Could restaurants and bars give an ice wholesaler a resale certificate when they used some ice in drinks and some to refrigerate food or bottles?

Plain-English summary

Restaurants and bars could give their ice wholesaler a resale certificate when the ice was used only as part of food or beverages served to customers.

Where a customer also used some ice as a refrigerant for bottled goods or food, it should not give a resale certificate. The wholesaler was directed to collect tax on all ice sold to that mixed-use customer.

The restaurant or bar could then deduct on its own return the tax-paid purchase price of ice actually set aside solely for resale in or with food and drinks. That deduction required good and sufficient records in an auditable form.

Common questions

Could a mixed-use restaurant issue a resale certificate for all ice?

No. The source required the wholesaler to tax the entire sale.

How did the buyer recover tax on ice actually resold?

By taking a deduction on its return for the documented tax-paid purchase price of the resold ice.

Citations and references

• Sales and use tax Ruling 68 (enclosed and 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/550-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/550-0360.pdf

Original ruling text

STATE OF CALIFORNIA

550.0360

STATE BOARD OF EQUALIZATION
May 1, 1964
"U"
Gentlemen:
This is in reply to your letter of April 3 in which you inquire whether or not ice sales to restaurants and bars are rightfully subject to retail sales tax. If the ice is being used only as a part of the beverages or food which are served, it will be in order for your clients to give you a resale certificate. A copy of Ruling 68 is enclosed for your information. However, many restaurants and bars use ice not to put in drinks, but also as a refrigerant to keep bottled goods and food cold. Such places should not give a resale certificate, and you should collect the tax on all the ice sold to them. If they keep proper records with respect to ice actually set aside solely for sale with the drinks or food, they may take a deduction on their own sales tax return for the amount of the purchase price of ice purchased tax paid and then resold in or with food and drinks. They must understand that if they wish to take this deduction they must keep good and sufficient records of the ice purchased and resold. Such records must be in a form that is susceptible to audit. Very truly yours, E. H. Stetson Tax Counsel By Philip R. Dougherty PRD:md [lb]