Which ingredient costs entered the tax measure when breweries furnished complimentary beer?

Plain-English summary

The 1969 letter addressed the ingredient-cost measure for beer given away by breweries. It treated hops as a flavoring extract excluded from the measure and, under the rule then in force, treated malt as nonfood and included it.

The official source appends a later correction. It states that Regulation 1602 was amended effective January 1, 1974 to classify malt as a food product and directs that malt no longer be mentioned in the annotation.

The corrected published point is that chemical additives are not food products and are subject to tax. The PDF does not provide a date for the appended editorial correction, so this page retains the underlying letter date and explains the controlling correction.

Citations and references

• Historical Sales and Use Tax Ruling 52(a)(1) and (a)(3)
• California Sales and Use Tax Regulation 1602, amendment effective January 1, 1974 as stated in the source
• Sept. 25, 1969 meeting agreement among the association representative, W. T. Denny, T. P. Putnam, Don Brady, and Assistant Counsel Lawrence A. Augusta — agreement summarized; request, agenda, exhibits, minutes, and separate agreement not reproduced in the official PDF
• Board review and readoption of all rulings and anticipated public hearing on Ruling 52 — described as pending; notice, hearing date, submissions, transcript, and resulting action not reproduced in the official PDF
• Undated David Levine annotation correction concerning Regulation 1602's Jan. 1, 1974 malt classification — correction text supplied; underlying amendment and editorial record not reproduced in the official PDF
• Official Annotation 280.0240's free employee beer, giveaways, nonexempt ingredient measure, listed food ingredients, hops, chemical additives, and amendment marker M99-1 — annotation supplies broader facts and provenance than the supporting PDF but no brewery transaction, union contract, ingredient, computation, or implementation record
• Possible later Ruling 52 hearing, Board action, brewery reporting, audit, assessment, payment, refund claim, appeal, or other outcome — not supplied in the official PDF

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 280.0240
• Original supporting opinion: 280.0240 PDF

Original ruling text

280.0240

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 26, 1969

Mr. G--- W. O--Executive Vice President
C--- B--- A--XXX --- Street
--- ---, CA XXXXX
Dear Mr. O---:
This is to confirm the agreement reached in our meeting on September 25, 1969, at which you, Mr. W. T. Denny, Mr. T. P. Putnam, Mr. Don Brady and I were present. We concluded that hops, considering the fact that many breweries are now utilizing hop extract, are a flavoring extract within the meaning of ruling 52(a)(1). Accordingly, the purchase price of hops should not be included in the measure of tax on complimentary beer. We also concluded that the purchase price of malt was to be included in the measure of tax on complimentary beer inasmuch as malt was specifically excluded from the term “food products” in ruling 52 (a)(3). This determination is to apply to all current periods. It will also apply to future periods unless the board changes the definitions found in ruling 52 when that ruling is reconsidered in the course of our current review and re-adoption of all rulings. You wish to be notified when the public hearing is scheduled on ruling 52 so that you might have the opportunity to present arguments in favor of classifying malt as a food product. Very truly yours,

Lawrence A. Augusta
Assistant Counsel

LAA:ph
The end of this annotation states:
“Malt is not a food product. Chemical additives are likewise not food products and are subject to tax. 9/26/69. (Regulation 1602 was amended effective January 1, 1974, to classify malt as a food product). After almost 25 years, there is no longer any reason to have malt mentioned at all. Please change this to read: Chemical additives are not food products and are subject to tax. 9/26/69. David Levine