No, under the source's described facts.

What if an importer sold the product and recovered the tax as an expense?

The recovered amount was taxable.

Citations and references

• Public Law 101-239 (Budget Reconciliation Act of 1989)
• Historical Internal Revenue Code sections 4681, 4682, and 4682(h)
• California Revenue and Taxation Code sections 6051 and 6201
• California Code of Regulations, title 18, Regulation 1617
• Requester's April 11, 1990 letter and request underlying the April 17, 1990 opinion — questions identified; full letter or request not reproduced in the official PDF
• April 17, 1990 opinion, April 20 distribution notation, and June 28, 1991 expanded response — both opinions and distribution notation reproduced in the official PDF; the later response supplies the fuller section 4681 and 4682 analysis
• Ozone-depleting chemicals held January 1, 1990, imported taxable products, manufacturer, producer, importer, consumer, floor-tax, direct federal payment, product sale, and expense recovery — transaction categories described; no chemical lists, inventory, purchase, import, production, sale, invoice, return, tax-computation, or payment records reproduced in the official PDF
• Instruction to Lani Arena to annotate at Gary Jugum's direction — instruction printed; underlying annotation request, review, and approval records not supplied in the official PDF
• Source-printed "he amount," "importer hereof," and sentence beginning "the amount" — printed text preserved; not silently corrected
• Possible later annotation action, return treatment, audit, assessment, refund claim, appeal, or transaction outcome after the opinions — 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/235-0120.pdf

Original ruling text

235.0120

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
916-322-6083

June 28, 1991

REDACTED TEXT

Re:

Ozone-Depleting Chemicals Taxes

Dear REDACTED TEXT:
I am writing in response to your letter of April 11, 1990, concerning OzoneDepleting Chemical Taxes imposed in Sections 4681 and 4682 of the Internal Revenue Code. You question whether such federal taxes are excluded from the taxable measure for purposes of California’s Sales and Use Tax. In California, except where sales are specifically exempted or excluded, sales tax applies to the gross receipts of retailers from all retail sales of tangible personal property. (Rev. & Tax. Code § 6051). A use tax is imposed on the storage, use, or other consumption in the state of tangible personal property. (Rev. & Tax. Code § 6201). Business Taxes Regulation 1617 specifies that the gross receipts subject to sales tax and the sales price subject to use tax do not include the amount of any federal tax imposed upon or with respect to retail sales, whether imposed upon the retailer or upon the consumer, and regardless of whether the amount of federal tax is stated to the consumer as a separate charge. However, gross receipts subject to the sales tax and the sales price subject to use tax include the amount of any manufacturers’ or importers’ excise tax included in the price of the property sold, even though the manufacturer or importer is also the retailer thereof. Again, it is immaterial whether or not the amount of such tax is stated as a separate charge. The Ozone-Depleting Chemicals Tax is imposed in Sections 4681 and 4682 of the Internal Revenue Code. Section 4681 imposes a tax on any ozone-depleting chemicals sold or used by the manufacturer, producer, or importer thereof, and on any imported taxable product sold or used by the importer thereof. Section 4682(h) imposes a tax on any ozone-depleting chemical which is held by any person, on January 1, 1990, for sale or for use in further manufacture. The federal excise tax imposed by Section 4681 is a manufacturers’ tax and pursuant to Business Taxes Regulation 1617, it is included in gross receipts subject to

REDACTED TEXT

2

June 28, 1991

sales tax, whether or not the manufacturer or importer is also the retailer thereof, and whether or not the amount of such tax is stated as a separate charge. The federal excise tax imposed by Section 4682 on any ozone-depleting chemicals held on January 1, 1990, by other than a manufacturer, producer or importer thereof is not subject to California use tax. The use tax is measured by the purchase price (Rev. & Tax. Code § 6201), and the federal excise tax imposed after the sale, selfdeclared and paid directly to the United States on tangible personal property is not subject to the use tax. Section 4681 also imposes the Ozone-Depleting Chemicals Tax on any imported taxable product sold or used by the importer thereof. The amount of the tax is the estimated value deemed to represent the cost of any ozone-depleting chemical used as material in the manufacture of the product and is paid directly to the United States. This self-declared federal excise tax is not to be included in the purchase price subject to California use tax if the product is used by the importer as the consumer. However, if the product is sold and the federal excise tax is recovered as an expense, tax will apply whether the excise tax is separately stated or included in the selling price. I hope that this letter has answered your questions. If I can be of further service, please do not hesitate to call. Very truly yours,

JV:wk
3165C
bc:

Janet Vining
Tax Counsel

San Diego District Administrator
Ms. Lani Arena – Please annotate per Gary Jugum.

235.0120

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
916-445-2705

April 17, 1990

REDACTED TEXT

Dear REDACTED TEXT:
This is in response to your request for application of the Sales and Use Tax Law regarding the new federal excise tax on ozone-depleting chemicals under the Budget Reconciliation Act of 1989, Public Law 101-239. The tax is effective January 1, 1990. The federal excise tax is a manufacturers’ tax and, pursuant to Business Taxes regulation 1617, it is included in gross receipts subject to sales tax and the sales price subject to use tax. Regulation 1617 states, in pertinent part, that “gross receipts subject to sales tax and the sales price subject to use tax include the amount of any manufacturers’ or importers’ excise tax included in the prices of the property sold, even though the manufacturer or importer is also the retailer thereof, and it is immaterial whether or not he amount of such tax is stated as a separate charge.” The self-declared federal excise tax (floor tax) on any ozone-depleting chemical which on January 1, 1990 is held by other than a manufacturer, producer or importer thereof is not subject to California use tax. The use tax is measured by the purchase price (Section 6201, Revenue and Taxation Code), and the federal excise tax imposed after the sale, self declared and paid directly to the United States on tangible personal property is not subject to the use tax. This federal excise tax is also imposed on any imported taxable product sold or used by the importer hereof. the amount of the tax is the estimated value deemed to represent the cost of any ozone-depleting chemical used as material in the manufacture of the product and is paid directly to the United States. This self-declared federal excise tax is not to be included in the purchase price subject to California use tax if the product is used by the importer (consumer). Of course, if the product is sold and the federal excise tax is recovered as an expense, tax will apply whether the excise tax is separately stated or included in the selling price.

REDACTED TEXT

2

April 17, 1990

I hope I have been responsive to your questions. If you need to discuss these issues further, please do not hesitate to call. Very truly yours, Gordon P. Adelman Tax Counsel GPA:sr cc:

Mr. Robert Nunes
Mr. E. L. Sorensen, Jr.

4/20/90 – cc: District Administrators
sfg
Mr. Glenn A. Bystrom