Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2012

Sales And Use Tax Court Decisions

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Canteen Corp. v. State Board of Equalization . . . (1985)

Vending Machine Operator Entitled to Nonreturnable Container Exemption

Taxpayer purchased nonreturnable paper cups and used the cups to hold the drinks dispensed through its vending machines. The Board contended that the taxpayer was liable for use tax on its purchases of the cups under Revenue and Taxation Code Section 6359.4, making vending machine operators consumers of tangible property sold through the vending machines for 15¢ or less. The taxpayer contended that it was nevertheless entitled to the tax exemption provided by Revenue and Taxation Code Section 6364(a) for its purchases of nonreturnable containers which it filled and resold along with the contents, even though its sales of the contents and the containers were nontaxable sales through vending machines. The trial court entered judgment in favor of the taxpayer.

The Court of Appeal, Second District, affirmed. The court held that the two sections were not irreconcilable with each other, that the taxpayer was entitled to the nonreturnable container exemption, and that the Board's Regulation 1574, which provided that vending machine operators were consumers of nonreturnable containers dispensed through the machines, was invalid as being in conflict with the statutory nonreturnable container exemption. Canteen Corp. v. State Board of Equalization (1985) 174 Cal.Ap¢p.3d 952.