California Code of Regulations › Title 18 - Public Revenues › Division 2 - California Department of Tax and Fee Administration- Business Taxes (State Board of Equalization- Business Taxes, See Ch. 6 and 9.9) › Chapter 4 - Sales and Use Tax › Article 3 - Manufacturers, Producers, Processors › Section 1533 - Liquefied Petroleum Gas

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) General. Commencing on and after
				  September 1, 2001, Section
				  6353(b)
				  of the Revenue and Taxation Code exempts from sales and use tax the sale of,
				  and the storage, use, or other consumption in this state, of qualified LPG used
				  by a qualified person in an agricultural activity, or used in a qualified
				  residence for a household activity. The terms "qualified LPG," "qualified
				  person," "agricultural activity," "qualified residence," and "household
				  activity" are defined below.
(b)
				  Definitions. For purposes of this regulation:
(1) "Agricultural activity" means the
				  producing and harvesting of agricultural products as defined in subdivision
				  (b)(4), by a qualified person as defined in subdivision (b)(5).
(2) "Household activity" means those
				  activities normally undertaken in a qualified residence as defined in
				  subdivision (b)(7), such as cooking, heating and lighting.
(3) "Person that assists a qualified person"
				  means a person employed by a qualified person, or engaged on a contract or fee
				  basis to perform activities described in Major Group 07 of the Standard
				  Industrial Classification Manual published by the United States Office of
				  Management and Budget, 1987 edition (hereafter SIC Manual) which include soil
				  preparation services, crop services, veterinary services, animal services,
				  landscape and horticultural services, and farm labor and management services,
				  that uses qualified LPG in assisting a person engaged in a line of business
				  described in subdivision (b)(5). A person that assists a qualified person may
				  perform a construction contract only if the person performing the contract is
				  engaged in farm management services as described in Code 0762 of the SIC Manual
				  and the construction is integral to the producing and harvesting of an
				  agricultural product as defined in (b)(4). A person that assists a qualified
				  person must provide physical aid or assistance in the actual producing and
				  harvesting of agricultural products owned by the qualified person and not
				  merely provide aid in administrative, managerial, or marketing activities. A
				  person that assists a qualified person does not include persons performing
				  services such as an attorney, accountant, consultant, or other similar
				  activity. Except as otherwise provided above, a person that assists a qualified
				  person also does not include persons who perform construction contracts or who
				  perform repairs to farm equipment and machinery, or a person who assists such
				  persons.
(4) "Producing and
				  harvesting agricultural products" means those activities described in Major
				  Groups 01, 02 and 07 of the SIC Manual. Major Group 01 includes establishments
				  engaged in the production of crops, plants, vines, and trees (excluding
				  forestry operations). This major group also includes establishments engaged in
				  the operation of sod farms; in the production of mushrooms, bulbs, flower
				  seeds, and vegetable seeds; and in the growing of hydroponic crops. Major Group
				  02 includes establishments engaged in the keeping, grazing, or feeding of
				  livestock for the sale of livestock or livestock products (including serums),
				  for livestock increase, or for value increase. Livestock, as specified in Major
				  Group 02, includes cattle, hogs, sheep, goats, and poultry of all kinds; also
				  included are animal specialties, such as horses, rabbits, bees, pets, fish in
				  captivity, and fur-bearing animals in captivity. Major Group 07 includes
				  establishments engaged in performing soil preparation services, crop services,
				  veterinary services, animal services, landscape and horticultural services, and
				  farm labor and management services. Producing and harvesting agricultural
				  products involves the cultivation of land or the growing, raising, or gathering
				  of the commodities described in Codes 0111 to 0291 of the SIC Manual and
				  integral activities thereto described in Codes 0711 to 0783 of the SIC Manual.
				  Such activities include, but are not limited to, flame weeding, pest control,
				  nut hulling and shelling, crop drying, cotton ginning, poultry and pig
				  brooding, livestock breeding, water heating, crop heating, and fruit ripening.
				  Producing and harvesting agricultural products also includes the washing of
				  agricultural products, the inspection and grading of agricultural products or
				  livestock, or the packaging of agricultural products for shipment. Except as
				  otherwise provided under Major Groups 01, 02 or 07 of the SIC Manual, producing
				  and harvesting activities do not include post harvesting activities nor those
				  activities described or otherwise designated in Major Group 20 - Food and
				  Kindred Products of the SIC Manual. Nevertheless, the specific activities of
				  sun drying or artificially dehydrating fruits and vegetables as described in
				  Code 2034 of the SIC Manual qualify as producing and harvesting activities
				  where those activities are performed by a qualified person as defined in (b)(5)
				  or a person who assists a qualified person as defined in (b)(3).
Example A: Grower A farms raisins and uses qualified LPG to
					 dry Grower A's raisins. Grower A is a qualified person (Code 0172 of the SIC
					 Manual) and uses qualified LPG in the producing and harvesting of an
					 agricultural commodity. The sale of qualified LPG to Grower A for use in this
					 activity is exempt from tax.
Example B: Grower B farms plums and contracts with ABC,
					 Inc. to dry the plums owned by Grower B in preparation for sale. ABC, Inc. uses
					 qualified LPG to dry the plums. ABC, Inc. is a person assisting a qualified
					 person (Code 0723 of the SIC Manual) such that the sale of qualified LPG to ABC
					 for use in this activity is exempt from tax.
Example C: Grower C farms corn. Grower C sells the "wet"
					 corn to a food processor based on the net dry weight of the product. The food
					 processor uses qualified LPG to dry the corn. The food processor's use of
					 qualified LPG to dry the commodity is not a qualified use since the food
					 processor owns the commodity and thereby only performs a non-qualified, post
					 harvesting activity. The sale of qualified LPG to the food processor for use in
					 this activity is not exempt from tax.
(5) "Qualified person" means a person who
				  purchases qualified LPG that is engaged in a line of business described in
				  Codes 0111 to 0291 of the SIC Manual or performs activities described in Codes
				  0711 to 0783 in addition to being engaged in a line of business described in
				  Codes 0111 to 0291, which includes cash grains, field crops, vegetables and
				  melons, fruits and tree nuts, horticultural specialties, livestock, dairy,
				  poultry and eggs, and animal specialties and who sells such commodities to
				  others. A qualified person also includes any person conducting activities, as
				  defined in subdivision (b)(3), that uses qualified LPG to assist a person
				  engaged in a line of business described herein in producing and harvesting
				  agricultural products owned by the qualified person. A qualified person is not
				  required to be engaged 50 percent or more of the time in a line of business
				  described in Codes 0111 to 0291. A qualified person does not include a person
				  operating a garden plot, orchard, or farm for the purpose of growing produce or
				  animals for that person's own use.
(6) "Qualified LPG" means liquefied petroleum
				  gas delivered into a tank with a storage capacity that is equal to or greater
				  than 30 gallons. Liquefied petroleum gas is a mixture of light hydrocarbons
				  which are gaseous at atmospheric temperature and pressure. Liquefied petroleum
				  gas occurs naturally in crude oil and natural gas production fields and is also
				  produced in the oil refining process. Its main components are Propane (C3H8) at
				  a boiling point of -42.07°C and Butane (C4H10) at a boiling point of
				  0°C. Delivery into tanks smaller than 30 gallons do not qualify for the
				  exemption even if the total delivery exceeds 30 gallons.
(7) "Qualified residence" means a primary
				  residence not serviced by gas mains and pipes, to which qualified LPG is
				  delivered by a seller. A primary residence means a person's domicile where that
				  person spends the greatest portion of his or her time during a calendar year. A
				  person may change his or her primary residence only when that person moves from
				  and otherwise abandons his or her previous residence and has no intent to
				  return to that previous residence. In no event shall a primary residence
				  include multiple residences maintained simultaneously such as a second, or
				  vacation home.
Solely for purposes of this regulation, a qualified
					 residence also includes a residence where qualified LPG is purchased by a
					 qualified person for use in a household activity at the primary residence
					 of:
(A) A person that assists a
				  qualified person; or
(B) An
				  employee of a qualified person where such person that assists a qualified
				  person or employee of a qualified person performs an agricultural service
				  described in Codes 0711 to 0783 of the SIC Manual for the qualified person. In
				  addition, solely for purposes of this regulation, a qualified residence
				  includes a residence where qualified LPG is purchased by a landlord or
				  management company on behalf of a renter or tenant for use in a household
				  activity at the primary residence of the renter or
				  tenant.