Did garlic cooking wine qualify as exempt food when the seller said it was non-drinkable and made only for cooking?

Plain-English summary

The seller supplied labels for red and white Garlic Cooking Wine and a bottle of the white product. It said the wine was non-drinkable and produced only for cooking, but the label did not make that statement.

Regulation 1602(a)(2) generally excluded vinous liquor from food products. Historical guidance made an exception when cooking wine was “rendered unfit for beverage use” under Internal Revenue Code section 5362 and therefore could be used only for cooking.

The garlic cooking wine might have qualified, but counsel did not know whether it actually met the federal standard. The response therefore did not establish exemption and expressly did not qualify as written advice under section 6596.

Common questions

Was the seller's statement that the wine was non-drinkable enough?

No. Counsel said the product had to come within the cited federal provision.

Did the letter definitively exempt the garlic cooking wine?

No. It said the product might qualify if the unresolved federal-law fact was established.

Why did ordinary wine treatment differ?

The regulation excluded vinous liquor, while wine legally made unfit for beverage use could qualify as cooking food.

Citations and references

• California Revenue and Taxation Code sections 6051, 6091, 6359, and 6596 (as cited)
• California Sales and Use Tax Regulation 1602, including subdivisions (a)(1) and (a)(2) (as cited)
• Internal Revenue Code section 5362 (as cited)
• Market St. Ry. Co. v. California State Board of Equalization (1953), 137 Cal. App. 2d 87, 96, 290 PO.2d 201 — as printed in the official letter
• Standard Oil Co. v. State Board of Equalization (1974), 39 Cal. App. 3d 765, 769, 114 Cal. Rptr. 571
• Redacted seller's August 25, 1994 letter to Assistant Chief Counsel Gary J. Jugum, two White and Red Garlic Cooking Wine labels, and bottle of the white product — request and submissions described; none reproduced in the official PDF
• Prior Board determination concerning cooking wine rendered unfit for beverage use under Internal Revenue Code section 5362 — described without an identifying citation or reproduced opinion in the official PDF
• Garlic Cooking Wine composition, drinkability, cooking-only use, and federal treatment — seller's statements described; underlying formula, ingredients, federal records, tests, labels, bottle, invoices, and sales records not reproduced in the official PDF
• Regulation 1602 enclosure and copy to a redacted district administrator — stated as enclosed or copied; enclosure and any follow-up not reproduced in the official PDF
• Possible later federal determination, product sale, audit, assessment, refund claim, appeal, or other agency action — 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/245-0330.pdf

Original ruling text

245.0330

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
LEGAL DIVISION (MIC:82)

MEMBER
First District

450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-3828

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento
────────

September 21, 1994

BURTON W. OLIVER
Executive Director

Mr. [ ]
[R]
--- --- XXX
P.O. Box XXX
---, California XXXXX
Re:

S- -- XX-XXXXXX
Garlic Cooking Wine

Dear Mr. [R]:
I am responding to your letter dated August 25, 1994, to Assistant Chief Counsel Gary J. Jugum. You ask if sales tax applies to your sales of Garlic Cooking Wine. You attached to your letter two labels for White and Red Garlic Cooking Wine and also a bottle of the white. Although the label does not say, you indicate that the wine is a “non-drinkable beverage and produced for the sole purpose of cooking....” OPINION A.

Sales and Use Tax Generally

In California, except where specifically exempted by statute, Revenue and Taxation Code Section 6051 imposes an excise tax, computed as a percentage of gross receipts, upon all retailers for the privilege of selling tangible personal property at retail in this state. (Unless otherwise stated, all statutory references are to the Revenue and Taxation Code.) “[I]t shall be presumed that all gross receipts are subject to tax until the contrary is established. The burden of proving that a sale of tangible personal property is not a sale at retail is upon the person who makes the sale ...” (§ 6091.) “Exemptions from taxation must be found in the statute.” (Market St. Ry. Co. v. Cal. St. Bd. of Equal. (1953) 137 Cal.App.2d 87, 96 [290 PO.2d 201.]) “The taxpayer has the burden of showing that he clearly comes within the exemption.” (Standard Oil Co. v. St. Bd. of Equalization (1974) 39 Cal.App.3d 765, 769 [114 Cal.Rptr. 571].)

Mr. [R]

B.

-2-

September 21, 1994
245.0330

Food Products Exemption

Section 6359, as interpreted and implemented by Regulation 1602, provides an exemption from sales and use taxes for sales of food products for human consumption under certain circumstances. Sub-divisions (1) & (2) of Regulation 1602(a) contain lists of products which, either singly or in combination, are considered “food products.” (Sales and Use Tax Regulations are Board promulgations which have the force and effect of law.) Sub-division (a)(2) specifically excludes “vinous liquors” from the definition of “food products.” We have previously determined, however, that where a vinous liquor, such as cooking wine, is considered to be “rendered unfit for beverage use” under Internal Revenue Code Section 5362 and so may only be used for cooking, then it qualifies as an exempt food product. Because you indicate in your letter that the wine is not drinkable, it may very well qualify. If so, its sales would be exempt from tax. Please be advised that this letter does not qualify as written advice that sales of the wine are not subject to tax under Section 6596, because we do not know if the wine comes under this Internal Revenue Code section. For your information, I have included a copy of Regulation 1602. I hope the above discussion has answered your question. If you need anything further, please do not hesitate to write again. Sincerely,

John L. Waid
Tax Counsel
JLW:es
Enclosure:
cc:

Reg. 1602

-- - District Administrator