Could a dry-ink-toner manufacturer buy methylene chloride for resale when much of it evaporated during production?

Plain-English summary

A dry-ink-toner manufacturer used methylene chloride while coating microscopic carrier particles. Those coated particles regulated the electrostatic charge transferred to toner ink particles and improved image reproduction.

The methylene chloride supplied propylene oxide and amylene, which became integral chemical components of the acrylic carrier coating and performed essential functions in the sold toner. Its role was limited to supplying those incorporated ingredients.

The purchase therefore qualified for resale. A large portion evaporated, but that loss did not create a taxable manufacturing use because the lost portion served only to incorporate the remaining property into the finished product.

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/440-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/440-0052.pdf

Original ruling text

State of California

Board of Equalization
Legal Division (MIC:82)

Memorandum
440.0052

To:

Mr. Mel Lewis
Orange County - Auditing

From:

Charles J. Graziano

Subject:

Taxability of Methylene Chloride Used in the Manufacture of
Dry Ink Toner

Date:

April 6, 1983

W--- T--SR -- XX XXXXXX

This is a follow-up to my memo of march 21, 1983, regarding the W--- T--- audit. On March 29, 1983, Mr. F--- S---, Technical Manager for W--- T---, contacted me by telephone. During our conversation, we extensively discussed W--- Technologies’ use of methylene chloride in the manufacture of dry ink toner. Mr. S--- also sent me a written statement concerning this matter (copy enclosed). As summarized below the information provided by Mr. S--- substantially supports the manufacturer’s contention that methylene chloride is purchased for the purpose of resale. Dry ink toner, as used in xerography, consists of two components: the toner particles (e.g. ink), and the much larger “carrier” particles. The carrier particles are microscopic metallic, plastic, or glass beads which have been coated with an acrylic plastic. The function of the carrier particles is to impart an electrostatic (triboelectric) charge to the ink toner particles, and thereby improve the quality of the final image reproduction. The purpose of the plastic coating on the carrier particles is to regulate the amount of triboelectric charge transferred to the ink particles. The role of methylene chloride in the manufacture of dry ink toner is limited to its use as a source of certain essential ingredients which become incorporated as component parts of the carrier’s plastic coating. These ingredients, propylene oxide and amylene, are the synthetic elastomers and polimerization inhibitors necessary for the formation of this plastic coating. Both propylene oxide and amylene become integrally and chemically part of the carrier particles, and as such, the perform an essential and beneficial function in the final product which is sold by the manufacturer.

Mr. Mel Lewis

-2-

April 6, 1983
440.0052

Therefore, we are of the opinion that methylene chloride is purchased for the purpose of resale and not for use as a manufacturing aid. Tax does not apply, even though a large portion of the methylene chloride is lost through evaporation, since the portion lost is used only for the purpose of incorporating the remainder of the property into the end product to be resold.

CJG:ba