Could a fruit packer buy fumold and ethylene oxide gas for resale when it placed them in fruit bags as preservatives?

Plain-English summary

California treated sales of fumold and ethylene oxide gas to a fruit packer as taxable retail sales. On the Board's understanding, fumold killed mold spores at packaging and preserved fruit through that use rather than through resale in the regular course of business.

Most fumold reportedly evaporated before the fruit reached consumers; the letter says a substantial remaining amount might have a deleterious human effect. The Board's information was that ethylene oxide was used in the same manner and had the same effect. Cartons, bags and labels were separately covered by a specific historical exemption, but counsel identified no comparable gas exemption.

Request, understood chemical facts, Ruling 49, and missing outcome

The April 29 request went to the Board's San Francisco office and was referred for reply. The August 21 letter is addressed to a redacted Cupertino taxpayer and person with a redacted account number; San Jose Auditing received a copy. The request, account, referral and audit material are absent.

The taxpayer asked about sales of fumold and ethylene oxide placed in packed fruit bags as preservatives. The source does not identify the fruit, bag, shipment, chemical supplier, trade composition, gas amount, application method, price, customer, destination or consumer sale.

Junior Counsel Bill Holden stated the general retail-sale rule: tangible personal property sales were taxable unless specifically exempt, and retail sale meant a sale for a purpose other than resale in the regular course of business. The source cites no statute or regulation for those definitions.

Former Ruling 49 reportedly provided a specific exemption for cartons, bags and labels. Although the letter says a copy was enclosed, the official PDF contains none. It gives no ruling date, text or URL and does not explain how each listed item qualified, so this page records the distinction without importing absent law or facts.

The source says There is no such specific exemption applicable to fumold or ethylene oxide and sales of such items are table if they are retail sales. Later sentences expressly classify both as taxable retail sales, showing that table is the printed word in an otherwise clear taxable conclusion; it is preserved rather than silently rewritten in the original text.

The fumold analysis is introduced as We understand. It killed spores that otherwise might develop into mold, and most evaporated before the fruit reached consumers. Counsel added conditionally that if most did not evaporate, a substantial amount might have some deleterious effect on humans eating the fruit. The source supplies no study, residue result, safety standard or expert evidence.

Holden's information was that ethylene oxide was used in the same manner and had the same effect as fumold. He therefore reached the same taxable-use answer without supplying separate ethylene-oxide facts or evidence.

The live 400.0060 annotation says the gases were placed in fruit bags as preservatives during shipment and that the packer or shipper used them. The supporting letter addresses a fruit packer, describes preservation before fruit reaches consumers, and does not use during shipment or separately identify a shipper. Those live additions are not attributed to the source.

No return, audit adjustment, assessment, payment, exemption claim, appeal or transaction outcome is supplied. The official PDF has a clean rendered text layer and only a small seal image. Two fresh downloads and extractions matched exactly, and the preserved source tail remains byte-identical after removal of only pdftotext's terminal newline and form feed. No case citation appears.

What this means for you

Produce packers and shippers

Putting a preservative inside a package did not by itself make it resale property. Document what the material does, when and how it is consumed, what remains at customer delivery, and the exact exemption claimed.

Accountants and tax professionals

Separate container items from chemicals used for a preservative function. Retain supplier invoices, chemical and application evidence, package and delivery facts, resale or exemption documents and current authority; the missing Ruling 49 cannot carry a modern claim.

Common questions

Did placement inside the fruit bag make the gas part of property resold?

No. Counsel treated its spore-killing function and evaporation as consumption rather than resale.

What did fumold do?

The Board understood that it killed mold spores at packaging so they would not develop into mold.

How was ethylene oxide treated?

The same way as fumold, based on the Board's information that its use and effect were the same.

Were cartons, bags, and labels treated identically?

No. The source said former Ruling 49 specifically covered them, but the enclosed ruling copy is absent.

Did the source prove fumold was dangerous to consumers?

No. It said only that a substantial amount remaining after packaging might have some deleterious effect.

Did the source say the gas was used during shipment?

No. That wording appears in the live annotation, while the letter discusses packaging, preservation and fruit reaching consumers.

Was any tax amount or outcome provided?

No. The source supplies no purchase amount, tax measure, rate, return, audit result, assessment or payment.

Citations and references

• Former California Sales and Use Tax Ruling 49 — historical container exemption distinguished
• April 29 request — referenced but not included
• Requester and account; fruit, bags and chemicals; application, evaporation and safety evidence; suppliers and purchases; prices; resale or exemption documents; tax measure and rate; return; audit; assessment; payment; claim; appeal; and outcome — described, understood or implicated but not included

Verbatim support

From the official August 21, 1953 letter:

We understand that fumold is placed in the fruit package for the purpose of killing mold spores which, if not killed, might develop into mold.

Accordingly, it is our opinion that the sale to you of fumold is a sale for the purpose of use and is therefore a taxable retail sale.

Our information is that ethylene oxide gas is used in the same manner and has the same effect as fumold. Its sale, too, is thus a taxable retail sale.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 400.0060
• Original supporting opinion: 400.0060 PDF

Original ruling text

400.0060

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

August 21, 1953
Taxpayer
Cupertino, California
Attention:

Mr. [X]

Account No.

• • XXXXX

Gentlemen:
Your letter of April 29 addressed to our San Francisco office has been referred to this office for reply. You ask if the sales tax applies to the sale to you of fumold and ethylene oxide gas. These items are placed in packed bags of fruit to preserve the fruit. The California sales tax applies to all retail sales of tangible personal property other than to sales which are specifically exempted. The sale to you of cartons, bags, and labels is covered by the specific exemption set forth in Ruling 49 (copy enclosed). There is no such specific exemption applicable to fumold or ethylene oxide and sales of such items are table if they are retail sales. A retail sale is defined as “a sale for any purpose other than resale in the regular course of business”. We understand that fumold is placed in the fruit package for the purpose of killing mold spores which, if not killed, might develop into mold. The fumold thus has the effect of preserving the fruit, but this effect is produced by killing the spores at the time of packaging. We further understand that most of the fumold evaporates from the package before the fruit reaches the consumer and that, if this were not so, the presence of a substantial amount of fumold might have some deleterious effect on humans consuming the fruit. Accordingly, it is our opinion that the sale to you of fumold is a sale for the purpose of use and is therefore a taxable retail sale. Our information is that ethylene oxide gas is used in the same manner and has the same effect as fumold. Its sale, too, is thus a taxable retail sale. Yours truly, Bill Holden Junior Counsel BH:ja cc: San Jose - Auditing