Could a rubber mold-release chemical qualify for resale because it remained as a film on finished tires and other rubber products?

Plain-English summary

A chemical company sold a rubber-processing product that manufacturers sprayed on molds to release molded items such as tires. The chemical adhered to the rubber and remained as a film on the finished product.

The remaining film did not establish resale treatment. Because the seller stated that manufacturers bought the product primarily as a mold-release lubricant, it was property used in manufacturing and the sales were taxable retail sales under section 6007 and then-current Ruling 14.

Citations and references

• California Revenue and Taxation Code section 6007 (as cited)
• California Sales and Use Tax Ruling 14 (as cited)

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/440-1340.pdf

Original ruling text

440.1340

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

March 4, 1954

E. I. --- N--- & Company
Incorporated
XXXX --- Street
--- XX, --Attention:

Your letter of December 22,
1953
Account No. OS-X-1959

Mr. D. F. M---, II
Legal Department

Gentlemen:
You inquire concerning the application of tax to your sales of “A---” ---, a rubber chemical, to rubber companies as a mold release agent for molded rubber products such as tires. “A---” --- is sprayed on the mold as a lubricant to free the rubber product from the mold after the rubber has been processed. However the “A---” --- adheres to the rubber and is present as a film on the finished rubber product. Ruling 14 states the tax does not apply to property purchased “fore the purpose of being incorporated into a manufactured article to be sold. Since you state that “A---” --- is purchased primarily as a lubricant, it is our opinion that it is purchased for the purpose of use in manufacturing and not for the purpose of being incorporated into the article to be sold. Ruling 14 is based on Section 6007 of the Revenue and Taxation Code which defines the term “retail sale” as “as sale for any purpose other than resale in the regular course of business.” Since “A---” --- is sold for some purpose other than or in addition to resale, namely as a lubricant, your sale is at retail and subject to the tax. Very truly yours,

Bill Holden
Assistant Counsel
BH:ja
cc:

New York