Could a water-treatment plant buy diatomaceous earth for resale when it used the material to filter treated water before distribution?

Plain-English summary

A water-treatment operator used diatomaceous earth to filter water after treatment and before the water entered the distribution system. The operator asked whether its purchases of that filtering agent were subject to sales tax.

Tax counsel said yes. The diatomaceous earth was tangible personal property used to process the water, not material purchased for resale. As understood in the letter, it removed impurities but did not dissolve or become part of the water ultimately distributed.

The letter says Ruling 14 covered the issue and that a copy was enclosed. That enclosure is not part of the published supporting-opinion PDF, so this page does not extend or reconstruct its contents.

Citations and references

• Ruling 14 (as cited; the stated enclosure is not included in the official PDF)
• Redacted recipient's April 20 letter asking whether purchases of diatomaceous-earth filtering agent were taxable — letter referenced but not reproduced in the official PDF
• Diatomaceous-earth identity, filtering use after treatment and before distribution, impurity removal, nondissolution, nonincorporation, purchase, and water-sale evidence — facts supplied as the Board's understanding; complete product specifications, treatment diagrams, dosing and filter records, chemical analyses, retention tests, purchase orders, invoices, and water-distribution records not reproduced in the official PDF
• Official Annotation 275.0360's filtering-agent and nonincorporation summary — annotation supplies no additional request, Ruling 14 text, product, process, transaction, or implementation record
• Possible later product or process change, purchase, 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/275-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/275-0360.pdf

Original ruling text

STATE OF CALIFORNIA

275.0360

STATE BOARD OF EQUALIZATION

April 27, 1964

“L”
Gentlemen:
This is in reply to your letter of April 20 in which you ask whether your purchases of diatomaceous earth filtering agent are subject to the sales tax. Since the diatomaceous earth is used in your water treatment plant to filter the water after it is treated and before it enters your distribution system, the diatomaceous earth constitutes tangible personal property purchased for processing a product rather than for resale. As we understand the use of diatomaceous earth as a filtering agent for water, the earth does not dissolve or become part of the water but serves only to remove impurities. Consequently, the sale of the diatomaceous earth to you is subject to the sales tax. Ruling 14 covers this problem, and we are enclosing a copy for your inspection. You may be interested to know that Mr. Dixwell L. Pierce has retired and Mr. H. F. Freeman has taken his place as Executive Secretary to the State Board of Equalization. Very truly yours,

E. H. Stetson
Tax Counsel

PRD/EHS:md [1b]