Could a restaurant buy Liquid Smoke for resale when it used the product to flavor barbecued meat sold to customers?

Plain-English summary

A restaurant or other customer applied Liquid Smoke as an ingredient when barbecuing meat that it would sell.

The Board treated the Liquid Smoke as purchased for resale because the smoke or ingredients in it became physically incorporated into the food and provided flavor.

The opinion was expressly based on an assumption that the use matched an older Attorney General opinion. That enclosed opinion is not included in the published PDF.

The official annotation records a 2005 amendment, while the supporting opinion remains dated August 24, 1964.

Common questions

Was Liquid Smoke exempt merely because it was used in a restaurant?

No. The stated basis was resale through physical incorporation into meat sold to customers.

What function did the incorporated material serve?

It provided flavor to the barbecued meat.

Is the cited Attorney General opinion available in the PDF?

No. The letter says it was enclosed, but the published source does not include it.

Citations and references

• Prior California Attorney General opinion concerning comparable Liquid Smoke use — described as still applicable without a date, number, title, or other formal citation; stated enclosure not reproduced in the official PDF
• Redacted organization's August 13, 1964 letter asking about Liquid Smoke — referenced; not reproduced in the official PDF
• Liquid Smoke applied by restaurants or other customers as an ingredient in barbecued meats for sale — use and physical-incorporation theory described; formula, ingredient specifications, labels, samples, customer statements, preparation records, invoices, and meat-sale records not reproduced in the official PDF
• Annotation 245.0680's current text and 2005-2 amendment notation — published on the official annotation page; no amendment file or supporting record reproduced in the official PDF
• Copy to a redacted district administrator — copy notation present; copy and any follow-up 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/245-0680.pdf

Original ruling text

245.0680

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

August 24, 1964

[T]
P.O. Box XXXX
--- ---, California
Attention:

B-XXXXXX

Mr. [T]
Division Secretary

Gentlemen:
In answer to your letter of August 13, 1964, we advise that “Liquid Smoke” is considered to be sold for resale to a restaurant or other customer who applies the Liquid Smoke as an ingredient for barbequing meats, which are to be sold. The theory is that the smoke or certain ingredients contained in it become physically incorporated into the food providing flavor to it. The Attorney General issued an opinion a number of years ago which is still applicable, and we are enclosing a copy. Our opinion on your question is based upon the assumption that the Liquid Smoke is used in a manner comparable to that upon which the Attorney General based his opinion. Very truly yours,

E. H. Stetson
Tax Counsel
EHS:fb
Enclosure
cc:

--- --- – District Administrator