Could a microfilm developer buy Kodak Pro-Star Developer and Pro-Star Plus Fixer for resale as ingredients of the finished microfilm?

Plain-English summary

A business recorded client documents on microfilm and transferred that microfilm with reels, trailer holders that locked it onto the reels, and boxes. In recounting a telephone call, the letter first named Pro-Star Developer and Pro-Star Fixer; in its conclusion, it named Pro-Star Developer and Pro-Star Plus fixer. Both were described as Kodak products.

The letter treated the developer and fixer as taxable manufacturing inputs. A redacted person from a redacted organization had informed Counsel that they were consumed in development and did not become physically incorporated into the microfilm. They also were not reusable by customers. The business therefore could not issue a resale certificate for the chemicals.

By contrast, the reels, holders, and boxes transferred with the microfilm were treated as resale property and qualifying nonreturnable containers. The source said the business could support those purchases with a resale or exemption certificate under the stated historical rules.

The April 18 inquiry asked for clarification of Sales Tax General Bulletin 50-24 dated July 10, 1950. Counsel said that bulletin had been revised into Regulation 1525.1, which governed reusable manufacturing aids, while Regulations 1525 and 1589 more directly governed these inputs and containers.

Live annotation and source posture

The current live annotation preserves the Pro-Star Plus Fixer and Pro-Star Developer names, microfilm use, consumption, no-incorporation and taxable-sale conclusion. It dates the annotation June 26, 1986, while the complete supporting letter is dated June 2, 1986; this page follows the body date. The live page omits the source's earlier Pro-Star Fixer wording, April 18 inquiry, telephone source, unidentified informant, client-document facts, reels, trailer holders and boxes, container exemption, certificate options, bulletin history, regulations and missing enclosures.

The supporting PDF supplies no April 18 inquiry, company or informant identity, telephone note, STGB 50-24, enclosed Regulations 1525, 1525.1, 1589, 1667 or 1668, chemical formula or quantity, consumption or incorporation test, proof customers could not reuse the chemicals, microfilm, reel, holder or box, returnability term, supplier invoice, resale or exemption certificate, client sale, tax return, audit, assessment, refund or later outcome. The chemical facts therefore rest on reported information whose source and evidence are unavailable.

CDTFA's Annotated Legal Opinions collection says letters are summarized as annotations and that statutory law controls whenever a statute and annotation conflict. The official two-page PDF has a clean native text layer and one small page-one letterhead stencil rather than scanned text, so no OCR was required. Both fresh direct PDF downloads and both live-page downloads were byte-identical, duplicate default PDF text extractions matched, and the original-text section remains byte-identical to its committed version and the fresh extraction after removal of only the extractor's terminal newline and form feed.

What this means for you

Separate processing inputs from property transferred with the finished microfilm. Substantiate whether each chemical is consumed or physically incorporated and whether customers can reuse it; separately document that reels, holders and boxes transfer as qualifying nonreturnable containers. The letter's chemical names and dates themselves require source-level care.

Common questions

Q: What date controls this page?

A: June 2, 1986, the date printed on the supporting letter. The live annotation says June 26.

Q: Which fixer name does the source use?

A: Both. Its telephone-facts paragraph says Pro-Star Fixer; its conclusion says Pro-Star Plus fixer.

Q: Why were the chemicals taxable?

A: Counsel was informed that they were consumed, not physically incorporated into microfilm, and not reusable by customers.

Q: How were the reels, trailer holders and boxes treated?

A: As property transferred for resale and as qualifying nonreturnable containers, supported by a resale or exemption certificate under the stated historical rules.

Q: Can the reader verify the chemical evidence or certificates?

A: No. The informant, tests, enclosures, purchases, certificates and transactions are absent.

Citations and references

• California Revenue and Taxation Code §§ 6007, 6051, and 6364
• California Sales and Use Tax Regulations 1525, 1525.1, 1589, 1667, and 1668
• Historical Sales Tax General Bulletin 50-24, discussed as superseded in the source
• April 18 inquiry, telephone facts and unidentified informant's incorporation statement — described but absent
• Regulations 1525, 1525.1, 1589, 1667 and 1668 — described as enclosures but absent
• Chemicals, microfilm, reels, holders, boxes, certificates, purchases, sales, tax filings and outcome — implicated but absent

Verbatim support

From the official June 2, 1986 Legal Counsel letter:

You also informed me by telephone that the chemicals used in developing the microfilm are the Pro-Star Developer, and the Pro-Star Fixer, manufactured by the Kodak company.

The reels, boxes, and trailer holders that are transferred to your customer as part of the sale are materials purchased by your company for the purpose of resale to your customer.

The chemicals used by your company to develop the microfilm are the Pro-Star Plus fixer and the Pro-Star Developer.

I was informed by X-------------- of the X------------- that these chemicals are consumed in the development process and do not become physically incorporated in the manufactured product, the microfilm.

Therefore, tax will apply to the sale of these chemicals to your company. You may not issue your supplier a resale certificate upon the sale of these chemicals.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 420.0553
• Original supporting opinion: 420.0553 PDF

Original ruling text

STATE OF CALIFORNIA

420.0553

STATE BOARD OF EQUALIZATION
Bc:

Hollywood – District Administrator

916-446-2242

June 2, 1986
X---------------------,
I am writing to you in response to your letter of April 18, 1986 requesting clarification of Sales Tax General Bulletin 50-24; July 10, 1950. You state in your letter that your company is involved in the activity of recording your client’s documents on microfilm and delivering the microfilm to your clients. Along with the microfilm you also transfer reels, upon which the microfilm is stored, trailer holders, which lock the microfilm onto the reel, and boxes. You also informed me by telephone that the chemicals used in developing the microfilm are the Pro-Star Developer, and the Pro-Star Fixer, manufactured by the Kodak company. In your letter you specifically request clarification of Sales Tax General Bulletin (STGB) 50-24. this bulletin has been revised and is now incorporated in Regulation 1525.1, entitled “Manufacturing Aids”. A copy of Regulation 1525.1 is enclosed for your information. Regulation 1525.1 pertains to manufacturing aids such as dies, patterns, jigs, and tools which are the type of manufacturing aids which can be sold to the customer for reuse. The items that you have listed I your letter are either not manufacturing aids (e.g., reel, holders, boxes) or are not manufacturing aids which can be reused (e.g., chemicals) by your customers; rather. Such items are either non-returnable containers for the microfilm (e.g., reel, holders, boxes) or used as a catalyst (chemicals) in the development of the microfilm. The ore pertinent regulations in this area are Regulation 1525 on Property Used In Manufacturing and Regulation 1589 on Containers. A copy of Regulations 1525 and 1589 are enclosed for your information. Sales tax is imposed upon all retail sales of tangible personal property in California, unless otherwise exempted. (Rev. & Tax. Code § 6051). A “retail sale” is defined by Section 6007 of the Revenue and Taxation Code as a sale for any purpose other than resale in the regular course of business. Regulation 1525(b), which interprets Revenue and Taxation Code Section 6007, states that tax does not apply to sales of tangible personal property to persons who purchase it for the purpose of incorporating it into the manufactured article to be sold. Conversely, Regulation 1525(a) provides that tax does apply to the sale of tangible personal property to persons who purchase it for the purpose of using it in manufacturing, producing or processing tangible personal property,

but which does not become physically incorporated into the manufactured product to be sold. The reels, boxes, and trailer holders that are transferred to your customer as part of the sale are materials purchased by your company for the purpose of resale to your customer. These items also qualify as non-returnable containers which are exempt from sales tax upon their sale to you, pursuant to Revenue and Taxation Code Section 6364. Tax does not apply to the sale of these items to your company. In order to avoid the imposition of tax on the sales of these items to your company, you must issue to your supplier either a resale certificate or an exemption certificate. Examples of each are shown in Regulations 1668 and 1667, respectively, copies of which are enclosed for your information. The chemicals used by your company to develop the microfilm are the Pro-Star Plus fixer and the Pro-Star Developer. I was informed by X-------------- of the X------------ that these chemicals are consumed in the development process and do not become physically incorporated in the manufactured product, the microfilm. Because these chemicals are not incorporated into the manufactured article, they are not purchased by X------------- for the purpose of resale. Because these chemicals are consumed by you and are not reusable by your customers, old STGB 50-24 and current Regulation 1525.1 do not apply to your chemicals. Therefore, tax will apply to the sale of these chemicals to your company. You may not issue your supplier a resale certificate upon the sale of these chemicals. If you have any further questions, please contact us again. Sincerely yours,

Teresa Armstrong
Legal Counsel

TA:ba
Enc.