Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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P

435.0000 PRODUCING, FABRICATING AND PROCESSING PROPERTY FURNISHED BY CONSUMERS—GENERAL RULES—Regulation 1526

Annotation 435.1224

(c) MISCELLANEOUS OPERATIONS

435.1224 Platinum Catalyst. The following covers the application of sales and use taxes to transactions involving platinum catalyst.

(1) A California oil refiner orders one "load" of fresh platinum catalyst for use in California from a catalyst manufacturer located out of state. Title to the platinum catalyst passes upon shipment.

Use tax applies and the measure of tax includes the total amount for which the catalyst is sold, including the cost of the platinum component of catalyst.

(2) Same as (1), above. The refiner has paid tax upon one load of platinum catalyst. The catalyst is used in the refining process and after a period of time has become contaminated and thus becomes spent catalyst. The oil refiner returns it to the catalyst manufacturer who salvages the platinum component from the spent catalyst and manufactures fresh platinum catalyst from the salvaged platinum component. The oil refiner retains title to the platinum in the spent platinum catalyst. The platinum manufacturer then ships the fresh platinum catalyst to the California oil refiner.

This constitutes a fabrication of customer owned property under section 6010(b) and the measure of tax is the total amount for which the catalyst is sold, including any "salvage" or "recovery" charges made and any other charge made to the oil refiner. The measure of tax does not include the value of the platinum component of the spent catalyst furnished to the catalyst manufacturer. It is immaterial that the catalyst manufacturer might commingle the spent catalyst with spent catalyst owned by it or by another oil refiner or with other fresh platinum on hand.

(3) Same as (2), above, except that the catalyst manufacturer ships fresh catalyst to the refiner prior to the time the catalyst manufacturer receives, at its plant, spent catalyst owned by the refiner. Upon shipment of the fresh catalyst, the platinum manufacturer retains title to the platinum catalyst furnished and charges rent until the spent catalyst is received from the refiner. If the spent catalyst received by the catalyst manufacturer balance the "platinum account" of the refiner, a catalyst manufacturer buys, on the open market, sufficient platinum to balance the account. When the account is balanced, title to the platinum component in the fresh catalyst passes to the refiner (and the rental obligation ceases), and title to the platinum component in the spent catalyst, or title to the platinum purchased from outside sources for the account of the refiner, passes to the manufacturer.

The transaction is subject to sales tax at the time title to fresh platinum passes to the refiner. The measure of tax includes the total amount for which the catalyst is sold, including the value of the platinum of the spent catalyst subsequently salvaged by the catalyst manufacturer.

Use tax also applies to the rental charge made for the fresh catalyst prior to the time of the sale of the fresh catalyst to the refiner.

(4) Same as (3), above, except upon shipment of the fresh catalyst to the refiner, the platinum manufacturer makes no "platinum account" entry and title to the second "load" of fresh platinum catalyst passes to the refiner upon shipment. The refiner returns the first "load" of spent catalyst to the catalyst manufacturer who salvages the platinum component of the spent catalyst and credits a "platinum account" it maintains in the name of the refiner. The refiner retains title to the platinum in the spent catalyst furnished by it to the manufacturer.

The application of tax is the same as in (1) above.

(5) Same as in (4), above. The oil refiner has paid use tax on the platinum component of the two "loads" of the platinum catalyst. The refiner maintains a "credit" balance of refiner owned platinum with the catalyst manufacturer. The refiner then orders a third "load" of fresh platinum catalyst. The catalyst manufacturer ships a fresh "load" to the refiner, depleting the refiner's credit balance. The refiner replenishes its platinum account by shipping the second "load" of platinum catalyst, which is now spent catalyst, to the catalyst manufacturer and refiner's "platinum account" is credited.

The application of the tax is the same as (2), above, assuming no intervening sale, purchase, or trade of the refiner's platinum pool maintained in the hands of the catalyst manufacturer. Tax applies only to the "fabrication" and "salvage" charges and does not include any "trade-in" value of the platinum in the spent catalyst returned to the catalyst manufacturer. 11/5/70; 5/20/96.