Was a citrus-tree nursery's one-percent state assessment taxable when included in or separately added to the customer price?

Plain-English summary

California imposed a one-percent annual assessment on licensed nursery dealers' gross sales of citrus fruit trees produced and sold within the state. The assessment was payable to the Department of Food and Agriculture when the nursery renewed its license and supported state citrus-tree programs.

The Board said sales tax applied to the retail customer's total charge for the citrus trees. That result did not change depending on how the nursery handled the assessment: the same taxable measure applied if the nursery absorbed it, built it into the tree price, or separately stated it on the customer's invoice.

Citations and references

• California Food and Agriculture Code section 6971 (as cited)
• California Revenue and Taxation Code section 6011 (as cited)
• Recently enacted California citrus-tree assessment described by the requester — bill, chapter, enactment date, legislative materials, and prior statute version not identified or supplied
• California Department of Food and Agriculture communication stating that the assessment used gross sales before sales tax and that collected assessment amounts were subject to sales tax — communication date, author, form, complete text, and copy not supplied
• March 17, 1992 association letter asking about citrus-tree assessment charges — letter and attachments, if any, not reproduced in the official PDF; response is dated May 18, 1993 and gives no explanation for the interval
• Licensed nursery dealers, prior-fiscal-year citrus-tree gross sales, one-percent assessment, license renewal, retailer absorption or customer reimbursement, and included or separately stated invoice charges — licenses, assessment returns, invoices, sales records, remittances, and accounting records not reproduced in the official PDF
• May 18, 1993 tax-counsel response — no association or nursery reply, transaction treatment, audit, assessment dispute, refund claim, agency adoption, appeal, or later outcome supplied
• Official Annotation 295.1305's one-percent assessment, licensed nursery dealer, California citrus-tree sales, total-charge conclusion, and May 18, 1993 date — annotation omits the March 17 request and response interval, redacted association and nursery, Food and Agriculture communication, license-renewal and prior-year measure, section 6011, absorbed-versus-passed-through alternatives, missing enactment and transaction 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/295-1305.pdf

Original ruling text

295.1305

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6496

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

May 18, 1993
BURTON W. OLIVER
Executive Director

Mr. B--- Z---, Chairman
C--- C--- N--- A--- Board
XXXX South -----, CA XXXXX
Re:

Taxability of Nursery Tree Sales
--- & --- Nursery
SR -- XX-XXXXXX

Dear Mr. Z---:
This office has received a letter from you dated March 17, 1992 concerning the tax applicable to assessments paid to the California Department of Food and Agriculture. In your letter, you state that the California Legislature has recently enacted an assessment on citrus tree sales by nurseries. The California Department of Food and Agriculture collects the assessment funds and has informed you that while the assessment is determined on gross sales before sales tax, the assessment amounts that you collect are subject to sales tax. You ask for an opinion as to this question. California Food and Agriculture Code section 6971 now provides that an annual assessment of one percent shall be levied upon any licensed nursery dealer on the gross sales of all citrus fruit trees produced and sold within California. The assessment is due and payable to the director of the California Food and Agriculture Department at the time that the nursery dealer applies for the renewal of his license issued by the Department. The measure of gross sales is determined to be the gross sales for the previous fiscal year of each licensee. The assessment received by the Department is paid into the State Treasury and credited to the Department of Food and Agriculture to support the citrus tree programs of the Department.

Mr. B--- Z---

-2-

May 18, 1993
295.1305

Sales tax is applicable to the sale of citrus trees to the retail customer based on the sales price paid by that customer (Rev. & Tax. Code § 6011). Although there is no requirement in Food and Agriculture Code section 6971 that the nursery dealer be reimbursed for the assessment by the tree purchaser, sales tax is applicable to the total charge paid by the customer when the assessment is not billed to the customer, when the assessment is included in the price for which the trees are sold or when the assessment is separately stated in the invoice provided to the customer. Very truly yours,

Thomas Cooke
Tax Counsel

TC:cl