Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
440.0000 PROPERTY USED IN MANUFACTURING—Regulation 1525
(a) MANUFACTURING AIDS
(6) Food and Beverage Processing
440.0626 Potato Sprout Inhibitors. Isopropyl-M-Chorocabanilate, also known as choropropham or CIPC, is applied to potatoes after they have been harvested to prohibit sprouting while in storage.
If the chemical is used during storage to prevent potatoes from sprouting, with the inhibition of sprouting to continue after the treatment even though the CIPC is physically removed after treatment, the CIPC cannot be purchased for resale and sales tax would apply to the sale of the chemical. The chemical in this situation would be considered used as a catalyst or to produce a chemical or physical reaction. (Kaiser Steel Corp. v. State Board of Equalization (1979) 24 Cal.3d 188.)
On the other hand, if the CIPC must be physically present on the potatoes at the time of sale in order to continue inhibiting sprout growth and if this is the grower's reason for applying the chemical, then the growers may issue a resale certificate to their vendors. 7/19/95.