How did California split ice sales to street-food vendors who resold some ice in drinks and consumed the rest to keep products cold, without resale certificates?

Plain-English summary

A taxpayer rented hot-dog carts to independent street vendors and also sold them ice without obtaining resale certificates.

The vendors used some ice in or with soft drinks sold to customers and used the rest to keep food and drinks cool while awaiting sale. The first use was resale; the second was consumption in the vendors' businesses.

Without clearer evidence supporting another split, the Board treated 50 percent of the ice sales as nontaxable sales for resale and 50 percent as taxable retail sales for business use.

Section 6359.7 did not exempt the taxable half. The memorandum said that exemption covered ice used by a carrier to pack or ship food products, not ice used by street vendors for cooling.

Common questions

Why was ice put in customer drinks nontaxable?

That ice was resold in or with the soft drinks.

Why was cooling ice taxable?

The vendors consumed it in operating their businesses rather than reselling it.

Was the 50/50 split mandatory in every case?

No. The memorandum used that split in the absence of clear evidence showing otherwise.

Citations and references

• California Revenue and Taxation Code section 6359.7 (as cited)
• Deputy Director Glenn A. Bystrom's April 11, 1995 memorandum concerning a recent Board decision — referenced; not reproduced in the official PDF
• Recent Board decision allocating the taxpayer's ice sales 50 percent to resale and 50 percent to taxable business use — summarized but not formally identified or reproduced in the official PDF
• Taxpayer's hot-dog-cart rentals and ice sales to independent street vendors — transactions and uses described; cart leases, invoices, resale certificates, vendor statements, soft-drink sales records, and cooling-use records not reproduced in the official PDF
• Absence of clear evidence supporting a different allocation — evidentiary condition stated; audit workpapers, tax returns, allocation computations, and underlying proof not reproduced in the official PDF
• Instruction to Robert Nunes to create the annotation and copies to William D. Dunn, Dennis fox, Robert Nunes, and James Stillwell — directive and copy list stated; annotation work record, copies, and follow-up not reproduced in the official PDF
• Possible later 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/245-0590.pdf

Original ruling text

State of California

Board of Equalization

Memorandum
To:

Mr. Glenn A. Bystrom, Deputy Director
Sales and Use Tax Department

From:

David H. Levine
Supervising Staff Counsel

Subject:

Ice Annotation

245.0590
Date:

June 19, 1995

This is in response to your memorandum dated April 11, 1995 regarding a recent decision of the Board. In that case, the Board regarded a person who sold ice to hot dog vendors (who used carts rented from the taxpayer) as having sold 50 percent of the ice for resale in soft drinks and as having sold 50 percent at retail for use in keeping food and soft drinks cool while awaiting sale. We agreed that an annotation on the subject was appropriate. Therefore, by copy of this memorandum, I am asking Mr. Nunes to annotate the following: Sales of Ice. A taxpayer rents hot dog carts to independent street vendors, and also sells them ice without taking any resale certificates. The street vendors use some of the ice to keep their products cool or fresh, and resell some of the ice in or with soft drinks. In lieu of clear evidence otherwise, the Board will regard 50 percent of the sales of ice as nontaxable sales to the vendors for resale in or with soft drinks and 50 percent of the sales of ice as taxable retail sales for use in the vendor's business. The exemption provided by section 6359.7 does not apply to these taxable sales since that exemption applies only with respect to ice used in packing or shipping food products for human consumption by carrier and not for use of ice by street vendors.

DHL:cl
cc:

Mr. William D. Dunn
Mr. Dennis fox
Mr. Robert Nunes
Mr. James Stillwell