Ezel / Tax Rulings / CA

Were a supplier's sales of fresh coffee to employers and separate sales of paper cups to employees taxable during employer coffee breaks?

Short answer The coffee was exempt when sold to the employer without other food amounting to meal service, but the separately sold cups were taxable because the supplier did not sell them filled with coffee.
State
CA
Ruling
Annotation 550.1540
Tax type
Sales and Use Tax
Issued
1964-07-13
Issued by
California State Board of Equalization
Requested by
A coffee supplier selling to business and industrial employers (identity redacted)
Topics
coffee paper cups food exemption employers
Source
View Original PDF

Apply this to your situation

This page answers the general question as of 1964. Ask about yours and see what current California tax law says, with citations.

Currency note: this ruling is from 1964
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 July 13, 1964 tax-counsel letter applies historical food and container rules to fresh coffee sold to employers for free distribution during established employee breaks and paper cups sold separately to employees. It assumes the supplier's other food sales did not amount to serving meals. Current law controls over the annotation. 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 supplier sold fresh liquid coffee to business and industrial employers, which distributed it free to employees during established coffee breaks.

Tax counsel treated the coffee as an exempt food product when the supplier did not also sell other food in a way that constituted serving meals.

The paper cups were different. The supplier sold cups to employees separately and did not sell coffee-filled cups directly to the employees or employer, so the cups did not qualify as exempt containers sold with nontaxable contents.

Common questions

Did the employer's free distribution make the coffee taxable?

No. Under the letter's facts, the supplier's coffee sale to the employer was exempt.

Why were the cups taxable?

They were sold separately rather than as containers holding coffee in a direct sale.

Citations and references

  • Sales and use tax Rulings 49, 52, and 53 (enclosed and cited)

Source

Original ruling text

550.1540

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

July 13, 1964

--- --- ----- --- ----- --- --“A”
This is in reply to your letter of June 18 in which you inquire about the taxability of your sales of fresh liquid coffee to business and industrial firms who distribute the coffee free to their employees during established coffee break periods. In this situation, the sale of fresh liquid coffee to an employer, not accompanied by your sale of other food products in such a way as to constitute the service of meals, is the sale of an exempt food product, and is not subject to the sales tax. The sale of the paper cups to the employees is taxable and is not considered exempt as the sale of a container with nontaxable contents because you are not selling cups containing the coffee directly to the employees or to the employer. We are enclosing copies of Rulings 49, 52, and 53 for your ready reference. If you have any further questions please do not hesitate in writing to us again. Very truly yours,

E. H. Stetson
Tax Counsel

By Philip Dougherty
PRD:o’b

[lb]

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