Is a separately stated environmental drum-cleaning fee charged with petroleum products subject to California sales tax?

Plain-English summary

A separately stated $6.50 environmental drum-cleaning fee was taxable when the seller charged it on each 55-gallon drum delivered with petroleum products. The fee reimbursed the seller's reconditioning and environmental costs, so the Board treated it as a service charge connected with the product sale.

The letter distinguished that fee from a separate $20 drum deposit. The deposit was credited back when the customer returned the empty drum and was described as nontaxable.

Citations and references

• The short letter cites no numbered statute or regulation for its conclusion.
• Requester's July 30, 1996 letter asking whether an environmental drum-cleaning fee was subject to sales tax — facts and question supplied; request, attachments, requester identity, and complete business description not reproduced in the official PDF
• Petroleum-product bids and sales to CHP, CalTrans, and other state agencies; 55-gallon drums; separately stated $6.50 cleaning fee reimbursing reconditioning and environmental costs; and refundable $20 drum deposit — facts supplied; bids, products, agency orders, invoices, drums, reconditioning and environmental-cost records, deposit and return records, credits, payments, returns, and tax computations not reproduced in the official PDF
• Official Annotation 295.0228's petroleum-product, separately stated drum-cleaning fee, reconditioning/environmental-cost reimbursement, and taxable-service-with-sale summary, dated Aug. 14, 1996 — annotation omits the July 30 request provenance, named state agencies, $6.50 amount, $20 refundable-deposit contrast, absence of numbered legal authority, source wording defect, and missing records and supplies no additional transaction record
• Possible later bid award, petroleum or drum delivery, fee or deposit collection, empty-drum return, deposit credit, return filing, audit, assessment, payment, refund claim, appeal, or other agency action — not 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/295-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/295-0228.pdf

Original ruling text

295.0228

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

August 14, 1996

Dear
This is in response to your letter of July 30, 1996.
We understand that you sell petroleum products to several state agencies, including the CHP, CalTrans, and many others. Per the bids, you collect an amount identified as environmental drum cleaning fee on each 55 gallon drum that you deliver with product to the agencies. This fee is $6.50 per drum separately stated on your invoice and is reimbursement for associated reconditioning and environmental costs. The agencies are also charged a nontaxable $20 drum deposit which is credited back to the customer upon return of the empty drum to you. You have inquired as to the sales taxability of the environmental drum cleaning fee. The amount in question 1S properly subject to tax. The fee in question is taxable as a charge for a service in connection with a sale.

Very truly yours,

Gary J. Jugum
Assistant Chief Counsel

GJJ:sr
bc:
Mr. David H. Levine
Mr. Ronald L. Dick
Ms. Candice McCanne