Laws, Regulations and Annotations
Business Taxes Law Guide – Revision 2023
Sales And Use Tax Regulations
Title 18. Public Revenues
Division 2. California Department of Tax and Fee Administration — Business Taxes (State Board of Equalization — Business Taxes — See Chapters 6 and 9.9)
Chapter 4. Sales and Use Tax
Article 3. Manufacturers, Producers, Processors
Regulation 1525. Property Used in Manufacturing.
Reference: Sections 6007–6009.1, Revenue and Taxation Code.
(a) Tax applies to the sale of tangible personal property to persons who purchase it for the purpose of use in manufacturing, producing or processing tangible personal property and not for the purpose of physically incorporating it into the manufactured article to be sold. Examples of such property are machinery, tools, furniture, office equipment, and chemicals used as catalysts or otherwise to produce a chemical or physical reaction such as the production of heat or the removal of impurities.
(b) Tax does not apply to sales of tangible personal property to persons who purchase it for the purpose of incorporating it into the manufactured article to be sold, as, for example, any raw material becoming an ingredient or component part of the manufactured article.
(c) Particular Application of New Oak Wine Barrels. Tax does not apply to sales of new, used, or re-coopered oak barrels to persons who purchase the barrels for the purpose of physically incorporating oak into wine to be sold. Re-coopered barrels have the inner surface shaved off to expose new wood. The use of oak wine barrels as a container during the manufacturing process is incidental to the primary purpose of incorporating oak into the wine.
(d) Particular Application of Brandy Barrels. Tax does not apply to sales of new or used oak barrels to persons who purchase the barrels for the purpose of physically incorporating oak into brandy to be sold. The use of the barrels as containers during the manufacturing process is incidental to the primary purpose of incorporating oak into the brandy.
History—Effective August 1, 1933.
Adopted as of January 1, 1945, as a restatement of previous rulings.
Amended by renumbering November 3, 1971, effective December 3, 1971.
Amended January 10, 1996, effective April 3, 1996. Added subdivision (c).
Amended October 8, 1997, effective April 4, 1998. Subdivision (d) added.
Amended January 6, 1999, effective May 1, 1999. Subdivision (c) is amended as follows: phrase ", used, or re-coopered" added to first sentence; new second sentence added; word "new" deleted from former second, now the third, sentence.
Sales Tax General Bulletin 50–24; July 10, 1950.
Subject: Regulation 1525, Property Used in Manufacturing, and Regulation 1541, Printing and Related Arts, as Applied to Dies, Patterns, Jigs, Tooling, Photo Engravings, and Other Manufacturing Aids.
When manufacturers purchase, or fabricate from raw materials purchased, dies, patterns, jigs, tooling, photo engravings, and other manufacturing or printing aids for the account of customers who acquire title to the property upon delivery thereof to, or upon the completion of the fabrication thereof by, the manufacturers, the manufacturers will be regarded as purchasing such property either as agent for, or for resale to, their customers. The tax will apply, accordingly, with respect either to the sale to the manufacturer as agent of his customer, or with respect to the sale by the manufacturer to the customer, and not also with respect to the sale to the manufacturer.
In determining whether the manufacturer or printer purchases the property on behalf of, or for resale to, his customer, the terms of the contract with the customer, the custom or usage of the trade and any other pertinent factors will be considered. For example, if the customer issues a purchase order for a pattern, die, or other tool, or on the purchase order for the goods itemizes or otherwise specifies the particular pattern, die, or tool which will be required by the manufacturer or printer to manufacture the goods desired by the customer, and the manufacturer obtains such tool pursuant to the customer's specific order, billing, itemizing, or otherwise identifying it to the customer separately from the billing for the article manufactured therefrom, and either delivers it to the customer or holds it as bailee for the customer, it will be presumed that the manufacturer acquired the property on behalf of the customer or for immediate resale to him.