When did noncarbonated Gatorade become exempt after being taxable as a soft drink with insufficient fruit juice?

Plain-English summary

Under the law in effect when the letter was written, “soft drinks” were excluded from exempt food. Counsel said the term was broad enough to include all nonalcoholic beverages, even when they were not ordinarily dispensed at bars or soda fountains.

Gatorade also lacked enough fruit juice to qualify under the existing juice exception. Its sales were therefore taxable through December 31, 1969.

The Legislature had enacted Assembly Bill 444. Beginning January 1, 1970, all noncarbonated soft drinks became exempt.

Because Gatorade was noncarbonated, it became exempt on that effective date.

Common questions

Was Gatorade exempt when the September 1969 letter was issued?

No. It remained taxable until January 1, 1970.

Did the bar-or-soda-fountain language exclude Gatorade from “soft drinks”?

No. Counsel read that phrase as modifying “beverages,” not the broader term “soft drinks.”

What changed the result?

The 1970 effective date of the law exempting all noncarbonated soft drinks.

Citations and references

• California Revenue and Taxation Code section 6359 (as cited)
• California Assembly Bill 444 — 1969 legislative change effective January 1, 1970, as discussed; bill text and chapter citation not reproduced in the official PDF
• Redacted seller's September 10, 1969 letter concerning Gatorade, including its quoted punctuation of section 6359 — request described; not reproduced in the official PDF
• Gatorade's nonalcoholic and noncarbonated status, bar or soda-fountain distribution, and insufficient fruit-juice content — facts stated or agreed; underlying formula, ingredient specifications, juice calculation, carbonation tests, labels, samples, distribution records, invoices, and sales records not reproduced in the official PDF
• Copies to the Pasadena Subdistrict Administrator, Oakland District Administrator, and H. A. Dickson — recipients stated; copies, responses, and any follow-up not reproduced in the official PDF
• Possible later product sale, return filing, audit, assessment, refund claim, appeal, formulation change, 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/245-0480.pdf

Original ruling text

245.0480

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 19, 1969

[X]
--- -----, CA XXXXX
Dear Mr. [X]:
In regard to your letter of September 10, 1969, I would agree that your product is not ordinarily dispensed at bars or soda fountains. However, the phrase “such as are ordinarily dispensed at bars and soda fountains or in connection therewith” in section 6359 qualifies only the word “beverages,” and not the words “soft drinks.” The entire paragraph reads: “‘Food products’ do not include spirituous, malt or vinous liquors, soft drinks, sodas, or beverages such as are ordinarily dispensed at bars and soda fountains or in connection therewith, medicines, tonics, and preparations in liquid, powdered, granular, tablet, capsule, lozenge, and pill form sold as dietary supplements or adjuncts.” There is no comma after “beverages” as you included in your letter. The term “soft drinks” is a broad one, including all beverages which are nonalcoholic. Though Gatorade is not a beverage ordinarily dispensed at bars or soda fountains, it is a “soft drink.” As it does not contain sufficient fruit juice to be exempt, sales are taxable until January 1, 1970. Beginning January 1, 1970, pursuant to a change in the law passed by this session of the Legislature (AB 444), all non-carbonated soft drinks will be exempt. Very truly yours,

Lawrence A. Augusta
Assistant Counsel
LAA:ph
bc:

Pasadena – Subdistrict Administrator (BM)
Oakland – District Administrator
Mr. H. A. Dickson