Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2015
Sales and Use Tax Annotations
440.0000 PROPERTY USED IN MANUFACTURING—Regulation 1525
(b) PROPERTY BECOMING COMPONENT PART OF FINISHED PRODUCT
(4) Miscellaneous Specific Components
440.2746 Dual Purpose Usage of Material. In Kaiser Steel Corporation v. State Board of Equalization, 24 Cal.3d 188, the Court gave clear recognition to the fact that some materials are purchased for a dual purpose, i.e., for incorporating into the goods produced and as a manufacturing aid. In producing steel, coal and coke are a heat source in the production of pig iron and a source of carbon which is important in purifying steel. There is a second purpose, that of incorporating some portion of the carbon in the finished steel. The manufacturer may purchase for resale that percentage of the coal and coke which is incorporated as carbon in the steel products sold.
Aluminum generally is used to remove oxygen from the molten metal and any incorporation of aluminum in the final product is incidental. However, in killed steel, aluminum is incorporated in the final alloy. The manufacturer may also purchase for resale that percentage of aluminum incorporated into killed steel. 9/17/80.