Did an oil refinery's provision of some eating facilities make a retailer's bulk insulated-container food sales taxable under the 1965 section 6359 amendment?

Plain-English summary

A retailer sold food in bulk insulated containers for consumption by employees of an oil refinery. The refinery supplied some facilities where the food could be consumed.

Tax counsel said customer-provided facilities alone did not activate the 1965 amendment to section 6359. Otherwise ordinary grocery stores, meat markets, bakeries, delicatessens, dairies, and other retailers could lose the exemption whenever customers later ate food using their own facilities, which the memorandum did not view as the amendment's intent or requirement.

The relevant facilities had to be reasonably intended for consuming the purchased food. The memorandum looked to their proximity to the point of sale and to an agreement that in some way obligated the food seller to sell food to someone other than the party furnishing the facilities.

Counsel acknowledged that the line was difficult to draw but treated the refinery facts as closer to an unchanged straight bulk sale.

Common questions

Did any customer-provided table or eating area make a food sale taxable?

No. The source required more than the fact that the purchaser furnished some consumption facilities.

What additional facts did tax counsel identify?

The proximity of the facilities to the sale location and an agreement obligating the seller to sell food to someone other than the facility provider.

Did the memorandum announce a precise bright-line test?

No. It expressly said the line was hard to draw and classified only the submitted situation.

Citations and references

• California Revenue and Taxation Code section 6359 (as cited after amendment)

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/550-1620.pdf

Original ruling text

State of California

Board of Equalization

550.1620
Memorandum
To:

Los Angeles – Dist. Prin. Aud. (JTQ)

From:

Tax Counsel (EHS)

Subject:

This refers to your memo of November 19 and its enclosures.

Date:

November 29, 1965

We do not believe that the change in Section 6359 requires that the tax be held to apply to the sale of food in bulk insulated containers, which are consumed by employees of an oil refinery. While it may be true that the oil refinery will furnish some facilities for consumption, this fact alone does not, in our opinion, bring the amendment to the statute into operation. If we were to take this position whenever a retailer of food products, e.g., a grocery store, meat market, bakery, delicatessen, dairy, or other retailer, should sell food which is ultimately to be consumed with facilities provided by the purchaser, the tax would apply. We do not think the intent was to go this far, nor are we required to go that far by the language used. We think that the facilities must be reasonably intended for use in consuming the food purchased as evidenced by proximity of the facilities to the place at which the food is sold, and by the terms of the agreement which in some manner shall obligate the food seller to sell food to someone other than the party actually furnishing the facilities. It is hard to draw the line with definiteness, but the situation which you submit seems more like the straight bulk sale situation which is not considered changed by the amendment to the law. EHS:fb [lb]