Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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U

570.0000 USE OF PROPERTY IN STATE AND USE TAX GENERALLY

Annotation 570.1115

(d) EXCLUSIONS

570.1115 Consumable Supplies for Foreign Air Carrier. A foreign air carrier has certain disposable trays, bowls, flatware, and the like shipped into California from out of the country and stored in duty free warehouses. The carrier contracts with another company to cater the in-flight meals. The company prepares the food, places it on the carrier's trays with the carrier's cups, bowls, flatware and napkins, and delivers the meal trays to the airplane. The carrier also stores passenger comfort items such as razor blades, eye shades, and slippers in the duty free warehouses. These items are delivered to the flight crew for disposal at their discretion with instructions not to give out the travel kits until after take-off. The carrier believes that the disposable food supplies and travel kits are used outside of California and are exempt from tax.

The only "use" of the disposable food supplies was to take the individual items and assemble them with food products to form a meal tray. In interpreting section 6009.1, the courts have stated that there is no taxable use if the property has no function in California other than to move through the state for consumption elsewhere. Accordingly, use tax does not apply to the storage of those items in this state for use outside the state. However, if any of the items used to prepare the meal trays are items which can be reused in California such as stainless silverware, cloth table napkins, glasses, etc., the use to assemble the trays will be subject to tax. section 6009.1 requires that the property be used solely outside the state.

Although the crew members do not have control over the comfort items and could give them out early to a passenger, it does not appear that they are given to passengers in California; accordingly, they are not subject to use tax pursuant to section 6009.1. If they were given away in California, a gift would have taken place in California, and the carrier would be responsible for the use tax. 5/23/91.