Was malt syrup exempt when retailers sold it as a molasses substitute for use in or on food?

Plain-English summary

The requester said retailers often sold the malt syrup as a substitute for molasses.

Former Ruling 52 included bakery products and syrups used as ingredients of, or upon, defined food products. Counsel concluded that malt syrup sold for that stated purpose fell within the exempt category.

That purpose also distinguished the product from the former rule's separate reference to taxable malt and malt extracts.

The same letter treated Portland Punch as taxable on the available facts because it appeared to be sweetened water with a small amount of fruit juice. This page addresses only malt syrup.

The official annotation notes a January 1, 1970 revision. The complete supporting letter itself is dated June 22, 1953, which is the issue date used here.

Common questions

Was every sale of malt syrup exempt?

No. The conclusion assumed it was sold as a molasses substitute for use in or on food products.

Why didn't the taxable rule for malt extracts control?

Counsel treated the stated molasses-substitute use as falling within the rule for food syrups.

Why is the issue date 1953 rather than 1970?

The official supporting letter is dated June 22, 1953. January 1, 1970 is identified by the annotation as a later revision date.

Citations and references

• California Revenue and Taxation Code section 6359 (as cited)
• Former California Sales and Use Tax Ruling 52, including the second and third paragraphs of Section A — as cited; stated enclosure not reproduced in the official PDF
• California Sales Tax General Bulletin 52-15 — as cited for Portland Punch; stated enclosure not reproduced in the official PDF
• Redacted organization's June 9, 1953 letter to Principal Auditor H. A. Dickson asking about Portland Punch and malt syrup — referenced; not reproduced in the official PDF
• Attached Portland Punch label and available facts about its sweetened-water, fruit-juice, base, powder, and concentrate characteristics — label and facts described; label copy, formula, ingredient specifications, sample, tests, invoices, and sales records not reproduced in the official PDF
• Malt syrup sold by retailers as a molasses substitute for use in or on food products — sales purpose described; product formula, labels, retailer records, customer statements, invoices, and use records not reproduced in the official PDF
• Annotation 245.0700's January 1, 1970 revision notation — published on the official annotation page; no revision file or supporting record reproduced in the official PDF
• Copy to San Francisco Auditing and possible later product sale, audit, assessment, refund claim, appeal, or other agency action — copy notation present; no copy, 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/245-0700.pdf

Original ruling text

245.0700

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

June 22, 1953

[X]
Attention:

[X]
Executive Secretary

Gentlemen:
In your letter of June 9 addressed to Mr. H. A. Dickson, Principal Auditor, you inquire whether “Portland Punch” and malt syrup are exempt food products or taxable items under Section 6359 of the California Sales and Use Tax Law and the regulation relating thereto, Sales and Use Tax Ruling 52 (copy enclosed). We have examined the label which you attached relating to “Portland Punch”. From what facts we have available, it would appear that “Portland Punch” is essentially a sweetened water flavored by fruit juice and therefore taxable under Ruling 52. In other words the base itself does not appear to be an exempt fruit product within the meaning of Sales Tax General Bulletin 52-15 (copy enclosed). Bulletin 52-15 was adopted in an effort to clarify the position of the staff with respect to the application of the tax under Ruling 52 to bases, powders, and concentrates. If you feel that this base is primarily a fruit juice rather than primarily a sweetened water with a small content of fruit juice added, we would be pleased to hear from you further concerning the contents of this product. As to the malt syrup, you state that this product is often sold by retailers as a substitute for molasses. You will observe that under the second paragraph of Section A of Ruling 52, food products include bakery products and also syrups for use as an ingredient of, or upon, food products as defined in the ruling. Assuming that the malt syrup is sold for one of the purposes mentioned above, it would appear to be in the exempt category, and the provisions of the third paragraph of Section A, referring to malt and malt extracts as taxable items, would apparently not apply. Yours very truly,

E. H. Stetson
Tax Counsel
WWM:ja
cc:
San Francisco - Auditing