Did brine inhibitor used in a vessel's affixed refrigeration system qualify as an exempt component part?

Plain-English summary

A seller asked whether brine inhibitor sold to a vessel operator qualified as a component part under Ruling 51.5.

The inhibitor was used in freezing coils within the vessel's refrigeration plant. It did not require ordinary replacement; additions were needed only to maintain proper freezing qualities.

California treated those facts like replacement refrigerant in a system affixed to watercraft and unlike consumable fuel or lubricating oil. The sale could be treated as exempt if the seller's description was correct.

What this means for you

Refrigeration suppliers, vessel operators, and tax advisers

Document whether a fluid remains in an installed vessel system and how often and why it is replenished. Routine consumption points away from component status; retention in the system supports it.

Common questions

Q: Did the inhibitor become a component part?

A: Yes, on the facts stated.

Q: Why was it different from fuel or lubricating oil?

A: It was retained in the refrigeration system rather than routinely consumed.

Q: Was the conclusion conditional?

A: Yes. The letter said the seller could treat sales as exempt if the described use was accurate.

Citations and references

• California Sales and Use Tax Ruling 51.5, as cited in the source

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 600.0320
• Original supporting opinion: 600.0320 PDF

Original ruling text

600.0320

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

July 11, 1951

B--- Company of California
XX --- ----- --- X, California
Attention:

Mr. V--- S. S--Manager

X XXXX

Gentlemen:
This is in reply to your letter of June 15 concerning the application of the State sales tax with respect to the sale of a Brine Inhibitor to M--- N--- Company which claims exemption from sales tax apparently upon the ground that this is an item which becomes an ingredient or component part of watercraft and thus qualifies for the exemption provided for in Sales and Use Tax Ruling 51.5, copy enclosed. We have held that refrigerant gas, where bought by operators of watercraft for the purpose of replacing refrigerants in systems affixed to watercraft qualified for the exemption. We understand from your letter that your Brine Inhibitor is used in the freezing coils as a part of the refrigeration plant of the vessels and does not require replenishment except as need to maintain the proper freezing qualities, thus distinguishing it from consumable supplies such as fuel and lubricating oil which do not fall within the exemption. If our understanding is correct, you may regard your sales of your product as within the exemption described in Ruling 51.5. Very truly yours,

E. H. Stetson
Tax Counsel

EHS:ph
cc:

Mr. Burnett Sheehan