How were bisulfite sales treated when the compound was used to keep peeled potatoes from discoloring?

Plain-English summary

Bisulfite sold to restaurants for treating peeled potatoes was exempt from sales tax on the described facts because the compound became incorporated into the potatoes. The first letter said the seller's “Sun-Blast Vegewhite” appeared to receive the same treatment based on the seller's description.

The second letter clarified that bisulfite was not itself an exempt food product. A processor's purchase was not taxable when the potatoes would be resold, but a sale of bisulfite to a consumer was taxable.

The Board had previously been unable to rule on Vegewhite because it could not determine whether the product became part of the potatoes or dissipated during cooking. The later conclusion therefore depended on the incorporation fact. The first letter also allowed a refund claim, subject to verification, to the extent the seller returned collected tax reimbursement to customers.

The official PDF includes the related May 9, 1961 discussion of sherbet and Seneca Apple Ade; that material is preserved in the original text below.

Common questions

Was bisulfite itself treated as exempt food?

No. The May 1961 letter expressly said it was not an exempt food product.

Why could a restaurant or processor buy it without tax?

On the described facts, the compound became incorporated into potatoes that would be resold.

Were direct sales to consumers taxable?

Yes. The May 1961 letter distinguished those sales from purchases connected with potatoes for resale.

Was a refund automatic for previously collected tax?

No. A written claim was allowed only to the extent the seller returned the tax reimbursement to customers, and the claim remained subject to verification.

Citations and references

• California Sales and Use Tax Law (applied generally in the letters)
• Redacted seller's December 14, 1960 letter describing Sun-Blast Vegewhite — product and claimed incorporation described; letter not reproduced in the official PDF
• Board's March 19, 1958 letter declining to rule without knowing whether Vegewhite became part of the potatoes or dissipated during cooking — described but not reproduced in the official PDF
• Sun-Blast Vegewhite and bisulfite sales to restaurants, processors, and consumers — uses and treatment described; underlying formula, label, directions, cooking tests, invoices, customer records, and resale evidence not reproduced in the official PDF
• Seller's possible written refund claim and return of collected sales-tax reimbursement to customers — procedure and verification condition stated; claim, returns, refund schedules, repayment records, and Board verification not reproduced in the official PDF
• Redacted executive secretary's April 28, 1961 letter and tentative taxable-and-nontaxable food list referred by H. A. Dickson — request and list described; letter and list not reproduced in the official PDF
• Department of Agriculture investigation concerning sherbet labeling and milk or milk-product content — conclusion reported; underlying agency correspondence, labeling rule, test, product records, and investigation materials not reproduced in the official PDF
• Seneca Apple Ade and sherbet food-product treatment — products and conclusions stated; underlying labels, ingredients, formulas, transactions, and sales records not reproduced in the official PDF
• Possible refund determination, audit, assessment, appeal, product sale, or other agency action after the letters — 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/245-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/245-0140.pdf

Original ruling text

245.0140

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001
TELEPHONE (916) 445-6450

December 20, 1960

[T]
XX --- ----- --- X, California
Attention:

Mr. [T]
Comptroller

-- - XXXXXX

Gentlemen:
This is to advise you that you are correct in concluding that sales of bisulfite to restaurants for fixing peeled potatoes so as to retard discoloration are exempt from sales tax on the basis that the compound becomes incorporated into the potatoes. From what is said in your letter of December 14, it would appear that your product “Sun-Blast Vegewhite” would also fall in this category. You will recall that in our letter of March 19, 1958, we advised you that we were unable to determine whether or not “Vegewhite” became a part of the potatoes and whether or not it would be dissipated in the cooking process. For that reason, we were not able to give you a ruling on the particular product. To the extent that you return to your customers the sales tax reimbursement which you have collected from them, it would be proper for you to submit a written claim for refund to the Board. The claim will, of course, be subject to verification.

J. J. Delaney
Associate Tax counsel
cc:

--- --- - administrator

245.0140

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001
TELEPHONE (916) 445-6450

May 9, 1961

[C]
Office of the Executive Secretary
XXX --- ----- --- X, California
Attention:

-- - XXXXX
Now: S- -- XX-XXXXXX

[]
Executive Secretary

Gentlemen:
This is in reply to your letter of April 28, 1961, to Mr. H. A. Dickson who referred it to us for reply. You submitted a tentative list of taxable and nontaxable food products for our approval. Only two items should be deleted from the list. Bisulfite is not an exempt food product. It is used on potatoes to preserve whiteness. Its sale to a processor is not subject to the tax where the potatoes will be resold, but its sale to a consumer is subject to tax. Seneca Apple Ade is an exempt food product. We have investigated sherbet with the Department of Agriculture, and they inform us that in order to label an item as “sherbet,” the manufacturer must incorporate in it milk or milk products. The 50% figure mentioned by Mr. Dickson is no longer a proper test. Since sherbet must be composed of some milk or milk products, we are of the opinion it is an exempt food product. Very truly yours,

E. H. Stetsen
Tax Counsel