Could a chlorine-gas seller deduct a California pesticide tax imposed on the manufacturer from taxable gross receipts?

Plain-English summary

A chlorine-gas seller could not deduct a California pesticide tax imposed on the manufacturer from taxable gross receipts. The memorandum treated the charge as an expense connected with the retail sale and found no statute excluding it.

The cited gross-receipts exclusions covered specified federal excise taxes, local sales and use taxes, and certain state motor-vehicle, mobilehome, or commercial-coach fees. None covered the pesticide tax, so the claimed $1,515 return deduction was invalid.

Citations and references

• California Revenue and Taxation Code sections 6012(a), 6012(a)(2), 6012(b)(1), 6012(c), and 6051 (as cited)
• Internal Revenue Code section 4091 (as cited)
• December 16, 1993 Board letter and taxpayer's reply note stating that the California Department of Agriculture imposed the tax on chlorine-gas manufacturers because chlorine gas was considered a pesticide — letter, note, attachments, and supporting tax material not reproduced in the official PDF
• April 20, 1994 Return Review memorandum asking whether the taxpayer's $1,515 California Pest Tax deduction was valid — memorandum, tax return, deduction schedule, invoices, tax assessment, payment records, and workpapers not reproduced in the official PDF
• June 6, 1994 Legal Division staff-counsel memorandum copied to a redacted district administrator — no return adjustment, taxpayer notice or response, audit, assessment, refund claim, agency adoption, appeal, or later outcome supplied
• Official Annotation 295.1160's manufacturer-imposed-tax and no-exclusion conclusion and June 6, 1994 date — annotation omits the redacted taxpayer, $1,515 deduction, December 16 letter and reply, April 20 memorandum, chlorine gas, Department of Agriculture, cited statutory exclusions, underlying records, later outcome, and reliance status and supplies no additional proceeding record

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/295-1160.pdf

Original ruling text

State of California

Board of Equalization
Legal Division

Memorandum
To

:

Mr. Steve Guest
Return Review Section (MIC:35)

From :

Pat Hildebrand
Staff Counsel

Subject:

S--- C--- Co.
SR -- XX-XXXXXX

295.1160
Date:

June 6, 1994

(916) 324-2642
CalNet 454-2642

This is in response to your memorandum dated April 20, 1994. You ask whether the taxpayer's deduction of $1,515.00 for a California Pest Tax is a valid deduction. Taxpayer replied to a letter from the Board dated December 16, 1993, with a note stating that this tax is imposed on the manufacturer of chlorine gas by the California Department of Agriculture because chlorine gas is considered a pesticide. Sales tax is imposed on all retailers measured by their gross receipts from retail sales of tangible personal property in this state, unless the sale is specifically exempt from sales tax by statute. (Rev. & Tax. Code § 6051.) Revenue and Taxation Code section 6012 provides that: "(a) 'Gross receipts' means the total amount of the sale or lease or rental price, as the case may be, of the retail sales of retailers, valued in money, whether received in money or otherwise." (Rev. & Tax. Code § 6012(a).) Charges for the cost of materials used, labor or service cost, and any other expense which is a part of the sale are not deductible from gross receipts unless specifically excluded by statute. (Rev. & Tax. Code §§ 6012(a)(2) and (b)(1).) Therefore, unless there is a statute which excludes a California Pest tax, the amount of the tax cannot be deducted from the taxable gross receipts. The only deductible taxes excluded from gross receipts are certain manufacturers' or importers' excise taxes imposed by the United States on retail sales; manufacturers' or importers' excise tax imposed by Internal Revenue Code section 4091; sales and use taxes imposed by cities, counties, cities and counties, or rapid transit districts; and the amount of certain motor vehicle, mobilehome, or commercial coach fees or taxes imposed by and paid to the State of

Mr. Steve Guest

-2-

June 6, 1994
295.1160

California. (Rev. & Tax. Code § 6012(c).) None of these exclusions from gross receipts applies to a California Pest Tax imposed on the manufacturer of chlorine gas. There is no basis for exclusion from gross receipts for the California Pest Tax and, accordingly, no basis for a deduction on the tax return. If you have further questions, feel free to write again.

PH:cl
cc:

--- --- District Administrator