Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 440.0110


(2) Thinners, Solvents, Reducers, Carriers

440.0110 Cyclohexanon. Cyclohexanon is utilized in the manufacture of magnetic recording tape. The chemical is added in a batch mix prepared to manufacture the coating applied to raw magnetic tape. The chemical functions as a solvent in the mix and also as a reaction tool for certain other mix components. Additionally, it serves to make the end product, the magnetic tape, softer and of higher quality, but there is no indication that this is the result of the incorporation of the cyclohexanon into the magnetic tape.

Approximately three percent of the chemical added to the batch mix remains with the end product in a combination of residual solvent and in the reaction product. The manufacturing residue or "runoff" of the chemical is recycled and repeatedly reused until the chemical substance is depleted.

For the manufacture of magnetic recording tape, Cyclohexanon is used repeatedly as a solvent in the manufacturing process. This utilization of the property is for a purpose other than incorporation into the end product. Property which is purchased for the purpose of use in the manufacturing process is not thereby exempt from the tax by reason of some part remaining in the end product (American Distilling Company v. SBE, 55 Cal.App.2d 799). Thus, the purchase of Cyclohexanon for use in the manufacturing of magnetic recording tape is taxable. 10/26/73.