Did sherbet qualify as exempt food when its label required the product to contain milk or milk products?

Plain-English summary

Tax counsel treated sherbet as exempt food. The Department of Agriculture had informed the Board that a manufacturer had to incorporate milk or milk products into an item to label it as sherbet.

The letter rejected a previously mentioned 50% figure as the proper test. Because sherbet had to contain at least some milk or milk products, the Board concluded that it was exempt.

The official supporting PDF also includes a separate December 20, 1960 letter about bisulfite used on peeled potatoes. That letter is reproduced below because it is part of the official PDF, but the published subject for Annotation 245.1040 is sherbet.

Common questions

Did sherbet need to contain 50% milk products?

No. The letter said the 50% figure was no longer the proper test.

Why did sherbet qualify as exempt food?

The conclusion rested on the requirement that a product labeled sherbet contain some milk or milk products.

Does the PDF address another product?

Yes. Its first letter concerns bisulfite sold for use on peeled potatoes; the second letter contains the sherbet conclusion.

Citations and references

• California Sales and Use Tax Law — food-product, resale-incorporation, and refund treatment applied without section numbers
• California Department of Agriculture product-labeling information reported May 9, 1961 — investigation and agency statement described without a statute, regulation, standard, official, or underlying record
• Redacted seller's December 14, 1960 letter concerning bisulfite and Sun-Blast Vegewhite — referenced; not reproduced in the official PDF
• Board's March 19, 1958 letter declining to rule because it could not determine whether Vegewhite entered the potatoes or dissipated during cooking — described; not reproduced in the official PDF
• Customer sales-tax reimbursement return and written refund claim subject to verification — conditions stated; customer records, reimbursement records, returns, payments, claim, amount, grounds, verification workpapers, and disposition not reproduced in the official PDF
• Redacted executive secretary's April 28, 1961 letter to H. A. Dickson and tentative taxable-and-nontaxable food-products list — request, referral, and list referenced; none reproduced in the official PDF
• Bisulfite, Sun-Blast Vegewhite, Seneca Apple Ade, and sherbet products — uses and classifications described; formulas, ingredient specifications, labels, samples, production records, invoices, and sales records not reproduced in the official PDF
• H. A. Dickson's former 50-percent sherbet figure — described as no longer proper without an identified memorandum, ruling, standard, or other record
• Combined December 20, 1960 bisulfite letter and May 9, 1961 sherbet letter published under one annotation PDF — sherbet letter signed “E. H. Stetsen” as printed
• Copy to a redacted administrator and possible later refund action, product sale, audit, assessment, 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/245-1040.pdf

Original ruling text

245.1040

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001
TELEPHONE (916) 445-6450

December 20, 1960

[T]
XX --- ----- --- X, California
Attention:

Mr. [T]
Comptroller

-- - XXXXXX

Gentlemen:
This is to advise you that you are correct in concluding that sales of bisulfite to restaurants for fixing peeled potatoes so as to retard discoloration are exempt from sales tax on the basis that the compound becomes incorporated into the potatoes. From what is said in your letter of December 14, it would appear that your product “Sun-Blast Vegewhite” would also fall in this category. You will recall that in our letter of March 19, 1958, we advised you that we were unable to determine whether or not “Vegewhite” became a part of the potatoes and whether or not it would be dissipated in the cooking process. For that reason, we were not able to give you a ruling on the particular product. To the extent that you return to your customers the sales tax reimbursement which you have collected from them, it would be proper for you to submit a written claim for refund to the Board. The claim will, of course, be subject to verification.

J. J. Delaney
Associate Tax counsel
cc:

--- --- - administrator

245.1040

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001
TELEPHONE (916) 445-6450

May 9, 1961
[C]
Office of the Executive Secretary
XXX --- ----- --- X, California

Attention:

• • XXXXX
    Now:
    S- -- XX-XXXXXX

[H]
Executive Secretary

Gentlemen:
This is in reply to your letter of April 28, 1961, to Mr. H. A. Dickson who referred it to us for reply. You submitted a tentative list of taxable and nontaxable food products for our approval. Only two items should be deleted from the list. Bisulfite is not an exempt food product. It is used on potatoes to preserve whiteness. Its sale to a processor is not subject to the tax where the potatoes will be resold, but its sale to a consumer is subject to tax. Seneca Apple Ade is an exempt food product. We have investigated sherbet with the Department of Agriculture, and they inform us that in order to label an item as “sherbet,” the manufacturer must incorporate in it milk or milk products. The 50% figure mentioned by Mr. Dickson is no longer a proper test. Since sherbet must be composed of some milk or milk products, we are of the opinion it is an exempt food product. Very truly yours,

E. H. Stetsen
Tax Counsel