Could bakeries buy Arkady and Fermaloid dough improvers for resale?

Plain-English summary

Board counsel reviewed a product bulletin describing Arkady and Fermaloid dough improvers. Bakeries added them to dough, where they affected yeast activity and produced improved extensibility, greater loaf volume, finer grain, and other desired characteristics.

Because the improvers became ingredients of the bakery products sold, their sales to bakeries qualified for resale rather than taxable consumption.

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/440-1920.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

San Francisco Auditing (ESA)

From:

Headquarters – Sales Tax Counsel (GAT)

Subject:

--- Brands Incorporated
--- --- Avenue
--- ---, New York
XXX --- Avenue
--- ---, California

440.1920
Sacramento
May 13, 1959

Account OS-B-Y-XXXX

This is in reply to your Memo of April 30 regarding the products Arkady and Fermaloid Dough Improvers. We have examined the F--- Bulletin which described these two products and explained that their function in the manufacture of bakery products. The bulletin is returned herewith. These product are added to dough and affect the activity of the yeast in the dough in such a manner that certain desirable characteristics are imparted to the dough, e.g., improved extensibility, greater loaf volume, finer grain, etc. It appears that Arkady and Fermaloid, when used by bakeries, become an ingredient of bakery products which they sell. It is, therefore, our opinion that tax does not apply to the sale of such Dough Improvers to bakeries, and that the bakeries may properly purchase such items for resale.

George A. Trigueros
GAT:o’b
cc:

--- --- (SS)