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Continental Water Conditioning Co. v. State Board of Equalization … (1989)

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Regeneration of Water Purification Tanks Is Taxable Sale

Taxpayer was in the business of selling and servicing water purification tanks. After resins in the tanks became depleted and were no longer usable to remove impurities, taxpayer replaced the tanks with similar tanks which had been regenerated at the taxpayer's plant. Taxpayer contended that the regeneration charges for replacing the depleted tanks were service transactions not subject to tax.

The court of appeal held in favor of the Board, stating that Sales and Use Tax Regulation 1546(b)(4) provides that a taxable sale includes the reconditioning of tangible personal property by delivery to the customer of reconditioned property which has been commingled with the same kind of property as that the customer originally delivered to the reconditioner. The court held that under the authority of Regulation 1546 and Culligan Water Conditioning v. State Board of Equalization (1976) 17 Cal.3d 86, the taxpayer's regeneration charges were taxable sales of the regenerated tanks. Continental Water Conditioning Co. v. State Board of Equalization (1989) 207 Cal.App.3d 783.