Was ICEE exempt because carbon dioxide helped freeze the drink rather than merely carbonating it?

Plain-English summary

ICEE argued that carbon dioxide contributed to the freezing process. But the dealer brochure described the product as a new way to serve carbonated drinks and said carbonation stayed locked in during freezing and was released as the drink melted.

The brochure also said syrup, water, and CO2 remained in constant proportion and that ICEE could not go flat.

Tax counsel concluded that CO2 was an essential part of the beverage itself, not merely a freezing aid. ICEE was therefore a carbonated beverage served in a different form, and its sales were taxable.

Common questions

Did frozen form make ICEE exempt?

No. The source treated it as a carbonated beverage in frozen form.

Was CO2 only used to make the product freeze?

No. The brochure showed that carbonation remained a continuing characteristic of the drink.

What product statement was especially important?

The brochure called ICEE “the new way to serve carbonated drinks” and said it could not go flat.

Citations and references

• California Revenue and Taxation Code section 6359 (as cited)
• Former California Sales and Use Tax Ruling 52(a)(2) (as cited)
• Redacted requester's March 18, 1970 letter and additional ICEE information — request and additional submission referenced; neither reproduced in the official PDF
• H. A. Dickson's request that Tax Counsel reply — referral stated; underlying request or transmittal not reproduced in the official PDF
• Advertising brochure prepared by a redacted party for prospective ICEE dealers — statements about carbonation, mixing, syrup, water, CO2, freezing, flavor, and serving quoted; brochure copy not reproduced in the official PDF
• ICEE formula, equipment, carbonation, freezing process, and sales — characteristics described; formula specifications, equipment records, tests, labels, cups, invoices, and sales records not reproduced in the official PDF
• Possible later 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/245-0580.pdf

Original ruling text

245.0580

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

March 24, 1970

Dear Mr. [X]:
Mr. H. A. Dickson has asked me to reply to your letter of March 18, 1970 concerning the application of tax to “ICEE” flavored frozen product. We appreciate your sending us the additional information to help clarify what you call a somewhat confusing situation. However, it appears clear to me that “ICEE” is a carbonated beverage and is therefore subject to tax. As you know, carbonated beverages are specifically excluded from the food products exemption by Revenue and Taxation Code Section 6359 and by Ruling 52(a)(2). The advertising brochure prepared by [M] for distribution to prospective dealers states that ICEE is “the new way to serve carbonated drinks.” It goes on to say: “Carbonation is locked in as drink freezes… released as it melts. ICEE CAN'T GO FLAT …is sparkly from start to finish. ICEE is always PERFECTLY MIXED. Syrup, water and CO2 are in constant proportion. Then, freezing in cup, it becomes tastier and tangier than the same flavor when simply poured over ice.” From this I can only conclude that ICEE is a carbonated beverage served in a new form. While the CO2 contributes to the freezing process, it is also an essential part of the beverage itself. Very truly yours,

Lawrence A. Augusta
Tax Counsel
LAA:ph

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