Were noncarbonated flavored waters, mineral waters, soft drinks, and canned iced teas exempt, and what if a product such as Koala Springs was actually carbonated?

Plain-English summary

A requester asked about bottled water, flavored mineral waters, other nonjuice soft drinks that were not carbonated, and canned iced teas. Because no taxpayer was identified, counsel characterized the response as general comments on hypothetical facts rather than specific written advice under section 6596.

The October 29, 1994 version of Regulation 1602(a)(2) included noncarbonated, noneffervescent bottled water intended for human consumption and other noncarbonated beverages as food products. Tea was separately listed as food.

The described noncarbonated flavored waters and drinks therefore qualified for exemption. Canned iced tea also qualified under the tea rule applied in the letter.

Koala Springs required factual confirmation. The requester described it as noncarbonated, but counsel had heard claims that it was carbonated. If carbonated, it fell outside the food-product definition and its sales were taxable.

The letter also identified an apparent contradiction in the grocery-store pamphlet and asked publications staff to investigate it.

Common questions

Were all flavored waters exempt?

No. The conclusion covered the described noncarbonated products; carbonation changed the result.

Was Koala Springs definitively exempt?

No. Counsel said it was exempt only if the requester's noncarbonated description was accurate.

Could the unidentified taxpayer rely on this as section 6596 advice?

No. The letter expressly said it was general hypothetical guidance because the taxpayer was not identified.

Citations and references

• California Revenue and Taxation Code sections 6051, 6359, and 6596 (as cited)
• California Sales and Use Tax Regulation 1602, including subdivisions (a)(1) and (a)(2), effective October 29, 1994 (as cited)
• Sales and Use Tax Annotation 245.1090 (historical tea guidance cited)
• Requester's November 1, 1994 letter and Return Review staff referral to the Legal Division — request and referral described; neither reproduced in the official PDF
• Pamphlet Number 31, Tax Tips for Grocery Stores (July 1993), page 5 — quoted, identified as apparently inconsistent, and submitted with the request; page and pamphlet not reproduced in the official PDF
• Prior Board determination that “other beverages” included all noncarbonated nonalcoholic drinks except water — described without an identifying citation or reproduced opinion in the official PDF
• Claims in other contexts that Koala Springs Mineral Water was carbonated — reported without identifying sources, records, tests, or correspondence in the official PDF
• Regulation 1602 enclosure and copies to Forms and Publications staff, Mary Claus, and the Oakland District Administrator — enclosure, copies, investigation, and any correction not reproduced in the official PDF
• Bottled water, flavored mineral water, Mystic, Snapple, other soft drinks, Koala Springs, and canned iced tea — products and assumed traits described; underlying formulas, ingredient specifications, carbonation tests, labels, samples, invoices, and sales records not reproduced in the official PDF
• Possible later pamphlet correction, product determination, 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/245-0450.pdf

Original ruling text

245.0450

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION - MIC 82
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)

DEAN ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego

Telephone No.: (916) 324-3828
Fax No: (916) 323-3387

BRAD SHERMAN
Fourth District, Los Angeles
KATHLEEN CONNELL
Controller, Sacramento
────────

January 27, 1995

BURTON W. OLIVER
Executive Director

Ms. [D]
[M]
XXXX --- -----, California XXXXX
RE:

[No Permit Number]
Flavored Mineral Waters

Dear Ms. [D]:
Mr. Mike Loretta of our Return Review Section has asked the Legal Division to reply to your letter to the State Board of Equalization dated November 1, 1994. You ask for clarification as to the taxability of sales of bottled water, flavored mineral waters, such as Koala Springs, flavored waters such as Mystic and Snapple, any other “soft drinks” which are not juices but are also not carbonated, and canned ice teas. You indicate that these products seem to be a source of “great confusion,” and enclosed a copy of page 5 of Pamphlet Number 31, “Tax Tips for Grocery Stores” (July 1993 ), which states that sales of “carbonated, effervescent, and noneffervescent bottled water are taxable.” Since you did not identify the taxpayer, this letter does not constitute specific written advice to the taxpayer under Revenue and Taxation Code section 6596. Rather, it constitutes general comments regarding the applicability of California Sales and Use Tax Law to a set of hypothetical facts. OPINION 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.) 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. Subdivisions (1) and (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.)

Ms. [D]

-2-

January 27, 1995
245.0450

Subdivision (a)(1) specifically lists “tea” as a food product. Effective October 29, 1994, subdivision (a)(2) reads, in part, as follows: “‘Food products’ include all fruit juices, vegetable juices, and other beverages, whether liquid or frozen, including all beverages composed in part of fruit or vegetable juice and concentrates, powders, or other bases for such beverages, and noncarbonated and noneffervescent bottled water intended for human consumption regardless of the method of delivery. ‘Food products’ does not include carbonated or effervescent waters, spirituous, malt or vinous liquors, or carbonated beverages.” Teas which do not claim medicinal qualities or the labels of which do not indicate specifically that they are sold as dietary supplements are considered food products the sales of which are exempt from tax. (Annot. 245.1090, Sales and Use Tax Annotations, are excepts from previous Board staff opinion letters and serve as guides to staff positions.) We have previously determined that the term “other beverages” includes all noncarbonated nonalcoholic drinks (except for water), flavored or otherwise. Thus the products you list qualify under the above authority as “food products” the sales of which are exempt from tax. I do have a question about Koala Springs Mineral Water. You indicate that it is a noncarbonated flavored mineral water. It has been claimed in other contexts, however, that this product is in fact carbonated. If that is true, it is excluded from the definition of “food products” under the above authority with the result that its sales are subject to tax. Thank you for bringing to our attention the apparent inconsistency in Pamphlet 31. I am, by copy of this letter, notifying our Forms and Publications Section of the problem for their action. For your information, I have included a copy of Regulation 1602. I hope the above discussion has answered your questions. If you need anything further, please do not hesitate to write again. Sincerely,

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

Reg. 1602

Ms. Mary Claus (MIC:58)- Please look into this problem.
The cited sentence appears to be internally contradictory. Oakland District Administrator – CH