Were petrolatum and mineral oil exempt when bakeries used them to lubricate equipment and some entered the dough?

Plain-English summary

Sales of petrolatum and mineral oil to bakeries were taxable retail sales. The bakeries bought the products to lubricate equipment and facilities used to make bakery goods, which was a purpose other than resale under section 6007.

The result did not change merely because raw dough picked up some lubricant and that amount became an ingredient of the finished product. The letter focused on the purpose for which the bakeries bought the products.

The same source also addressed “carmel coloring.” It treated retail sales of that coloring as taxable because it was not food, but allowed resale treatment when a bakery bought it to become a component of bakery goods sold to customers.

Common questions

Did incidental incorporation into dough create resale treatment?

No. The products were purchased as equipment lubricants, so incidental entry into the dough did not control.

What statutory definition did the letter use?

Section 6007 defined a retail sale as a sale for a purpose other than resale in the regular course of business as tangible personal property.

Was the coloring always taxable?

No. Although it was not treated as exempt food itself, its sale to a bakery could qualify for resale when it became a component of goods the bakery sold.

Citations and references

• California Revenue and Taxation Code section 6007 — retail-sale definition quoted in the letter
• Sales and Use Tax Ruling 52 — historical treatment of coloring extracts cited; stated enclosure not reproduced in the official PDF
• Sales and Use Tax Ruling 14 — historical component-part resale treatment cited; stated enclosure not reproduced in the official PDF
• Redacted seller's June 20 letter asking about petrolatum, mineral oil, and carmel coloring sold to bakeries — referenced; source-printed carmel form preserved; letter not reproduced in the official PDF
• Petrolatum and mineral oil used on bakery equipment and facilities, including lubricant picked up by raw dough, and carmel coloring incorporated into bakery goods — products and uses described; formulas, specifications, labels, samples, equipment and production records, bakery statements, 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/245-0900.pdf

Original ruling text

245.0900

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

June 23, 1950

Gentlemen:
This is in answer to your letter of June 20 with respect to the application of the State sales tax to your sales of petrolatum, mineral oil, and carmel coloring to bakeries. Section 6007 defines a retail sale to mean “a sale for any purpose other than resale in the regular course of business in the form of tangible personal property.” As the petrolatum and mineral oil are sold to the bakeries for the purpose of lubricating the equipment and facilities used in the production of the finished bakery products, it appears that they are sold for a purpose other than resale. Thus, we regard such sales as retail sales subject to the tax regardless of the fact that some part of the lubricant may be picked up by the raw dough and becomes an ingredient thereof. As indicated by Sales and Use Tax Ruling 52, copy enclosed, coloring extracts are not regarded as food products for purposes of the sales tax. Accordingly, the tax will apply to the retail sale of carmel coloring. Where, however, the carmel coloring is sold to a bakery for use as a component part of bakery goods sold by the bakery, the sale is exempt as a sale for resale, as indicated by Ruling 14, copy enclosed. Very truly yours,

R. G. Hamlin
Associate Tax Counsel
RGH:hb