Ezel / Tax Rulings / CA

When could carbon dioxide sold for beverage use qualify for resale?

Short answer CO2 used solely to carbonate soda water or another sold beverage qualified; CO2 bought to push draft beer through lines was a taxable dispensing input.
State
CA
Ruling
Annotation 440.1940
Tax type
Sales and Use Tax
Issued
1952-08-07
Issued by
California State Board of Equalization
Requested by
A carbon-dioxide seller asking about gas used with draft beer and carbonated beverages
Topics
carbon dioxide beverages component parts resale exemption
Source
View Original PDF

Apply this to your situation

This page answers the general question as of 1952. Ask about yours and see what current California tax law says, with citations.

Currency note: this ruling is from 1952
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is a California State Board of Equalization tax-counsel letter dated August 7, 1952, published by CDTFA as support for a sales and use tax annotation. It distinguishes carbon dioxide incorporated to carbonate a sold beverage from gas used only to move draft beer through pipes. Another taxpayer should not treat it as binding and should check current beverage, carbonation, dispensing, component-part, resale, and sales-and-use-tax rules. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

A carbon-dioxide seller asked about gas used in beverage service. Counsel distinguished the purpose and destination of the gas.

CO2 bought solely to create the charge or sparkle in soda water or another sold beverage qualified for resale because it was incorporated into the product.

CO2 used with draft beer was taxable on the stated facts. The purchaser bought that gas to force beer through dispensing pipes, not to incorporate and resell the gas as part of the beer.

Source

Original ruling text

STATE OF CALIFORNIA

440.1940

STATE BOARD OF EQUALIZATION

August 7, 1952

Account X------------------X----------------------------

Gentlemen:
With reference to your inquiry of July 9 and our reply of July 12, 1951, we have received a report from our San Francisco office stating that you have been advised by competitors that they are not required to pay sales tax on the sale of CO-2 gas used in connection with the sale of draft beer. It is our opinion that the sales tax is applicable with respect to sales of CO-2 gas for use in the sale of draft beer. Inasmuch as the purchaser buys the gas for use in forcing the draft beer through the pipes rather than for the purpose of reselling the gas, it is our opinion the sale to him is a retail sale and taxable. On the other hand, where gas is purchased for the sole purpose of incorporating it into a product to be sold, the sale of the gas would be exempt as a sale for resale. This would be the case, for example, where the gas is to be used to produce the charge or sparkle in soda water or other beverages. We understand, however, that gas purchased for use in the sale of draft beer is not purchased for this purpose. Very truly yours,

E. H. Stetson
Tax Counsel
EHS:ja
cc:

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