How did California treat a supplier's sales of prepared food, beverages, and passenger-service items to airlines that made no separate passenger charge?

Plain-English summary

A corporation prepared food that airlines then served to passengers. Tax counsel treated the supplier's prepared food sales as exempt food for human consumption because the supplier itself did not serve the food. Baby food received the same treatment.

The memorandum assumed the airlines did not separately charge passengers for meals or beverages. On that assumption, the airlines were the consumers of the beverages, so the supplier's beverage sales to them were taxable.

The same consumer treatment applied to cups, toilet tissue, napkins, baby bottles, and similar passenger items sold by the supplier to the airlines.

Common questions

Why was the prepared food exempt?

The supplier prepared it, but the airlines—not the supplier—served it to passengers.

Why were beverages treated differently?

With no separate passenger charge, the source regarded the airline as the consumer of the beverages.

Did the ruling cover cups and napkins?

Yes. It treated those and similar passenger supplies as taxable sales to the airline as consumer.

Citations and references

• The complete supporting memorandum cites no numbered statute, regulation, or case.

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/550-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/550-0040.pdf

Original ruling text

State of California

Memorandum

To:

Out-of-State – Auditing (DMA)

From:

Tax Counsel (EHS:ARW) - Headquarters

Subject:

C--- O--- C--- Corp.
Building XXX
--- International Airport
--- XX, --- ---

Board of Equalization

550.0040
Sacramento
October 22, 1964

This is in reply to your letter of September 11, 1964 requesting an opinion with respect to the application of the Sales and Use Tax Law to sales of prepared food and other items by the above corporation. C--- O--- C--- Corporation prepares the food which is served to the passengers by the airlines. Since the food is not served by C--- it is exempt as sales of food for human consumption. Sales of baby food would be exempt as a food product. As a general rule, airlines do not make a separate charge for meals and beverages served to their passengers. Assuming this to be the case with the airlines C--- is dealing with, the sales of beverages to the airlines would be taxable since they are regarded as the consumers. The airlines would likewise be the consumers of such items as cups, toilet tissue, napkins, baby bottles, etc., and the tax would apply on sales of such items to the airlines by C---.

ARW:dse