Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2011
 

Sales And Use Tax Law

CHAPTER 4. EXEMPTIONS

Article 1. General Exemptions

Section 6359

6359. Food products. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage, use, or other consumption in this state of, food products for human consumption.

(b) For the purposes of this section, "food products" include all of the following:

(1) Cereals and cereal products, oleomargarine, meat and meat products, fish and fish products, eggs and egg products, vegetables and vegetable products, fruit and fruit products, spices and salt, sugar and sugar products, candy, gum, confectionery, coffee and coffee substitutes, tea, and cocoa and cocoa products.

(2) Milk and milk products, milkshakes, malted milks, and any other similar type beverages which are composed at least in part of milk or a milk product and that require the use of milk or a milk product in their preparation.

(3) All fruit juices, vegetable juices, and other beverages, whether liquid or frozen, including bottled water, but excluding spirituous, malt, or vinous liquors or carbonated beverages.

(c) For purposes of this section, "food products" do not include medicines and preparations in liquid, powdered, granular, tablet, capsule, lozenge, and pill form sold as dietary supplements or adjuncts.

(d) None of the exemptions in this section apply to any of the following:

(1) When the food products are served as meals on or off the premises of the retailer.

(2) When the food products are furnished, prepared, or served for consumption at tables, chairs, or counters or from trays, glasses, dishes, or other tableware whether provided by the retailer or by a person with whom the retailer contracts to furnish, prepare, or serve food products to others.

(3) When the food products are ordinarily sold for immediate consumption on or near a location at which parking facilities are provided primarily for the use of patrons in consuming the products purchased at the location, even though those products are sold on a "take out" or "to go" order and are actually packaged or wrapped and taken from the premises of the retailer.

(4) When the food products are sold for consumption within a place, the entrance to which is subject to an admission charge, except for national and state parks and monuments, marinas, campgrounds, and recreational vehicle parks.

(5) When the food products are sold through a vending machine.

(6) When the food products sold are furnished in a form suitable for consumption on the seller's premises, and both of the following apply:

(A) Over 80 percent of the seller's gross receipts are from the sale of food products.

(B) Over 80 percent of the seller's retail sales of food products are sales subject to tax pursuant to paragraph (1), (2), (3), or (7).

(7) When the food products are sold as hot prepared food products.

(e) "Hot prepared food products," for the purposes of paragraph (7) of subdivision (d), include a combination of hot and cold food items or components where a single price has been established for the combination and the food products are sold in combination, such as a hot meal, a hot specialty dish or serving, a hot sandwich, or a hot pizza, including any cold components or side items. Paragraph (7) of subdivision (d) does not apply to a sale for a separate price of bakery goods or beverages (other than bouillon, consommé, or soup), or where the food product is purchased cold or frozen; "hot prepared food products" means those products, items, or components that have been prepared for sale in a heated condition and that are sold at any temperature that is higher than the air temperature of the room or place where they are sold.

(f) Notwithstanding paragraph (6) of subdivision (d), if the seller elects to separately account for sales of food products specified in subdivision (b), then the gross receipts from the sale of those food products shall be exempt under subdivision (a), provided that the separate accounting is fully documented in the seller's records. However, if the seller's records do not reflect the separate accounting of the gross receipts from sales of nontaxable food products, the seller's election under this subdivision shall be revoked.

History.—Stats. 1953, p. 1629, in effect September 9, 1953, added the former last paragraph. Stats. 1963, p. 4046, in effect September 20, 1963, deleted "milk and milk products" from first paragraph and completely revised the former next to last paragraph, making it the last paragraph; and the former last paragraph was made the third paragraph, with the words "milk and milk products" added and "which are purchased for consumption off the premises of the retailer" deleted. Stats. 1965, p. 2427, in effect September 17, 1965, added in the last paragraph "whether" and "or by a person withwhom the retailer contracts to furnish, prepare, or serve food products to others." Stats. 1969, p. 3127, in effect January 1, 1970, revised the fourth paragraph and added the fifth paragraph, and added (d) to the sixth paragraph. Stats.

1970, p. 1057, in effect November 23, 1970, rearranged wording of fourth paragraph. Stats. 1971, p. 3711, in effect December 14, 1971, operative January 1, 1972, deleted "other than candy and confectionery" from and added "non-medicated chewing gum", to second paragraph, and added (e). Stats. 1983, Ch. 323, in effect July 21, 1983, operative August 1, 1983, added a new subdivision "(e)" in the sixth paragraph, changed previous subdivision "(e)" to "(f)", and changed all references to previous subdivision "(e)" to "(f)". Stats. 1984, Ch. 930, effective January 1, 1985, changed subdivision letter and number designations, added all text in paragraph (6) of subdivision (d). Stats. 1985, Ch. 1197, by Section 1 of chapter, effective January 1, 1986, added "marinas, campgrounds, and recreational vehicle parks" in subdivision (d)(4), and substituted "paragraph" for "paragraphs" in subdivision (d)(5)(B). Stats. 1991, Ch. 85, in effect June 30, 1991, operative July 1, 1991, in subparagraph (b)(1) added "other than candy or confectionery" after "sugar and sugar products" and after "cocoa and cocoa products", deleted "and nonmedicated chewing gum" after "cocoa and cocoa products", added "any of the following:" after "do not include", "(1)" before "Medicines", and paragraph (2), in subdivision (c) and added subdivision (f). Stats 1991, Ch. 88, in effect June 30, 1991, operative July 15, 1991, substituted "July 15" for "July 1" in subdivision (f). Prop. 163, Sec. 2, in effect December 1, 1992, deleted "other than" after "sugar and sugar products,", added ", gum," after "candy", deleted "or" before "confectionery", added "and" after "tea,", and deleted ", other than candy or confectionery" after "cocoa products" in subdivision (b)(1); substituted "including" for "except" after "liquid or frozen," and added "but excluding" after "bottled water," in subdivision (b)(3); substituted "do not include medicines" for "do not include any of the following: (1) Medicines"; deleted former subdivision (c)(2) which defined snack foods; inserted a comma after "items" in the second sentence of subdivision (e); and deleted former subdivision (f) which stated that "The amendments to this section by the act adding this subdivision shall become operative on July 15, 1991.". Stats. 1995, Ch. 647, in effect October 6, 1995, operative April 1, 1996, added commas after "sale of" and "state of" in subdivision (a); substituted "that" for "which" after "product and" in paragraph (2) and added a comma after "malt" in paragraph (3) of subdivision (b); deleted "such" after "are sold in", deleted "or" after "serving," and added a comma after "sandwich" in the first sentence and substituted "that" for "which" throughout the second sentence of subdivision (e); and added subdivision (f). Stats. 1996, Ch. 124, in effect January 1, 1997, deleted "provided for" after "exemptions" in subdivision (d); substituted "those" for "such" after "even though" in paragraph (3) of subdivision (d); and substituted "does" for "shall" after "subdivision (d)" in the first sentence of subdivision (e).

Sandwiches as "meals"; "paper napkins" as facilities.—The sale of hot dog and hamburger sandwiches, even when served with beverages, from sandwich stands or booths where neither chairs nor tables are provided for customers, does not constitute a "meal" within this section. A "paper napkin" is not "tableware" within this section, since the rule of ejusdem generis is applicable. Treasure Island Catering Co., Inc. v. State Board of Equalization (1941) 19 Cal.2d 181.

Skinless sausage casings.—Cellulose sausage casings used in manufacture of skinless wieners but removed and destroyed prior to sale are not food or food products nor do they become an integral part of food products within the meaning of this section. Luer Packing Co. v. State Board of Equalization (1950) 101 Cal.App.2d 99.

Cardboard trays.—The trial court was sustained in its finding that the serving of sandwiches and beverages on nonreturnable cardboard trays constitutes serving meals and furnishing food for consumption from trays. Hart's Drive-In Corp. v. State Board of Equalization (1956) 145 Cal.App.2d 657.

Glacéd Fruits.—Glacéd fruits were properly classified as "candy or confectionery" under this section as operative prior to January 1, 1972. Mission Pak Co. v. State Board of Equalization (1972) 23 Cal.App.3d 120.

Revenue and Taxation Code Section 6359(c) Held Constitutional.—Certain restaurant owners, operators of drive-ins providing carhop services, sought to recover sales and use taxes paid by them on sales of "take out" orders. Such orders are taxable under subparagraph (c) of Section 6359 of the Revenue and Taxation Code when the food is purchased at a drive-in type of operation, whether it is consumed on the premises or not, although "take out" orders at conventional restaurants are exempt. The drive-in operators argued that subparagraph (c), and the Board's administration thereof, was unconstitutionally vague, and arbitrarily discriminated between drive-ins and conventional restaurants. The court, in holding the provision constitutional, found that the distinctions made in the statute had a rational basis in the Legislature's desire to equalize competition and tax burdens between conventional restaurants and newly evolving forms of eating establishments where food was consumed in a similar manner, whether inside one's own car or inside a restaurant. The court also found that the statute prescribed a standard sufficiently definite to be understandable to the average person desiring to comply therewith. Henry's Restaurants of Pomona, Inc. v. State Board of Equalization (1973) 30 Cal.App.3d 1009, hearing in Sup. Ct. den. May 16, 1973.

Subsidies to Cafeteria Operators.—Subsidies paid by employers to operators of employee cafeterias are not includable within the operators' gross receipts and not subject to tax. Szabo Food Service, Inc. of California v. State Board of Equalization (1975) 46 Cal.App.3d 268.